I think I going to get a few traffic jams!
Brazilians bask in forgotten feelings of optimism
By Raymond Colitt
Published: December 17 2004 19:19 | Last updated: December 17 2004 22:25
Brazil's shopping malls are packed with consumers, its stock market set a historic high a short time ago and President Luiz Inácio Lula da Silva recently celebrated strong economic growth figures. There is an unmistakable air of optimism that has failed to permeate South America's largest economy for years.
“Brazilian entrepreneurs have not been this optimistic in a decade,” says Aloisio Campelo, co-ordinator of opinion surveys at the Brazilian Economics Institute (Ibre). Only two years after Brazil looked as if it could follow Argentina into bankruptcy, its economy this year will grow by more than 5 per cent, the fastest rate in a decade.
Brazil has also reappeared on the radar screen of international investors, after being eclipsed by other emerging markets such as China, India and Russia in recent years.
“Brazil may not yet be the flavour of the month but international investors are beginning to take a closer look again,” says António Correa de Lacerda, head of Sobeet, a global economy think-tank in São Paulo. “The investment climate has improved considerably.”
He expects economic growth of 5 per cent next year, with total investments increasing to 22 per cent of gross domestic product, up from 18 per cent last year and 20 per cent this year.
This recovery is particularly sweet for Mr Lula da Silva, whose economic orthodoxy last year put a brake on growth and disappointed his traditional leftwing supporters. His government's approval rating bounced back to 62 per cent in November from a low of 51 per cent in June this year, according to an Ibope poll released this month. The government obtained the best marks for its efforts to create jobs.
Brazilian consumers are also willing to spend money again after years of uncertainty and falling real wages. They have been buying more than 1m new cellular phone subscriptions each month this year on average, making Brazil's mobile telephony sector one of the world's fastest growing. With nearly 60m subscribers it is expected to surpass Germany soon to become the world's fourth largest market.
In 2002, telephone companies with large exposure to Brazil, such as Spain's Telefónica or Telecom Italia, saw their share prices plummet. “Today they are beaming with joy, they are making good money,” says Stephen Graham, head of Latin America telecommunications research with UBS, the investment bank.
Brazil's middle class is also travelling abroad again for the first time in years, aided by a currency recovery of 30 per cent against the dollar in two years. Foreign travel is up 15 per cent compared with last year and flights are more than 90 per cent booked. “At this rate airlines will have to use more and larger planes to meet demand,” says Leonel Rossi Junior, head of the association of travel agents.
Vehicle manufacturers will have produced roughly 2.2m cars this year, more than ever before, reflecting not only a rebound in domestic demand but also a surge in exports.
With the prospects of further monetary policy tightening this month and a possible slowdown in the global economy, most economists expect a slowing of GDP growth next year to about 3.5 per cent.
However, for a roller-coaster economy that has retreated two years for every year of growth over the past two decades, such prospects are good news.
“Brazil is no longer as vulnerable to external crises as it used to be,” says Roberto Setubal, president of Banco Itau, the country's second-largest bank. “We are quite optimistic for the coming years.” |
