Janus Capital’s EM strategist Matt Hochstetler has offered some of his views on Brazil’s economy, saying that the country exchanged a bit of short term pain for long term gains. In his recent FT article, he says that despite the lagging GDP growth in the last two quarters, the future “remains bright.” According to him, the growth rate bottomed in Q4. He is also positive on this and next year, considering that “growth responds to changes in monetary policy with a time lag.”
“… I would be surprised if 2012 GDP growth did not exceed last year’s 2.7% and if 2013 GDP growth was not over 4.5%. The 2013 pace is double developed market growth and far ahead of the negative numbers expected in recessionary Europe. Also, the Serasa leading indicator of credit shows that lower inflation, low unemployment, lower interest rates and low household debt should lead to lower consumer delinquencies within the next few months. These factors are leading indicators of growth.
Brazil has more ability to stimulate its economy than almost any other country…. another growth driver will be the near tripling of oil production in Brazil over the next decade, while supply from many other parts of the world is declining… Brazil has made great strides in building investor confidence, including a regulatory environment that has made frauds far less likely in Brazil over the past decade than in other emerging markets.
“No economy grows in a straight line … the miracle continues.”