Former Brazilian Finance Minister Delfim Netto said recently that the country’s GDP should grow between 3.6% and 3.7% this year, more than the 3% forecast by the International Monetary Fund (IMF).
Delfim Netto, as usual, downplayed the importance of estimates, both his and IMF’s. “What will 2012 be in terms of growth is not yet built,” he said, mocking analysts who project GDP growth below 3% this year, considering these same analysts were way off in their 2011 projections. The fourth quarter GDP this year could grow by 4% over the same period last year, said Delfim.
Delfim drew a parallel between growth and inflation to show that Brazil got back to the path of sustainable growth for the long run, considering the last two decades. For instance, between 1948 and 1980, inflation was stable and in this period the country grew 7.5% annually. “Since then, we grew only 2.6% in a period when there was hyperinflation and six official plans to control it.” But since inflation got back under control in recent years, he said it was possible to increase the rate of economic growth, as seen recently.
The former finance minister attributed the low growth of last year to the performance of the industry and said that in trying to protect its industry the government is not looking at past efforts, it is just trying to take assess the local technical advantages to develop an oil and gas industry, among other sectors. He also emphasized the need to correct distortions in the tax system, which is “regressive (those who earn less, pay more in proportion) and inefficient”.
For Dauphin, Brazil still has the ability to export and the solution is not only the currency depreciation against the dollar, but also on the correction of distortions such as the tax credits retained by the government and the system inefficiency.
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“When you are not sure about what you’re doing, you do it slowly,” he said referring to the uncertainties related to monetary policy actions and their effects on economic activity.