Brazil has been recently growing less than the US and Europe, the two regions at the heart of the world crisis. Although the Brazilian government believes (or at least pretends to believe) in a positive result for the third quarter Gross Domestic Product (GDP), most analysts bet on a negative growth – the fall varies between 0.1% and 0.3%. The official result will be announced by the Brazilian Institute of Geography and Statistics (IBGE) in early December. 
According to economist Carlos Thadeu, manager of Franklin Templeton Investments, the U.S. economy advanced 0.6% between July and September. Europe have also grown during this same period by about 0.2% to 0.3%. “In other words, the slowdown of the Brazilian economy was very significant. In addition to the GDP fall in the third quarter, one should not discount the possibility that Q4 (October – December 2011) GDP numbers will again be negative. If this happens, Brazil will be technically in recession, “he said.
In Thadeu’s views, it was this dismal picture that led the Central Bank to relax, last Friday, short-term credit standards (maturing in 60 months). The government believes that by strengthening consumer spending this holiday season through debt, it can partially offset the contraction of productive investment and industry weakness. “President Rousseff’s order is to make the economy work again. For her, there must not be the slightest possibility of the country falling into recession,” said an adviser to the Presidential Palace. 
Dilma has already been warned by the Finance Minister, Guido Mantega, and the president of BC, Alexander Tombini, that the global crisis will worsen in the coming months, even with the changes of government in Italy and Greece. Regardless of the fiscal adjustment commitments of the PMs of the two countries – Mario Monti, and Lucas Papademos, respectively – the results will only appear in the long run. In the short-term, though, the situation will get worse with a strong impact on Brazil. 
The government is confident that with the new incentives to credit, the 14% increase in the minimum wage next January, and the resumption of public expenditure for investments in infrastructure, both consumption and production will get back to ensure growth close to 4% in 2012 (this year, bet on a number less than 3%). The President Dilma is also counting on the continued reduction in the basic interest rate (Selic), so that companies feel more comfortable to expand factories, ensuring more jobs and higher wages for workers.
Even hoping for a larger cut in the Selic rate at this year’s last meeting (end of November), the Presidential Palace will be content with a cut of 0.5 bp from the current 11.50 % to 11%. In the financial market, almost 45% of investors already take for granted the decrease of 0.75 bp, with the base rate closing 2011 at 10.75%. Investors are betting that the Selic can fall to a single-digit by 1Q12, anywhere between 9.5% and 9.75%.

Source: Blog do Vicente

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