Brazil is becoming more 'competitive'

Seeking to woo foreign money, Rousseff insists that government infrastructure investments are reducing Brazil’s high cost of doing business

Brazil is becoming more 'competitive'

World Bulletin / News Desk

Government investment in infrastructure, education and innovation are all helping to increase Brazil competitiveness in the international economy, Brazillian President Dilma Roussef claimed at the World Economic Forum on Friday.

She used her 30-minute long speech in Davos, Switzerland to defend her administration's policies despite Brazil's struggling economy. Rousseff said that large government outlays to improve transport systems and other infrastructure would reduce production costs, helping to control inflation and improve productivity.

"We want to make our economy more competitive," Rousseff said. “This is why we are confronting the bottlenecks generated by decades of underinvestment, compounded by a sharp increase in demand in recent years."

Rousseff insisted that emerging economies like Brazil would continue to be exciting to investors even after more developed countries had recovered from the global economic crisis sparked by the 2007 credit crunch.

"It is hasty to say that, after the crisis, emerging economies will be less dynamic. They will be very dynamic because there are great opportunities.”

With a recent Central Bank poll showing most analysts predicting only 2.0 percent growth in 2014, less than the government was hoping for, Rousseff was particularly keen to encourage more foreign investors in Brazil.

“Our success in the coming years will be associated with the partnership with investors from Brazil and around the world. We have always treated external investment well,” Rousseff said.

“My government has taken steps to further facilitate this relationship. Aspects of recent events should not obscure this reality,” she added, alluding to Brazil’s economic turndown since 2011.

Foreign Direct Investment (FDI) has remained surprisingly consistent in Brazil, despite the rate at which Brazil’s economy has decelerated – from 7.5% GDP growth in 2010 to 0.9% in 2012.

Figures from Brazil’s Central Bank released Friday showed that Brazil brought in $64.045 billion of FDI in in 2013, down slightly from $65.272 billion in 2012. However, December’s FDI exceeded expectations of about $5.5 billion, reaching $6.490 billion.

Even so, FDI was not significant enough to dent Brazil’s current account deficit, which increased by $21.13 billion during 2013 to $81.37 billion at the end of the year.

A precipitous fall in Brazil’s trade surplus, pushed down by billions in imports of fuels by state-controlled oil and gas giant Petrobras, is significantly to blame for the widened deficit.

Brazil lacks sufficient refinery capacity to process enough oil into fuel for its increasingly affluent, car-driving population. To meet this demand, Petrobras has to spend billions on fuel in the international market and sell it at a loss in Brazil, where the government caps prices to ward off inflation.

Rousseff stressed her government’s dedication to keeping inflation low. "I want to emphasize that we will not be weak on inflation."

Controlling inflation and balanced public accounts are "essential requirements to ensure economic stability," she added.

Inflation has historically been a serious problem in Brazil, where many remember their wages losing value overnight in the 1990s. Controlling inflation – especially in the run-up to her fight for reelection in October – is a priority for Rousseff’s government.

Brazil’s official inflation rate ended the year at 5.91% which, although above market expectations of around 5.82%, was below the government's target ceiling of 6.5%.

Last Mod: 26 Ocak 2014, 15:14
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