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BRAZIL.

BRAZIL

 % Change (In millions US $)

 Interest Trade
Date CPI M1 Rate(%) Imports Exports Bal

 1990 1,794.8 2,350.0 -- 20,478.0 31,378.0 10,900.0
 1991 460.0 300.0 900.0 21,584.0 32,486.0 10,902.0
 1992 1,147.0 913.0 1,180.0 20,542.0 36,207.0 15,665.0
 1993 1,600.0 600.0 -- 24,870.0 38,821.0 14,300.0
 1994 800.0 200.0 1,600.0 33,535.0 43,659.0 10,124.0
 1995 20.0 25.0 70.0 50,000.0 46,900.0 -3,100.0
 1996 10.0 -15.0 35.0 52,900.0 47,700.0 -5,540.0
 1997 4.8 5.0 22.0 62,080.0 53,090.0 -8,990.0
 1998 -18.0 1.0 38.0 57,550.0 51,120.0 -6,430.0
 1999 9.1 15.0 26.6 49,138.0 48,483.0 -655.0
Jan 0.5 -- 41.0 3,700.0 2,940.0 -154.0
Feb 1.4 -- 45.0 3,050.0 3,270.0 249.0
Mar 0.6 -- 42.0 4,050.0 3,830.0 -220.0
Apr 0.5 -- 32.0 3,670.0 3,700.0 300.0
May -0.4 -- 24.5 4,070.0 4,380.0 312.0
Jun 0.8 -- 21.0 4,450.0 4,310.0 -144.0
Jul 1.1 -- 20.3 4,023.0 4,117.0 94.0
Aug 0.7 -- 19.2 4,458.0 4,770.0 -101.0
Sep 0.9 -- 19.1 4,254.0 4,187.0 -67.0
Oct 1.1 -- 18.8 4,458.0 4,304.0 -154.0
Nov 1.5 -- 18.7 4,531.0 4,002.0 -529.0
Dec 0.5 -- 18.8 4,424.0 4,673.0 249.0
 2000 4.4 8.0 16.5 55,777.0 55,086.0 -691.0
Jan 0.6 -- 19.0 3,569.0 3,453.0 -94.0
Feb -0.2 -- 19.0 4,047.0 4,123.0 78.0
Mar 0.2 -- 18.5 4,451.0 4,472.0 42.0
Apr 0.1 -- 18.5 3,995.0 4,181.0 183.0
May 0.0 -- 18.5 4,700.0 5,063.0 392.0
June 0.2 -- 17.5 4,605.0 4,861.0 258.0
Jul 1.4 -- 16.5 4,887.0 5,003.0 118.0
Aug 1.6 -- 16.5 5,423.0 5,519.0 97.0
Sep 0.3 -- 16.5 5,046.0 4,724.0 -320.0
Oct 0.0 -- 16.5 5,162.0 4,638.0 -523.0
Nov -0.1 -- 16.5 5,020.0 4,390.0 -630.0
Dec 0.3 -- 15.8 4,872.0 4,659.0 --
 2001 5.5 7.0 18.0 58,000.0 58,400.0 400.0
Jan 0.4 15.30 5,017.0 4,538.0 -479.0
Feb. 0.11 15.25 4,003 4,083 80.0
Mar 0.51 15.75 5,446 5,167 -279.0
Apr 0.61 16.25 4,610 4,730 120.0
May 0.17 16.75 5,156 5,367 211
Column
Number 1 2 3 4 5 6

 (In millions US $)

 Current Exchange Rate
Date Acct Bal Reserves Off/Par

 1990 1,790.0 8,751.0 172.0 190.0
 1991 2,000.0 8,552.0 1,090.0 1,120.0
 1992 6,450.0 19,893.0 12,241.0 14,600.0
 1993 2,000.0 23,000.0 320.0 325.0
 1994 -1,000.0 36,471.0 0.9 0.9
 1995 -17,000.0 50,000.0 1.0 1.0
 1996 -15,000.0 58,000.0 1.0 1.0
 1997 -33,800.0 51,000.0 1.1 1.1
 1998 -34,900.0 44,600.0 1.2 1.2
 1999 -27,000.0 36,353.0 1.8 2.0
Jan -- 36,400.0 2.1 2.0
Feb -- 35,600.0 2.0 2.1
Mar -- 34,600.0 1.7 1.7
Apr -- 44,300.0 1.7 1.7
May -- 44,300.0 1.7 1.8
Jun -- 43,000.0 1.8 1.8
Jul -- 41,346.0 1.8 1.9
Aug -- 41,918.0 1.9 2.0
Sep -- 42,753.0 1.9 2.0
Oct -- 40,053.0 2.0 2.0
Nov -- 42,175.0 1.9 2.0
Dec -- 36,353.0 1.8 2.0
 2000 -24,000.0 32,844.0 2.0 2.1
Jan -- 37,560.0 1.8 2.0
Feb -- 38,364.0 1.8 1.9
Mar -- 39,169.0 1.7 1.9
Apr -- 33,333.0 1.8 1.9
May -- 28,581.0 1.8 1.9
June -11,300.0 28,264.0 1.8 1.9
Jul -12,706.0 29,614.0 1.8 1.9
Aug -- 31,396.0 1.8 1.9
Sep -24,800.0 31,203.0 1.8 2.0
Oct -24,680.0 30,404.0 1.9 2.1
Nov -- 32,582.0 2.0 2.2
Dec -- 32,844.0 2.0 2.2
 2001 -24,000.0 34,000.0 2.1 2.4
Jan 35,604.0 2.0 2.1
Feb. 35,450 2.04 2.13
Mar 34,390 2.15 2.21
Apr 35,471 2.37 255
May 35,471 2.37 2.55
Column
Number 7 8 9 10

FOOTNOTES BY COLUMN: Annual figures for 2001 are projections. 1-2:
Annual figures represent January December increase. 3: Interest
rates shown for 1998 are the effective nominal monthly rate for 180
day loans. As of 1999, rate shown is Selic overnight rate. Annual
figures represent monthly average for year. 4-0: Annual figures
represent values at year end. 9: A new currency, the real,
was introduced in July 1994.

SOURCES BY COLUMN: 1, 2, 4-9: Central Bank. As of 2000, inflation
figures are from IPC FIPE.


FINANCIAL OUTLOOK

* Annual inflation forecasts have been increased by FIPE from 4% to 5%, due to increased transportation costs and higher energy, water and gasoline prices. Central bank officials predict inflation will rise 1.5 percentage points because of the sinking real during first-half 2001. Both the finance ministry and the central bank believe Brazil will meet its 2001 IMF inflation target of 4%, with a cushion of 2%, meaning that inflation can be as high as 6% and still meet IMF goals. The finance ministry announced a 2002 target of 3.25%, also with a 2% cushion, while the central bank projects inflation for 2002 will be 3%.

* The benchmark Selic interest rate has been steadily rising from its January low of 15.25%. Ongoing concerns about Argentine contagion and the depreciation of the real have sparked concerns over inflationary pressure, pushing the central bank to hike interest rates to 18.25% from 16.75%. According to the minutes of the last central bank meeting, potential damage to the economy from a falling real required the central bank to "increase significantly" the Selic rate.

* The trade balance may move into positive territory this year. The deficit has shrunk from $678 million at the end of the first quarter to $70 million at the end of the first half, as the sinking real has squelched imports and boosted exports. Overall, exports have reached record highs, despite the crisis in top trading partner Argentina and Brazil's own energy crisis. The temporary reduction of the Mercosur common external tariff (TEC) from 14% to 0% on capital goods could prove to be problematic for Brazil. A 0% TEC could push down exports to Argentina by 50%.

* Reserves increased in the second quarter because of a government decision to draw $2 billion from the IMF. The government also decided to suspend a payment due to the IMF at the end of the year. Central bank president Arminio Fraga announced that the government would increase the amount of bonds it plans to issue in 2001, from $6 billion to $7 billion. Foreign reserves jumped to $37.998 billion after the IMF capital injection.

* The real continues to fall, hitting record low levels since it was created in 1994. Culprits are the uncertainty surrounding Argentina's financial situation and fears that the energy crisis will hurt Brazil's economy in the coming years. The central bank was forced to intervene several times during the month of June to shore up the currency's value. On June 20, the real plunged to an all-time low of R2.47:$1, reflecting a 30% loss since January, before the central bank decided to step in. By mid-July, it had fallen as low as R2.553:$1.

ECONOMY MONITOR

* Growth Outlook: The energy crisis has forced down many of this year's earlier optimistic growth projections. The finance ministry predicts 3.6%, despite the crisis, but the central bank forecasts 2.8%, down from 4.3% in March. Joyce Chang of JP Morgan has lowered her projection to 2.5% for 2001 and to 3% for 2002. Deutsche Bank analysts have lowered predictions to 2.6% for 2001 and 3.2% for 2002. First-quarter growth was 4.13%.

* Political Factors: President Fernando Henrique Cardoso's popularity has plummeted after reaching record highs at the beginning of the year. The energy crisis and a number of corruption scandals among members of the ruling coalition have contributed to the Cardoso's fall from favor. Among the more serious scandals was the violation of the voting panel of the senate, which lead to the resignation of two powerful senators, including former senate president Antonio Carlos Magalhaes. Current senate president Jader Barbalho is also under fire, because of accusations of corruption while he was a minister in the Sarney administration (1985-90). Some analysts fear that the energy crisis and the crisis in the ruling coalition will threaten Cardoso's ability to handpick his successor next year. At present, health minister Jose Serra and the Ceara governor Tasso Jereissati are still considered likely candidates. The PMDB has threatened to abandon the coalition and pick its own candidate. One possibility is former president and current Minas Gerais governor Itamar Franco. The Workers Party recently announced an economic plan intended to calm the nerves of foreign investors.

* Fiscal Situation: The finance ministry announced a five-part program that should help improve Brazil's fiscal situation. The program includes an extension of the CPMF financial transactions tax until 2004, higher import taxes and lower taxes on exports, higher fuel taxes and revamping of the current sales tax. The primary surplus was within the IMF target of R16.7 billion (approximately $6.79 billion) for the first five months of the year, while the current account deficit reached $11.426 billion (5.25% of CDP), just below the 5% IMF target.

* Major Sectors: Industrial production continued to grow in the first quarter, with a 6.1% increase. This pace is expected to slow dramatically in the third quarter as a result of the energy crisis. Both industrial and residential consumers have been asked to cut consumption by 20%. The crisis has especially hurt electronics manufacturers, which have noticed a significant drop in purchases within Brazil.

* Employment: Despite fears that unemployment would climb due to energy rationing, it has continued to drop or remained steady. According to official statistics bureau IBGE, national unemployment reached 6.5% in both March and April. According to labor-union-supported think tank Diesse, unemployment dropped by 1.8% in the city of Sao Paulo in May. The percentage of unemployed people is expected to increase in June because energy rationing has prompted many manufacturers to cut production and lay off employees

* Stock Market: With the minority shareholder's law awaiting senate approval for the past 18 months, Sao Paulo Bovespa officials have taken several steps to improve minority shareholder's rights, corporate governance and transparency. In addition to the Novo Mercado, launched last November, the Bovespa has also started a new program to reward companies for improving investor relations. On June 26, the new Corporate Governance program listed 15 companies as Level One, allowing them to receive a larger share of funds from Brazilian institutional investors. They are Bradesco, Bradespar, Gerdau, Globo Cabo, Banco Itau, Itausa, Perdigao, Randon, Sadia, Unibanco, Unibanco Holdings, Varig, Varig Servicos, Varig Transportes and Weg.

COMPANY MONITOR

* Airplane manufacturer Embraer won a contract valued at $750 million to $3 billion to provide up to 100 large jets to Brazilian airline TAM. National development bank BNDES, along with several pension funds, recently sold 77 million shares of Embraer, roughly 10% of the company's total capital.

* Banco Itau began selling Level 1 ADRs on the New York stock exchange, and a Level 2 offering could be in the works. Itau had record first-quarter profits and the highest earnings of any public company in Brazil last year.

* Citibank is close to closing a deal to buy a R$750 million ($305 million) share of Banco Meridional. The bank is valued at R$3 billion. The deal would allow the Vidigal family to maintain some control of the bank.

* Sadia and Perdigao, Brazil's top processed food companies, announced joint meat export venture BRF Trading. The firms hope to take advantage of the mad-cow and foot-and-mouth crises to boost exports.

* The finance ministry announced plans to bail out Brazil's largest banks, Caixa Economica Federal and Banco do Brasil, both federally owned. Costs will run R12.5 billion ($5.4 billion) or 1% of GDP.

* Embratel applied to telecom regulator Anatel to offer local phone service. Doubt remains as to whether local carriers Telemar and Telefonica will meet Anatel's requirements to expand beyond their concessions.

* Internet Gratis, known as iG, Brazil's largest free ISP, announced that the company had reached the breakeven point. Earlier this year, iG sold part of its operations to Telemar and laid off employees to reduce costs.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2001 Gale, Cengage Learning. All rights reserved.

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Title Annotation:economic indicators
Publication:America's Insider
Article Type:Illustration
Geographic Code:3BRAZ
Date:Aug 3, 2001
Words:2368
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