Brazil Outlook
Friday 28 January, 11.00 - 12.00
World Economic Forum: http://www.weforum.org/s?s=Brazil
With a new government in place, what are the country’s domestic and international priorities in 2011?
The following dimensions will be addressed:
- Policy continuity versus new realities
- Macroeconomic challenges
- Foreign policy agenda
Key Points
• New President Dilma Rousseff, Brazil’s first woman head of state, promises continuity.
• Brazil has figured out how to grow and decrease inequality at the same time.
• Inequality and infrastructure remain priorities.
• Brazil successfully weathered the economic crisis in part because it had the strength to take countercyclical measures for the first time in recent history.
• Monetary policy will stay on the same track that it has been on for the last 11 years.
Synopsis
Brazil’s first woman president, Dilma Rousseff, begins her term promising continuity and trying to maintain what most observers consider to be a virtuous circle of success. Notably, in recent years, the country managed to break with the old convention of expanding the pie before dividing it: Brazil has figured out how to grow and decrease inequality at the same time. The new administration plans to continue to battle inequality and to improve and add infrastructure – not in the least because the country will host the World Cup in 2014 and Rio de Janeiro the Olympics two years later.
Brazil has successfully weathered the economic crisis in part because its fiscal and monetary positions allowed it to take countercyclical measures for the first time in recent history. The National Development Bank (BNDES) reacted by increasing outlays, especially for investments in infrastructure. As the crisis winds down, the BNDES plans to retreat, to reduce its role and leave more space for private lenders.
Monetary policy will stay on the same track that it has been on for the last 11 years. The inflation target regime includes a floating exchange rate, accumulation of foreign reserves, and reasonably well adjusted public finances. The Central Bank’s mandate is to deliver monetary stability, which in the current climate means dealing with the copious flows of incoming capital. In that spirit, it has tightened financial and monetary conditions, and is keeping a steady eye on the inflation rate.
Part of the problem with capital flows to emerging market countries like Brazil is that they lack the capacity to absorb the massive influx. Foreign cash ends up in short-term instruments because there are not enough long-term opportunities available. Brazil has recently begun to provide incentives to encourage more investment in corporate bonds and other longer-term instruments.
In terms of foreign policy, Brazil will continue to strengthen ties to its South American neighbours and extend its global reach, without ignoring old ties with the United States, Europe and Japan. Rousseff has chosen Argentina for her first foreign visit as president, and she is scheduled to meet with US President Barack Obama in March. In recent years, Brazil has opened more than 40 embassies around the world, mainly in Africa, the Middle East and Central Asia, and it will work to strengthen ties in those places. It will also work closely with other emerging market countries, notably China, India and South Africa, in a number of venues. The country continues to support reform of the United Nations and of the UN Security Council.
Participants:
Antonio De Aguiar Patriota, Minister of External Relations of Brazil
Luciano Coutinho, President, Brazilian Development Bank (BNDES), Brazil
Frederico Fleury Curado, President and Chief Executive Officer, EMBRAER, Brazil; Global Agenda Council on Emerging Multinationals
Vikram Pandit, Chief Executive Officer, Citi, USA
Alexandre Tombini, President of the Central Bank of Brazil
Renato Augusto Villela, Secretary of State for Finance, Government of the State of Rio de Janeiro, Brazil
Moderated by
Moisés Naím, Senior Associate, International Economics, Carnegie Endowment for International Peace, USA; Global Agenda Council on Illicit Trade
Disclosures
This summary was prepared by William Hinchberger. The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.
Copyright 2011 World Economic Forum
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of the World Economic Forum.
[Same link directs to the live discussion]
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