In 2006, lower interest rates and inflation and growth
Program Director of Corporate Courses Getulio Vargas Foundation
After the euphoria following the 4.9% growth in Gross Domestic Product (GDP) in 2004, Professor Antonio Carlos Porto Gonçalves, director of the Program Courses Corporate Getulio Vargas Foundation, guarantees: this year, GDP varies at most 3.5%. Next, an election year, the trend is that the total wealth of the country has new high: 4%, the same level of the inflation target of the government that must be met.
Foreign investors have three good reasons to dump resources in Brazil in 2006: the economic policy will be maintained with lower inflation, interest rates will be lower, a greater intake. Moreover, until now at least, the government has managed to make the political crisis has not affected the economy. And it must be so in the next year, even against a backdrop of the race inheritance.
In contrast, foreign investors remain two reasons that justify or explain the reticent behavior over the country: the dollar and the area of infrastructure, which remains the bottleneck. It is they who, according to Professor Antonio Carlos Porto Gonçalves, Program Director of Corporate Courses FGV, inhibit, delay and reject investments. He expects no "great emotion" in the economy next year. "The most optimistic scenario and the more cautious are not as antagonistic," he explains.
At the meeting of management gurus in Sao Paulo, Expo Management successfully performed by HSM, Professor Gill spoke to managers from many areas and explained why the trade balance, despite the low value of the dollar has hit successive record . "The results have shown an increased participation in markets and items with little weight in the export list, which shows the diversification of products sold and the countries of destination, something very positive," he mused. For him, however, "the current exchange rate level is in the medium term, potentially harmful to exports, in addition to causing fear to foreign investors that there might be a rapid appreciation of the dollar against the real, inhibiting the inflow of capital in the country. "
Economist spoke to the Manager Online and detailed scenarios for 2006 in the following interview.
Manager - A year ago at this same event, you said the businessmen who still believed that CLT could be renewed under Lula. She was not and certainly will not be an election year ...
Gonçalves - will not be changed also due to the political crisis the country is experiencing and that disrupted everything, the government has lost its political base in Congress, and any substantial reform faces very difficult to pass. This one, then forget it, since it is quite controversial. In an election year, the government will not succeed and will not even try to tamper with the CLT.
Manager - You said he saw a chance for that change in 2005 ...
Gonçalves - Yes, this year 2005 there was a chance for the modernization of the CLT, a slight chance that was lost five months ago. The government, the political crisis, missed the chance to approve any substantial reform, any structural reform.
Manager - Despite the reforms do not leave the paper and face obstacles in the conduct policy, which should be the growth of GDP in 2005?
Gill - the first year of this government, in 2003, GDP fell 0.2% last year, the result was positive and there was an increase of 4.9% and this year should grow just 3%, maybe 3.5 %.
Manager - And next year, the presidential election?
Gill - I think a little more rise 4%. But then, if no investment in infrastructure and a policy that leads to a reduction in interest rates, GDP will fluctuate between 3.5% and 4% a year at most. To have a more significant increase in the range of 7%, the reforms are crucial and the government would have to make a shock management.
Manager - blocking investments infrastructure?
Gonçalves - The government has invested little and the area of infrastructure already presents serious problems. The government has no resources, spends a lot of interest, therefore, has no basic investment this year as interest rates shot. Then, of course, everything I said last year in relation to bottlenecks in the area of infrastructure is still valid.
Manager - still worth or worsened, since the economy grew and the infrastructure is still pretty much the same?
Gonçalves - Yes, from this point of view, it has worsened. If this is not solved, the economy is slipping. This is the point, the basic element that exists: the government need to invest and invest heavily in infrastructure. The next year, election year, it must be hard for this, since the government has no political base. He can not cut spending in order to spend on infrastructure. So we have to guess, 2006 will be lost in this aspect. In the sense of public investment, the year must be lost.
Manager - For some time, the magazine Examination showed that the government spends only 0.5% of the budget in infra-structure. Developed nations, however, may spend the equivalent of 6%. What is the effect of this gap of 5.5% between what is spent and what would be ideal?
Gonçalves - The government has spent 35% of GDP in taxes and one can not say that it lacks resources. Ie: the government can not do a good job in the area of infrastructure and that inhibits investment.
Manager - This is reflected in the pool and inhibits investment in Brazil?
Gill - When a company decides to invest in a country if there is a chance without electricity, she'll think twice, think again. The investment is impaired in spite of the stability and credibility of national economic policy abroad. A company does not invest in a country that may be missing port, road, water, electricity. This inhibits investment.
Manager - But at least, inflation is no longer threat to the foreign investor?
Gonçalves - Inflation this year has been practically wiped out, eliminated. Will hit an average of 5.5% in the year and today it is little more than 6% in the period retroactive to the last 12 months. It will, therefore, fulfilled the goal that the government pursues. But if you go from 5.5% to 4% a year, you will feel much more comfortable in Brazil? It's much better inflation of 4% compared to 5.5% a year? This is the kind of success is questioned. The reduction of inflation is not successful because out of 5.5% per annum to 4% does not bring a gain in welfare.
Manager - This is the trend for next year?
Gonçalves - Yes it is. But one must consider that interest rates are high and the government seems lost in long-term goals. The Brazilian economy presents a sharp drop in inflation. In September, for example, the IPCA in 12 months was 6.04%. In the same period, the IGP-DI, which includes, in addition to retail prices, wholesale prices and construction, rose by 2.08%. In the year to last September, these rates were, respectively, variations of 3.95% and 0.19%. This decline in inflation should provide a reduction the basic interest rate of the economy, the Selic. Reducing the risk of Brazil must be another reason for the gradual reduction of this rate.
Manager - Some economists argue that the trend for 2006 is a reduction in interest rates, which should lead to a warming of economic activity ...
Gonçalves - Yes, interest rates are going down. May fall to 13% or 15%, hypothetically, for instance. And that makes a difference because the government will spend lots of money with interest. This difference of 2% means something close to $ 800 billion, or enough money to build two plants of Itaipu.
Manager - Despite interest, agriculture saved the first year of the economy under President Lula. The agricultural GDP grew 4.5% in 2003 at a time when the economy as a whole bitterly a performance 0.2% lower than the previous year. What is the trend for the agricultural sector?
Gonçalves - In 2005, GDP of the agricultural sector will not indicate recovery because there was much reduced size of areas planted, but in 2006, a recovery may occur.
Manager - E commerce?
Gonçalves - The trade is a reflection. If there is no industry and agriculture to sell, trade feels the reflection, the coup. I understand that primary key is the same industry and agriculture.
Manager - What is striking is that the country has exported more and even with a larger number of items, which shows the diversification of products sold to foreign markets and also the countries of destination. But industrial production has measured an increase and then there was a new setback ...
Gonçalves - While the exchange rate have gone from $ 3.90 to $ 2.20 in relation to the dollar, exports have not suffered so much, surprisingly. The trade surplus continues, and even break records. The reflections of the dollar exchange rate could refer to larger effects on balance. Everyone, including me, thought that the balance would feel more effects. But he felt. The Brazilian exports diversified number of products because there are also new products. This is a new fact: Brazil, today, has diversified the agenda of rich countries. With that, he might resist the reduction of exchange rate $ 3.90 to $ 2.20.
Manager - The dollar is illusory?
Gonçalves - Ever wonder if the exchange rate was R $ 3.90? I think $ 3.90 is an exaggeration, but let's assume that a dollar is worth $ 3.00. The real is very valuable for two reasons: the entry of foreign capital and the expansion of the falling dollar worldwide. Everybody was wrong in the projection of U.S. dollars. I did a survey on the dollar and saw that everyone was wrong, all projections have failed. But it's really cheap. In September, for example, exports totaled $ 10.6 billion and imports U.S. $ 6.3 billion. Both exports and imports were a record for the month of September.
Manager - How is the job next year with these values?
Gonçalves - A country that grows 3% a year can not assess a 5% growth in the supply of manpower. And part of the capital to increase production. If you have a country growing by 3% to 3.5% if the job in parallel, increased 1.5% or 2%, employment has grown much. The government does not place data on employment in percentage terms, refers to absolute numbers. With a workforce of 90 million people, 1.5% equates to 1.3 million jobs.
Manager - The absolute numbers, the government talks in generating 4 million jobs - reflect the economic reality in relation to economic growth?
Gonçalves - And it takes see and reflect on the quality of work. We do not know what the quality of jobs offered. There's a demagoguery in numbers. If we generate 4 million jobs in three years, this is a very bad, deadpan. To reason with me: if the workforce is 90 million people, 4 million jobs in three years - or four of which - a mean increase of 1% per year, a ridiculous number. The government talks of four million jobs since the absolute number is impressive, but meaningless.
Manager - With 4% inflation and 4% GDP growth next year will be better?
Gonçalves - No major changes. Any difference, more or less, will be minimal. The economy does not promise big thrills for the next year.
Manager - With the expectation of inflation at 4% and GDP to grow 4%, what is the best scenario and what the variation more optimistic?
Gonçalves - A clash of management, ie, a fiscal policy that reduce taxes and a monetary policy of interest rate reduction. If this occurs, the country creates conditions for further growth. In the worst case scenario, a most serious political crisis may interfere, for example, with the radicalization speech. President Lula has managed to shield the economy and deserves to be commended for that. If it was a Hugo Chávez, he could have caught the MST, the UNE and made a big fuss, characterized that it has been persecuted, that is the victim. The attitude of the president until he was good because he got quiet.
Manager - The economy is susceptible to turbulence in the succession process?
Gonçalves - The president has not admitted to candidacy by not knowing what the opposition has up its sleeve. One of the remarkable things was that this political crisis, passivity, perhaps fearing that the opposition might have on hand. Up because of it all, the government will maintain the economic policy, will honor the minister Palocci.
Manager - You can draw any lesson from political crisis and the fact that the economy has not been affected?
Gill - I think so. In Brazil there are some institutions - the Central Bank and the IRS, for example - that are above politics.
Manager - There are conditions for a new industrial recovery?
Gonçalves - The industrial area has returned to skating and can not be said to be a reflection of the political crisis. The factors were the high interest rates, the Central Bank's goal was to slow the economy to reduce and control over inflation, imports slowed, the currency has fallen sharply.
Manager - To the outsider, what does that mean?
Gonçalves - means little because the government will invest 0.5% in infrastructure. If the government invests little and you're an investor, why would you put your money or your business here?
Manager - The market potential and unmet demand in some industries - automobiles, for example - do not weigh?
Gonçalves - The government has not done his part. If the world can grow 7%, the company will also try to invest to grow at least 7%. Nobody Business has been great, everybody is on hold, paying to see. Fabio
0 comments:
Post a Comment