Brazil jumps from 15th to 12th greatest world economy

[Guest dreynsol]

http://www.brazzil.com/images/stories/2005/may05/brazilian_agriculture_soybeans.jpg

 

Despite Infrastructure Woes Brazil's Economy Is World's 12th

 

Written by Cláudia Abreu

Saturday, 14 May 2005

 

A Gross Domestic Product (GDP) of US$ 729.6 billion, the 12th position in the ranking of the greatest economies in the world, an investment rate of 19.6% of the GDP in 2004 and exports of US$ 104 billion in the last 12 months.

 

Last year, the Brazilian GDP increased 5.2% in relation to 2003, the greatest expansion since 1994. The result made the country jump from the 15th to 12th greatest world economy.

 

According to information from the Brazilian Institute for Geography and Statistics (Instituto Brasileiro de Geografia e Estatística, IBGE), the economic growth in 2004 was driven by the industry, the families' consumption and retaking of investments.

 

In the industry, durable consumers' goods (furniture and home appliances) and capital goods (machinery and equipment) were the main sectors.

 

The carmakers, bus and truck manufacturers registered, last year, an increase in 20.7% more than in 2003. In 2004, the Brazilian companies manufactured 2.2 million vehicles. The sector, however, has the capacity to produce 3 million.

 

"Not even our current exchange rate, considered unfavourable for exports (the American dollar closed at R$ 2.47 last Friday), is getting in the way of the carmakers," stated Rogério Mori, economics professor at the Economics School of São Paulo (EESP), of the Getúlio Vargas Foundation (FGV), university in São Paulo.

 

The automobiles meet the internal demand and are exported mainly to other countries in Latin America. Arab countries are increasing their purchases from Brazil.

 

...

 

Agribusiness

 

Agriculture continues as the country's main motor. In 2004, the remainder in the agribusiness trade balance beat records, with a surplus of US$ 34 billion. This year, the performance promises to be even better.

 

...

 

Barriers

 

Another barrier to development is the high benchmark interest rate (Selic) of Brazilian economy and the instability of the American currency. This year the 2004 figures will not repeat themselves.

 

"I believe in an increase in 3%," states Mori. The deceleration, according to the specialist, is in part because of the increase in the Selic that, currently, is of 19.5% per year.

 

"Last year, the rate was around 16% good part of the months," he says.

 

The rate has been increasing every month since September last year. The government's reasoning is that the measure helps contain inflation, since the aim this year is of 4.5% and, according to analysts, is currently at around 7%. "The government is pressing to close the year at 5.1%," states Mori.

 

The exchange value has also contributed to the deceleration. The rise and fall of the dollar has been causing discomfort among exporters.

 

"The American currency below R$ 2.70 may destabilize the trade balance," already say some businessmen in the country.

 

"The industries of consumer and capital goods, which had good performances in 2004, may suffer losses this year," states Mori.

 

You can read the entire article at:

 

http://www.brazzil.com/content/view/9250/76/

 

At least someone, other than us, is hoping the exchange rate improves! :-)

 

Tchau,

 

- Drey

[trilingual]

Honey, the entire export, agribusiness and tourism sectors of the economy (which are the main drivers of Brazil's economic recovery) want a weaker currency!!! They're screaming for it every day in the Brazilian media!!! The desirable range is between R$2.80 - R$3.15 = US$1.00.

 

The easiest way for Brazil to achieve that would be to reduce their astronomical interest rates. After suffering through years of runaway hyperinflation I can understand why Brazil is so allergic to the idea of inflation increasing even a small amount, but I think Brazil can lower interest rates considerably without setting off an inflationary cycle. A weaker real would slow down the current boom in consumption, especially of imports and tourism abroad by Brazilians (both of which have increase significantly) which should offset any inflationary impact of a cheaper real.

[Guest dreynsol]

Hi Tri,

 

Thanks for the input as usual. I agree with you about their 19.5% interest rates. I thought that 16% was high and thought they would be headed downward.

 

The only thing I can think of is that this is some pre-election year posturing so that they can brag that they reduced the inflation rate.

 

But I doubt that the average Brazilian on the street really cares as long as their salaries are keeping pace. Maybe, I'm wrong...

 

I find it amazing the 12th largest world economy still thinks that a US$120 minimum wage per month is acceptable (that's 75 cents per hour!) -- and our garotos make $20 per hour, without a tip. :-)

 

It's hopelessly sad that the rich keep getting richer, and the poor turn to violence or dealing in drugs.

 

It is very telling, that Big Daddy said that a popular novela (TV series) is about Brazilians trying to sneak into the US from Mexico. Those attempting to do so has increased over the last year, while their economy is the best it's been since 1994.

 

Hopefully, things will improve, otherwise you could see another Ecuador over the horizon where people take to the streets and demand that politicians live up to their word.

 

This is not politics in my opinion per se, only an insight into our living and enjoying the pleasures of Brazil. :-) and hopefully, not being surrounded by a desperate class of people willing to pull a knife on us to meagerly improve their social status. x( -- which actually did happen to a good friend and a veteran Rio traveller recently.

 

Tchau,

 

- Drey

[trilingual]

The grossly unequal distribution of wealth is Brazil's biggest social problem. But that's been true for 500 years, and Brazilians haven't revolted against it. In fact, they're revolted against relatively few things in their history. If it's a choice between revolution and going to the beach, or getting together with your friends for a few beers, guess which wins in Brazil?

 

That said, things ARE slowly getting better there, and the current economic growth phase is being fed by internal consumption and increased consumer optimism. The minimum wage is low, but for the first time in memory exceeds US$100 a month, thanks in part to the weak dollar which makes the R$320 minimum wage more valuable. Employment is growing and you can feel that people are more optimistic and less squeezed. Shopping mall sales at Xmas and Mother's Day were very good this year. In most big cities, families live on more than the minimum wage. Most regular jobs pay more than the minimum wage, and usually offer additional benefits like meal and transportation vouchers. For the sauna guys it's usually not difficult to pull in R$1000 a month or more. When added to the incomes of other family members, who all usually pool at least parts of their incomes, they manage to do OK. Not luxuriously, but OK. Most families operate the same way, pooling their income.

 

Brazil still needs a lot of work, and a lot of reform, but it isn't sitting on its hands. Over the long term it's clear that things have improved, even if it's sometimes difficult to see on a day-to-day basis.

[JamesK840]

I've been thinking of putting some of my IRA into Brazilian stock, specifically I noticed an Exchange Traded Fund (sorry, don't know the symbol off the top of my head) that I was going to put some money in since everything on this board points to things improving in Brazil (and I could swear I've noticed positive stories about Brazil in other sources a lot lately too).

 

Maybe less risky would be the Latin American ETF, and I was going to do some of that too for diversity, but any prognostications on the future of Brazil's economy? Any bumps in the road right around the corner?

 

It seems to me we're on a permanent overall downward economic slope in the US, and not just through bad political policy... Becoming a service economy seems like a house of cards and regardless it seems clear China's going to eventually become THE economic superpower... So diversifying out of country seems very important for long-term goals.

 

Anybody else feel this way?

[trilingual]

Personally I'm really sorry I didn't put some of my IRA into a Latin America fund a couple of years ago. They've really taken off in the last few years! The stock markets in Brazil and Argentina, in particular, have surged. The IBOVESPA index in Brazil keeps breaking records, but I don't know that there will be the booming growth in the future that we've seen in the past two or three years. I think the local stock markets have been recovering from the crashes caused by the currency devaluations and from here on out will grow at more normal rates. Argentina may grow at a faster rate than Brazil for a while longer because it was totally in the hole and has farther to go to get back to where it was. Brazil has largely recovered.

 

What happens in Brazil in the future will depend on whether interest rates there come down (which should increase the value of local stocks), whether the dollar strengthens there, and what happens to the rest of the world economy. Thanks to the strong dollar, Brazil's exports absolutely boomed, but now that the dollar has weakened against the real there are signs that exports and industrial production are slowing down -- Brazil's exports are starting to get more expensive. Big parts of Brazil's exports are agricultural, though, so how they do depends on crop conditions elsewhere. China is buying soybeans like crazy, for example, and my guess is that will continue to grow. According to "O Globo," for the first time Brazil pumped more oil than it uses a couple of days ago. It looks like Brazil may manage to become self-sufficient in oil soon, and that will help their economy considerably.

 

Lots of factors to consider, as you can see. If you're investing short-term, it's hard to say exactly what's going to happen. If you're looking more at mid-term or long-term I'd say go ahead (but not putting all your money in one basket). Latin America still has enormous room for growth. As prosperity spreads there, slowly but surely, more and more people come into the market economy and become consumers and savers themselves. So in the long-term I think it'll grow more than the U.S. or Europe. For much the same reasons you probably should think about putting some of your money in an Asian fund.

[Guest dreynsol]

Here's an interesting article about investing in Brazil.

 

http://www.brazzil.com/content/view/8966/76/

 

Tchau,

- Drey

[trilingual]

RE: Effects of strong real

 

While the difference in the exchange rate between the real and the dollar doesn't have that much impact when you're talking about small sums (R$100 - 200), the increasingly strong real does begin to smart when you're talking about larger numbers.

 

I was just recalculating my budget, which was based on R$2.8 = US$1. At today's exchange rate, with the dollar going for R$2.44, I've realized that my monthly U.S. income, when converted to reais, is R$1,000 less than it was a few months ago. I'm down almost R$2,000 from when the dollar was worth R$3.15!!! Since I now live on a middle-of-the-middle class fixed retirment income, having R$2,000 less a month to spend is making a big difference, considering that my expenses in Brazil remain at the same price (or more) as when the dollar was valued at R$3.15! Keep this in mind, guys, if you're considering retiring to Brazil on a limited fixed income!

 

It makes an even bigger difference if you're buying property. An apartment priced at R$200,000 was worth US$63,500 when the dollar was worth R$3.15. The same apartment now, with the dollar worth R$2.44, costs US$82,000 -- nearly US$20,000 more!!! Ouch!!!

 

Needless to say, I'm praying for the dollar to recover! Not only will it be good for me, personally, it'll also help Brazil's booming export and tourism industries, which are beginning to feel the negative effects of their products being more expensive for foreign customers. Brazil's Central Bank just raised interest rates AGAIN, complicating the hopes for a recovery of the dollar. But there were concurrent reports about inflation being flat (or even deflation, depending on the index being viewed) and this has been true for the last couple of months. So maybe the Central Bank will finally start ratcheting down the interest rates soon. Brazil's Central Bank is not yet fully autonomous, and the current administration NEEDS rates to come down in the near future if it's to have any chance of re-election next year. So, one way or another, I think rates will began falling, and one of the effects is likely to be that the real finally starts weakening. Unless, of course, the Bush administration manages to drive the U.S. over the precipice before then, in which case all bets are off!

[nycpaul]

RE: Effects of strong real

 

Speaking of an American retiring in Brazil on a fixed income, what should that income be at a minimum to enjoy a comfortable retirement in Rio? Nice apartment on or near the beach, frequent visits to restaurants, taking advantage of the saunas, etc.

[trilingual]

RE: Effects of strong real

 

Between US$2000 - 3000 a month (net) should be more than sufficient if you aren't responsible for anyone else. Besides your costs in Rio, you have to remember anything you continue having to pay in the U.S., plus airfares back and forth if you don't get permanent residence and spend part of the year back in the U.S.

 

My own expenses have increased because of having a BF I've been supporting while he's finishing his university degree. (He gave up his teaching job and moved to Rio to be with me and to earn his mathematics degree.) Recently he's been bringing in more income of his own through teaching Portuguese to foreigners (including M4Mers). He's had a steady flow of clients the past 3 months, so that's helped. He'll graduate at the end of next year, and should be able to find a full-time teaching job after that. Depending on whether he gets a job at a public or private school, he expects to be able to earn R$2000/mo. at a minimum, and there won't be any more tuition to pay. Obviously, that will have a big impact on the family budget! I'm also looking into ways I can supplement my own income. Another US$1000/mo. would ease the squeeze significantly!

 

For reference and planning purposes, the rent on my 2-bedroom apartment in Copacabana (on a standard 30-month lease) is R$850, which is somewhat on the low end. Had the apartment been renovated before rental, it could have gone for R$1200. Tenants also have to pay the monthly building association fee and the property tax. In my case, the total monthly expenditure comes to about R$1150. If you own an apartment you won't have monthly rent, of course, but you will still have the building fee and property tax to pay. Electricity, gas, phones (fixed and cellular), cable w/broadband, newspaper and magazine subscriptions and a weekly maid add another R$700 or so. I like to cook and we eat in quite a bit. Supermarket (for 2 people) runs about R$500/mo. When I don't feel like cooking, and it's not a special occasion, we usually go to neighborhood restaurants that are either "por kilo" or offer "executive" lunches (i.e., blue-plate-specials) for under R$20 per person including drinks.

 

That should help give you an idea of what it might cost to live in Rio.

[nycpaul]

RE: Effects of strong real

 

Thank you once again, Tri, for always giving such valuable information. I am seriously considering moving to Brazil upon my retirement here in the US. From your figures, it looks like this would be financially feasible for me.

 

Now, if I could ask you a few personal questions, which I would certainly understand if you don't care to answer. Did you meet your boyfriend at a sauna? Was is the age difference between you and him? Now that you have a boy friend, do you still frequent and take advantage of the sauna experience?

 

Finally, I have fallen in love with a sauna "boy." What are the chances of a relationship that starts this way becoming/remaining successful.

[trilingual]

RE: Tri Imitates Ann Landers

 

Well, this is kind of taking the thread off-topic but here goes:

 

I didn't meet my BF at a sauna. I met him on-line, on Gaydar. He's 27 and I'm 59. We have an "open" relationship. I can't realistically expect a good-looking, desirable 27-year-old gay man who likes to go out dancing not to be confronted with temptation and act upon it at times. I don't care about that; what I do care about is honesty. I don't want to put him in the position of having to lie about something, because if I caught him in a lie that would destroy my trust in him and it would destroy the relationship. I occasionally go to the saunas myself, but much less frequently than I did in the past. I just don't have the same "need" as before I became romantically involved. Having an "open" relationship hasn't always been completely easy or stress-free, but on the whole it's working. We HAVE been able to be honest with each other, our relationship has grown and developed beyond just the physical, and we've been together now for more than a year and a half. (It'll be 2 years in November.) During that time my BF has had a couple of guys he's fooled around with fall for him, hard, and they were both younger and considerably wealthier than I am. Yet he didn't take them up on their offers, and he's stayed with me. Needless to say, that's greatly reinforced my confidence in the strength of our relationship!

 

There's no reason why a relationship with a sauna guy can't succeed. It has for many other men! You just need to be clear-eyed about this, though. Some of the guys are manipulative and users, and are accustomed to being dishonest. Others, however, are honest, decent guys. They're just working at the saunas because of economic necessity and would be glad to stop if they had an alternative. If you're prepared to offer such an alternative (at least until your partner can find other suitable employment, and if you're willing to make up the difference between what he earned at the sauna and on a different job) things can work out. I would not recommend expecting 100% fidelity. The sauna guys are mostly handsome and desirable and opportunities for "adventures" come easily to them. And they're Latin males! Remember, too, that many of the guys really are bisexual (my boyfriend isn't) and may still want to be with women from time to time. So you'll have to face that reality if you want a relationship to work and be durable, just as I have. If you can handle all that, then I think your chances of a successful relationship are pretty good!

[nycpaul]

RE: Tri Imitates Ann Landers

 

Tri, I apologize if I got this thread a little off focus but I do appreciate you taking the time to answer my real and honest questions. I never cease to be amazed at the time and positive attention you give to all who post on this board. Obviously, I have many serious decisions to make in the near future.

[Guest dreynsol]

RE: Tri Imitates Ann Landers

 

hi nycpaul,

 

Feel free to continue this topic on my Sao Paulo Memorial Day thread since that trip will be more about the pitfalls of meeting and falling for a sauna boy. I just hope he picks up his money for the bus fare. :-)

 

- Drey

[xchris]

Live in a growing Brasil

 

Hi Nycpaul and Tri,

 

Brsil is growing fast, being now 12th place greatest world economy is a reason of happiness and hope among the young generation as well. This will contribute to modify our behave in Rio, or even to enlarge our interests in our possible future in Brasil. All said about costs of living in Rio is correct under my point of view.

 

I own now my apt in Flamengo and my bf live there while I'm in Italy. The costs Tri listed are fair. I have not to pay a rent, but I pay for University and transports : 500+300 Rs per month.

 

When you find a boy you plan living with in Rio, be sure to have a sort of honeymoon before, living in the same apt for a certain lenght of time, trying to discover his needs and habits, what he likes, and the way to survive together with balanved respect. It is clear to me that the idea of life is different for them, they sort of espect lot of money from their relationship with us, they are not accostumed to all the information we have in our world. And they see our First World like a Myth they would like to reach, even with the attitude of growing consumer habits. Most of these beautiful boys are like that, mostly when they work in saunas, seen as an investment full of dreams.

A percentage of hustlers, a percentage of thiefs and liers, a percentage of traficants, a percentage of desperate, a percentage of honest guys. But all nice and sweet. So you must be careful when you decide to exit from the role of quick client and open your Pandora Pot.

 

Try and hope. Ride and built. Every nice creation need time. And a cost. You must be tolerant but firm, speak a lot about what you like and what your purposes about the future are, been tolerant with his needs and clarify yours. Never hide your sorrows or disappointments, just understand that you both need to learn from the perspective of the other. You both have something to give and something to get, something precious to carry and something marvellous to obtein. Maybe Tomcal was right when he said "You dond give sex gratis, I don't give money gratis". This would be the easier way. But if or when we want more, we must know that the cost is greater, and hipotetically the gain larger...

 

Me and my bf have an open relationship as well, it is obvious due to the difference of age. I'm almost 47 and he's 26, he like to party and going disco and I doesn't. But we both are "galinha" enough to desire other dishes co eat. Just we clarify that we stay well togetheer and planned many projects for the future together, I support him and he helps me with all my necessities there.

 

The idea is that the relationship works good if we both are able to enlarge our knowledge and happyness thanks to the other.

 

We meet some friends there, from University or work, and established a nice relationship with people to hang out, going to popular fests, samba schools, visiting beaches out Rio, talking about normal brasilian problems, exchanging advices on lawyers and bricklayers, or just having evenings home together eating pizza, etc. This is a new orizon for me and I feel contribute to ellarge theirs. I love this life and I'm obviously planning to live in Rio more months soon, trying to use the remaining strenght of my income from the weakening Europe.

 

Like everything in the earth, there's no reason to dream impossible dreams, nor reasons to weep all the time, if you succeed in balancing the best of your legitimate values.

 

But i'm a Libra, so maybe I'm bit accostumed...

 

XcHRIS