São Paulo – The world economy remains on the path to recovery and growth is being driven by wealthy countries. Brazil, however, should also face a difficult year as a result of economic and political crises in emerging countries, and drought on the domestic front. One way to make gains within this scenario, according to the economist José Roberto Mendonça de Barros, is by boosting exports. “Brazil will suffer badly, and as a result exports to other destinations, perhaps the Middle East, become more valuable,” he said last Tuesday (18th) during the lecture Brazilian economic outlook at the offices of the Arab Brazilian Chamber of Commerce in São Paulo.
As per the forecasts of MB Associados, a consulting firm of which the economist is a founding partner, the Brazilian Gross Domestic Product (GDP) should be up 1.6% this year and no more than 2% in 2015. The US dollar should be worth R$ 2.60 by the end of 2014, and the official inflation rate should be 6.5%, near the top of the target range set by the Central Bank.
Barros noted that the Brazilian government will need to manage challenges in the energy sector, which is in an “extremely delicate situation” due to low rainfall and high consumption, and to handle the rising inflation, which should be pressured by commodities prices. Agricultural products’ prices are on the way up as a result of the failure of the coffee crop, for instance. Add to these challenges the fact that this is a year of election, in which the government avoids making changes that affect the population.
Aside from domestic issues, crisis in emerging countries is likely to cause damage to Brazil. Case in points are losses in trade with the neighbours Venezuela and Argentina, but also due to political issues in Thailand, Ukraine, and Turkey, and economic issues in South Africa.
One of the avenues for Brazil to address these challenges, said Barros, is to work on trade with other countries and increase exports. Following the lecture, he told ANBA there is room for sales to Middle East countries to grow.
“Relations with the Arab countries can be expanded, because these countries possess a broad economic foundation, a relevant population, and are highly dependent on imported goods, which Brazil can supply, especially foodstuffs, seeing as our food industry is strong,” said Barros, who holds a PhD in Economics from Yale University, in the United States. He is also a former professor at the University of São Paulo and the former Economic Policy secretary to the Brazilian Ministry of Finance, during the first term in office of former president Fernando Henrique Cardoso (1995-1998).
The Arab Brazilian Chamber president Marcelo Sallum said Brazilian exports to Arab countries can increase, and businessmen must regard the foreign sector as an opportunity. He also said Brazil is still struggling with the Saudi embargo on Brazilian beef, and that this challenge can be overcome by organizing a business mission accompanied by a “high-ranking” Brazilian government official.
Global performance
Concerning the global economy, Barros believes recovery should continue in the United States and Japan, that China’s growth should remain stable, and that the Eurozone should see a gradual pickup. Japan, Barros said, is succeeding in fighting off deflation, which causes products’ prices to drop. China is faced with domestic political challenges, but should still grow by approximately 7.5%.
Some of the Eurozone economies are still in serious economic difficulty, as is the case with Italy, with a 12% unemployment rate, and Spain, at 25%. These two countries, however, have shown signs of reacting over the past few months. Still, said Barros, the single currency is devalued, which helps the performance of a stable economy such as Germany, but not that of Italy, for instance, which is plagued by rising production costs, shrinking industry output and debt rollover issues, none of which is the case with Germany.
Barros’ lecture was attended by roughly 50 entrepreneurs and executives. It opened the 2014 Arab Brazilian Chamber Lecture Cycle, organized by former board member Mário Rizkallah.
*Translated by Gabriel Pomerancblum
