São Paulo – Brazil’s Gross Domestic Product (GDP) was up 1.5% in quarter two from quarter one this year, a result deemed “very good” by the minister of Finance Guido Mantega, who gave a press conference by telephone to international media outlets this Friday (30th) in Brasília. He said the GDP’s growth was driven by investment, and forecasted that this trend should become more pronounced as a result of myriad infrastructure concessions due in Brazil.
“The (GDP) growth is quality growth because it is being fuelled by investment, from the first quarter on, due to fixed capital formation,” said the minister. “Investment (in Brazil) will increase, as a result of new concessions due this year. Brazil is pouring more than US$ 200 billion into (infrastructure) projects pending auctioning by late 2013 or early 2014,” he said, in a reference to airport concession auctions in Rio de Janeiro and Confins, oil well auctions held last May, energy auctions held in August, road auctions amounting to 7,500 kilometres scheduled for September, and auctions of railway stretches.
According to quarter two GDP figures released this Friday morning by the Brazilian Institute of Geography and Statistics (IBGE), the 1.5% increase in GDP in quarter one this year is Brazil’s best performance since quarter one 2010, when the GDP was up 2%. In quarter one this year, the GDP was up 0.6%.
According to IBGE’s breakdown per economic sector, agriculture was up 3.9%, industry was up 2% and trade was up 0.8%. Demand-driven variation was up 0.3% for families’ consumption, 0.5% for government spending, and 3.6% for investment. Goods and services exports were up 6.9% and imports were up 0.6%. Mantega said sectors directly linked to demand have grown and caused investment to increase. Such is the case with the extraction industry, which was up 1.2%, the processing industry, up 1.7%, and civil construction, up 3.8%.
Mantega compared Brazil’s GDP to those of other emerging countries in the Brics, a bloc composed of Brazil, Russia, India, China and South America, and said that only China saw a higher increase in GDP in quarter two. “Our results were outstanding. Our GDP was second only to China’s, and we ranked second among the Brics. As the GDPs of other countries go down, Brazil’s goes up. I believe we will see a moderate growth trend throughout the year,” he said.
Consumption and inflation
The minister of Finance denied that there has been a change in Brazil’s growth policies, seeing as presently, GDP growth stems from rising investment, whereas three years ago, it was driven by families’ consumption. “There has been no change. This is the continuation of a successful model implemented over the past ten years, during which consumption has grown. At this time, there are approximately 100 million potential consumers in Brazil. From now on, however, the engine of growth is infrastructure investment. Consumption will grow at a slower rate because families have greater indebtedness levels and credit is scarcer, but the total wages paid should grow by 2% to 3% a year. On the other hand, we are directing our stimuli into infrastructure investment,” said Mantega.
The minister also said the reduction of inflation should enable families’ consumption to grow. Mantega ensured that the government is carefully monitoring the dollar hike, and acting to prevent Brazil’s real from greatly depreciating. He noted that the rising price of the American currency stems from a monetary policy of the Fed’s, i.e. the United States Central Bank, but said Brazil’s investment-driven GDP increase should cause the country to attract more foreign direct investment and equity investment. These can cause the dollar price to drop.
*Translated by Gabriel Pomerancblum
