São Paulo – Economist José Roberto Mendonça de Barros made a positive evaluation of the world economy over the next two years, in a talk promoted on Tuesday (09) at the Arab Brazilian Chamber of Commerce auditorium, in São Paulo. To him, this year will be better than last year, and 2014 will be better than 2013. Barros has already occupied several positions in the public and private sector has a postdoctorate from the University of Yale School of Economics, in the United States, and was a professor from the University of São Paulo (USP).
Despite the crisis that faces Europe, the economist sees positive signs on the horizon of the three main economies in the world: United States, China and Japan. In the United States, the real estate market has returned to growth, there is great potential in the area of energy, with forecasts showing that the country may become self-sufficient in oil by 2020; and the topic of the “fiscal cliff”, which generates so much fear late last year, did not generate serious effects.
“This is being the new ‘Millennium Bug’,” said the economist regarding the fiscal cliff. “The automatic cuts in the [North American] budget area already taking place and the economy is heading in the direction of a fiscal adjustment without an impending recession,” he added.
In his evaluation, the economy of the US should grow “moderately” this year and expand between 3% and 3.5% next year. “This time the global economy will be pulled by the United States,” he said.
That does not mean that China, the powerhouse in recent years, will perform badly. “There will be no ‘crash landing’ in China, which should grow 8% [this year],” he pointed out, referring to a term used by analysts to illustrate a possible forced deceleration of the Chinese Gross Domestic Product (GDP).
In the case of Japan, which has been stagnated for a long time, Barros pointed out that the government plans to use the monetary policy to provide incentives to economic activity, as was done in the United States and also by the European Central Bank, with the so-called “quantitative easing”, an euphemism for the injection of currency into the economy with the objective of causing depreciation and fostering exports.
Devaluation of the yen, as occurred with the dollar and euro, may, in theory, foster Japanese sales. “With this, the first, second and maybe the third main economies in the world can continue growing or return to growth,” he pointed out.
In Asia, in his opinion, the “disappointment” came from India, a “complex, closed and decelerating” economy. “India is no longer a candidate, alongside China, for double digit growth,” he said. “The country shines less in the world of the Brics,” he added, referring to the acronym that refers to Brazil, Russia, India, China, and, more recently South Africa.
Europe, in which one country after the other presents problems, with Cyprus as the most recent example, may also be lagging behind, in Barros’ opinion. Nothing stops other small nations from shaking the Euro Zone even further, not to mention the uncertainty that still surrounds the future of large economies like Italy and, mainly, Spain.
With the perspective of the United States becoming self-sufficient in oil, another of the Brics may also face problems, namely Russia, as one of the country’s main economic activities is the export of hydrocarbons.
This, however, should not affect the Arab oil exporters as strongly, as they can win markets, especially in Europe and Asia. As an example, Barros showed that in February this year, China overtook the US as the main importer of the commodity for the first time.
Brazil
To Brazil, the scenery is not bad. He believes that the foreign demand for Brazilian products, mainly those from agribusiness, “should continue good”, international interest rates should remain low and the dollar should appreciate.
Domestically, however, the economist believes that there has been a worsening in the business environment, mainly with regard to the “volume of regulation” by the government in certain sectors, like energy.
He pointed out, however, that the country has great advantages, which are its broad domestic market and the situation of full employment lived in the country. In this respect, business turned to the domestic market has great chances of prospering. “Brazil has a large domestic market and that should continue, and what is connected to it should do well. What is lacking all around the world today is internal consumption,” he said. It is worth recalling that what has made the Brazilian GDP grow in recent years was family consumption.
In this line, he listed sectors that have good perspectives for expansion in the country, like trade, services, consumer goods, civil construction and agribusiness. These are areas that he recommends to foreign investors, including the Arabs.
What is lacking for Brazil to have more vigorous and sustainable growth is a greater rate of investment. “The central problem is returning to investment in a conscious manner,” he said. Mainly in the area of infrastructure, public investment is sliding and private investment is still shy, and the way out, in his opinion, are concessions. “If the country continues sliding in this, it will continue slipping regarding growth,” he pointed out.
This question is directly connected to another matter of concern: inflation. With growing demand and low investment, the tendency is for offer not to supply the domestic market and result in higher prices.
This year, Barros believes that the Brazilian GDP should grow by up to 3%. In 2014, his projection is 4%. His estimates for inflation are 6% and 6.5%, respectively.
The talk was accompanied by businessmen, consultants, self-employed professionals and directors of sector organisations. The opening was by Arab Brazilian Chamber president Marcelo Sallum, by director Mário Rizkallah, who is responsible for organisation of talks, and by the dean of the Council of Arab Ambassadors in Brazil, Ibrahim Alzeben, who is the ambassador of Palestine.
*Translated by Mark Ament