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Economy Grew 9% in First Quarter

Brazil’s official statistical agency, IBGE, reports today that Brazil’s economy grew 9% in the first quarter over the year-ago period, and that GDP was up 2.7% over the last quarter of 2009.  They say this puts Brazil’s economy in a similar position to the other “BRIC” economies.  Already reporting for this year were China – with an 11.9% annualized growth rate – and India, at 8.6%.

Brazil’s central bank said the number was in line with their growth estimates.  We have not reviewed Brazil’s central bank previous estimates, but the projected range for this quarter was between 7.5%-10%.  This looks like a gimme, and we wonder why a central bank would give such generous leeway, unless it was trying to make sure the government couldn’t possibly disappoint.

Press commentary says Brazil is running counter to the economic trends in Europe, observing that Britain’s new government is talking austerity measures, and Germany just announced significant the layoffs of public service employees and personnel cuts in the armed services.  Brazilian government spending, meanwhile, continues to grow, raising fears of inflation.  The strong growth number just reported for the first quarter was strong, but growth is noticeably slower in the current quarter. 

Brazil Update - Moonshot GDP Release & Presidential Election Commentary - Brazil GDP

 

Elections

Brazil’s election authorities fined President Lula – for the fifth time – for campaign violations.  A sitting president is not allowed to campaign during the preliminary stages of an election, only once the official campaign season has started and the official candidates have been named.  Lula appeared before a federation of labor unions in a May Day celebration and said the country “needs continuity” – a clear reference to his hand-picked successor, Dilma Rousseff.  The mistake will cost him about US$4,500.

Polling shows recent gains in Rousseff'’s popularity, despite the scandal that surfaced in the past week, where it was revealed that a journalist, together with a former senior police official and a former military intelligence officer were planning an espionage campaign aimed at presumptive opposition candidate Jose Serra.

Under Brazil’s constitution, Lula, who has held the presidency for two terms, cannot run for a third consecutive term.  In a newspaper interview this week, Lula said he would not rule out the possibility of his returning to run for president in 2014.  He emphasized, however, that he is looking forward to attending the World Cup games that year – when Brazil will be the host – as a private citizen. 

Brazilians will vote for a new president on 3 October.

Moshe Silver

Chief Compliance Officer & Managing Director