Green shoots spring up in resilient Brazil economy
RIO DE JANEIRO (Reuters) - Brazil, among the last major economies to feel the effects of the financial crisis, is showing growing signs of a rebound on the back of resilient consumers, a healthy banking sector and higher global commodity prices.
At her busy real estate office on a beach-front Rio de Janeiro street, Beth Martins says she barely noticed the global crisis that sent house values plummeting in many countries.
Home sales hit record levels at the end of 2008, possibly as Brazilians, scarred by past crises, rushed to invest money in bricks and mortar, and have already recovered from a brief lull this year helped by a sharp drop in interest rates, she said.
"The money that the government liberated has helped a lot of people to buy. This crisis isn't affecting us much, and prices are rising -- it's surprising," the sales manager said.
After an abrupt contraction at the end of 2008, green shoots have been springing up in recent weeks in Latin America's biggest economy, surprising some economists who had expected Brazil's slump to be longer and deeper.
The economy shrank 0.8 percent in the first three months of 2009, putting Brazil officially in recession after the 3.6 percent fall in the last quarter of 2008. But the contraction was much smaller than many economists had expected, serving as a reminder of how Brazil's vast domestic market helps insulate it from global downturns.
Payroll jobs rose for a fourth straight month in May, indicating that companies are returning to normal after a 655,000 net plunge in jobs in December that prompted concern in President Luiz Inacio Lula da Silva's center-left government.
Major steelmaker Companhia Siderurgica Nacional, or CSN (CSNA3.SA), said this week it had hired 1,200 workers at its main plant near Rio, the latest sign that demand for Brazil's commodity exports from countries such as China is recovering. The company laid off more than a thousand workers earlier in the year as global demand for steel dried up.
Meanwhile, the main Sao Paulo stock market index .BVSP, up 32 percent this year as foreign funds flow back to the country, is approaching pre-crisis levels above 50,000. Brazil's currency, the real, has surged 19 percent this year to above 2 per U.S. dollar.
Taking another look at the data, U.S. bank Morgan Stanley last week dialed back its forecast that Brazil's economy would shrink 4.5 percent in 2009, saying it had been "far too pessimistic" and had not foreseen the rebound in fund inflows and commodities. Morgan Stanley now sees growth at minus 1 percent this year and a rebound to 2.5 percent growth next year.
SHIELDED
Economists say Brazil has been shielded from the crisis by its solid banking sector, whose lack of bad debt problems enabled it to keep lines of credit open to companies and consumers after an initial squeeze late last year.
Consumer confidence has been propped up by a series of tax breaks on cars and electrical appliances, while the currency's strength has kept inflation in check and allowed the central bank to slash interest rates. The benchmark rate is now below 10 percent for the first time in decades, making housing and car loans more attractive.
"We're not feeling any retraction," said Hector Nunez, chief executive of Wal-Mart Stores Inc (WMT.N) in Brazil, as the U.S. retailer announced plans this week to invest 1.6 billion reais here in 2009, up one-third over 2008.
"The most positive signal for the economic rebound is that credit offers are still growing." Continued...
