Traders wagering against Brazil are making a bad bet as Latin America’s biggest economy is ready to grow 4 percent in 2013, Finance Minister Guido Mantega said.
The government yesterday cut taxes for the construction industry as it steps up efforts to revive growth in the biggest emerging market after China. Record low interest rates, subsidized credit and tax breaks to consumers and industry have failed to accelerate growth in 2012. Economists cut their 2012 growth forecast to 1.27 percent after gross domestic product expanded at half the expected pace.
“Whoever bets against Brazil is making a bad bet,” Mantega said in an interview from his office in Brasilia. “We are in a transition period.”
The Brazilian stock market has plunged 12.5 percent in dollar terms this year, more than any other of the 18 major stock markets tracked by Bloomberg.
Brazil has reduced its overnight benchmark rate by more than any other group of 20 nations in the past 16 months, has implemented measures that weaken the currency, lowered payroll taxes and designed a plan to reduce energy costs that will help fuel growth, Mantega said. Growth will quicken to about 4 percent in 2013 and about 5 percent in 2014, he said.
Fourth-quarter GDP will rise 0.8 percent from 0.6 percent in the third quarter in the most pessimistic scenario, Mantega said earlier yesterday at a public hearing in Congress. He added that third-quarter growth was disappointing, even as industry and agriculture grew.
High Rate ‘Addiction’
Analysts surveyed by Bloomberg forecast the economy had expanded 1.2 percent in the third quarter.
“Reaching that growth level in the fourth quarter in the worst case scenario is definitely possible,” Thiago Carlos, economist at Link SA Cctvm, said in a telephone interview from Sao Paulo. “It does not mean that there will be a sustained economic recovery. But investment will not fall like it did in the third quarter.”
Investment in Brazil fell 2 percent in the July-September period from the previous quarter to 18.7 percent of gross domestic product, the national statistics agency said Nov. 30.
The real has weakened 11.9 percent this year, the worst performance amid the 16-most traded currencies tracked by Bloomberg. Since August 2011, the central bank reduced the benchmark interest rate by 525 basis points, or 5.25 percentage points, to 7.25 percent.
“Lower interest rates, lower taxes and a more competitive exchange rate are the pillars of an economy that will start investing more,” Mantega said. “The economy was addicted to high interest rates. It’s an addiction almost like cocaine.”
Analysts expect the economy to expand 3.7 percent in 2013, after slowing for a second straight year in 2012, according to a central bank survey.
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