Brazilian economy picks up

Press, 28 March 1981, Page 14

Brazilian economy picks up

From “The Economist,” London

International banks are warming to Brazil again after a frosty spell at the end of last year. The economic figures are looking good — there was a 32 per cent rise in export earnings in 1980, and a 13 per cent cut in the volume of imported oil. Mr Antonio Delfim Neto, Brazil’s Planning Minister, seems to be making an international hit with his policies. Especially the economic liberalisation measures introduced last November and tighter control of public expenditure. And the Brazilians seem to have accepted, in a sharp contrast to last year, the high interest rates that the international bank market is demanding from Brazilian borrowers.

If the rosy picture continues, Brazil will "have little trouble in raising, on the international capital markets, the $23 billion bankers estimate it will need this year. The I.M.F. is not now expecting the Brazilians to come knocking at its door in 1981.

That $23 billion figure includes the refinancing of over $3 billion of Brazil’s $7 ballion of unpublished, “guesstimated” short-term debt. When their external accounts went askew at the end of 1980, the Brazilians upped their dependence on short-term credits from suppliers. especially of oil. Of the $2O billion remaining only $5 billion will actually be new money, if bankers continue to renew maturing loans as they are now doing. That will push up Brazil’s external debt by the end of 1981 from its present $6O billion to over $65 billion.

These figures also assume trade brought into balance this year. It is hoped that export earnings can be increased to $25 billion-$26 billion this year, and imports held at slightly below that.

Exports have got off to a far better start than in 1980. There was a deficit of only SIO4M in January, a bad exporting month. That is less than a

quarter of the January, 1980, figure. Excellent harvests have yet to feed through into the' trade figures, and the move to faster, regular devaluations (known as the “trotting peg") is starting to stimulate exporters. Record soya, coffee, sugar and maize crops are hoped for, although early estimates of a record 56M tons of grains. 12 per cent more than last year, are being revised downwards slightly, because of a drought in the North-east. This year's coffee crop is expected to be a record 30M sacks, compared with 22M last year. This is mixed news: the price will probably drop. It is hoped to earn more than last year's $1.3 billion from sugar, while a frost in the Florida orange groves will ensure that Brazil's citrus earns SSOOM in foreign exchange this year. Production "from Brazil's own oil weils is now running at around 230,000 barrels a day, 50.000 up on last year, and should continue to creep up this year: oil imports are being held at 750.000 b/d, at least for the first quarter.

The price for this virtue is being paid at home. Sales of cars in the first two months of 1981 are down by at least 30 per cent on last year's figures, and there seems little hope of an imminent upturn. More than 6000 car workers have already been laid off. and thousands more are likely to follow.

Consumer spending in Sao Paulo stores in January was down 11 per cent over the same, month last year. Unemployment. always hard to estimate, is thought to be rising. Brazil's pampered middle class is feeling the pinch: whitecollar jobs are disappearing, too.

Savings have risen sharply in the first two months, helped by the freeing of controls on interest rates. Over-all gross domestic product growth is likely to be around 5 per cent in 1981 compared with an embarrassingly high 8 per cent last year. Mr Delfim Neto is telling’visitors that, if gross domestic product growth looks like falling below 4 per cent, the Government will stimulate the economy.