Brazil is Slipping Deeper into Crisis

So far, Brazil has been weathering the global crisis better than many other countries. However, recent economic data points towards a sharp slowdown in the biggest economy in the Latin America.

During the last few years, the main driver of the Brazilian economy has been exports of agricultural and industrial commodities. So, as long as the global economy was performing well and commodity prices were high, the trade surplus along with the fiscal surplus was on the rise. Moreover, Brazil was attracting foreign capital. In fact, we estimated that during a series of share issues about 70 per cent of money came from overseas investors.

However, as the global financial crisis begins to get worst, the demand for Brazilian products is drying up. For example, the trade surplus narrowed to $24.7 billion last year from $40 billion in 2007 and industrial output slumped by 14.5 per cent year on year. To make things even worst, the global financial crisis triggered an outflow of foreign capital and Brazilian banks stopped lending to businesses and individuals.

Anna Fedec,
2/13/2009 5:40:38 AM