Tuesday, July 7, 2009

Financial Times: Brazil Dancing Through the Crisis: Stable, Mature, and Growing

Yesterday we posted a note discussing the record high sales of new vehicles in Brazil so far this year. Coincidentally, today the Financial Times of London has an article on Brazil: "Dancing Through the Economic Crisis". The article discusses what we said yesterday and expands on the Brazilian economy in general:

"It is a mature democracy with a diversified economy, a young, adaptable population revelling in increasingly stable employment and rising incomes. It is also a rising power in food and industrial commodities, a big future exporter of oil and home to the world’s fourth biggest derivatives and equities exchange."

"The country has been following broadly the same economic policies for the past 15 years, under one centre-right and one left-wing administration. [...] Brazil, unlike Russia, India and China, with which it is constantly compared as a member of the Bric group of big emerging nations, is not only a mature, stable and diversified economy but also one largely unthreatened by social, demographic or economic upheavals."

"... Brazil’s huge domestic market of 190m people, a market capable of supporting not only distinct brands but also entire industries. Take the “flex-fuel” car. More than 90 per cent of new cars sold in Brazil have “flex” engines, capable of running on gasoline or ethanol or any mixture of the two. This means motorists running on gasoline or ethanol or any mixture of the two. This means motorists can decide at the pump which fuel to buy, depending on price. Flex-fuel cars have helped Brazil become the world’s sixth biggest auto producer but they are made almost entirely for Brazilians."

"And the global crisis? It hit the auto industry hard, because sales depend on credit and credit disappeared from Brazil last year as it did from the rest of the world. But the government pumped liquidity into the economy by releasing R$100bn from banks’ reserve requirements – the share of their deposits they must park at the central bank – and temporarily removed vehicle sales taxes."

Green Shoots

"...But if talk of green shoots makes sense anywhere in the world it is in Brazil, an emerging world leader in farming, mining, oil, even investment banking, and with a home market its rivals can only dream of."

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