Well, it is official. Yesterday’s numbers reveal Brazil is the world’s sixth-largest economy, having beaten out the United Kingdom, and with a shot at surpassing France to be number five by the end of the year.
But in reality, this was a very bad week for economic news in Brazil. We learned that the country’s economy, as measured by GDP, only grew by 2.7 per cent in 2011. That is compared to 7.5 per cent in 2010. That is a big slowdown, leading the Central Bank today to make a huge cut (75 basis points) in Brazil’s very-high interest rates.
And this was just after we saw that China revised its own growth predictions downward, which hit the Brazilian stock markets hard. Of course, China is the main external driver of Brazilian growth.
The second half of 2011 was the worst period for Brazil in the last 5 years, and basically didn’t really grow at all.
But does this change Brazil’s long-term prospects? Yes, but perhaps not too much. The world is in deep crisis at the moment – the Eurozone debacle especially, alongside the high price of oil and a threat of war with Iran – and it was impressive Brazil managed even to keep its head above water. Growth is expected to pick back up next year, and almost everyone agrees that interest rates here need to come down sooner or later.
But things are not looking like they did a year ago. It does not seem like Brazil is on an automatic, independent path to superpower status. Getting back on track will likely require some kind of action from the government.
