Brazil's economic recovery depends on U.S.
President Dilma Rousseff says Brazil's sluggish economy will improve only when there is an improvement in the U.S. economy.
By Ben Tavener
SAO PAULO
The Brazilian economy is “playing in defense” due to international pressures and will return to significant growth only when an improvement is seen in the United States' economic affairs, President Dilma Rousseff said Monday.
Rousseff, who is seeking a second term in office in October's presidential elections, made the comments during in an interview that was broadcast Monday morning on the national breakfast television show, Bom Dia Brasil.
“We are in a situation where Brazil is playing in defense in relation to the international crisis. Protecting jobs, wages and investments,” Rousseff said. “Why? Because we are betting on a recovery … where fiscal policy can be switched from defensive to offensive.”
The president said Brazil needed to keep a close eye on how the “international crisis” progressed. "The United States is evolving well; I believe Brazil can go into a different phase which required fewer stimuli. It can be handed over to the economy's natural dynamic and, perfectly well, move into recovery."
She said that although some other Latin countries had seen their economies grow faster, Brazil was suffering from a slump in demand from Argentina, Brazil's biggest importer, which is tackling its own economic woes.
Brazilian media picked up on a number of errors made by Rousseff in the interview, which was recorded Sunday, including that the country's rate of unemployment, which at 4.9 percent, the president said “no other country has.”
In reality, a number of countries have unemployment at or below this rate, including China, Russia and Austria, the Folha de S.Paulo newspaper reported. Joblessness among Brazil’s youth is also far higher that at 13.7 percent.
While being questioned on Brazil's lackluster economic performance, Rousseff slammed a manifesto pledge made by her main presidential rival, Brazilian Socialist Party candidate Marina Silva, to grant independence to the country's central bank.
Rousseff said Silva's proposal would create a “fourth power” and “give power to the bankers,” whom the president said her rival supported, as well as reducing the role of the country's public banks.
The Workers' Party candidate, who unlike Silva has not yet produced a formal manifesto, has regularly attacked proposals for an independent central bank, preferring the current “quasi independence” afforded to the institution, and said any reduced function of the public banks would jeopardize successful social programs implemented under the ruling government that have reduced poverty and helped less privileged Brazilians buy property.
Rousseff fought off criticism of the high level of inflation, which recent figures showed had surpassed the upper limit of the government's target annualized rate of 6.5 percent.
The president said inflation had been a problem in many countries, including in the United States, but that it was under control in Brazil even if it had temporarily breached the target ceiling.
Consumer prices rose 6.62 percent in the 12 months to mid-September, the country's national statistics agency said Friday.
However, later on Monday, the government released its much-anticipated revised forecast for 2014 economic growth, slashing its previous 1.8 percent forecast to 0.9 percent. The new prediction, which had been expected, is still higher than the most recent market forecast, and much weaker than the 2.5 percent that it achieved in 2013.
Brazil had previously been touted as a rising star among emerging economies: in 2010, the year in which Rousseff won her first term in office, the economy skyrocketed 7.5 percent. Although it weathered the 2008-9 international crisis without severe impact on growth or job losses, the last three years have all seen weaker economic expansion.
If GDP does come in under one percent this year, it will be the worst performance since 2009, when it contracted 0.3 percent.
The central bank's latest survey of market analysts reported that Brazil would see GDP growth of 0.30 percent this year, and 1.01 percent in 2015. It was the 17th time in a row that the market has cut its forecasts.
This bleak outlook has led the markets and academics to call for a change to the ruling government's fiscal policy, widely described as overly "interventionist" by business figures.
Rousseff previously signaled that she would present a "new team" if she were to be re-elected which would include the replacement of current finance minister Guido Mantega.
The markets have reluctantly backed Silva after polls showed market favorite Aécio Neves, candidate for the Social Democracy Party, was polling third and would likely be eliminated in the first round of voting Oct. 5.
Recent election polls have shown Rousseff's lead widening in the first round; however, a highly-likely runoff against Silva is currently too close to call.
