Brazil’s finance minister Guido Montega gave a speech in New York recently. His objective was to encourage foreign investment of capital in Brazil. In his speech he addressed some of the concerns investors may have:
Inflation in Brazil ended 2012 at 5.84%. At this level inflation is getting close to the top of the central bank’s target range. (4.5% +/- 2%)
However, Montega said that “inflation control is a priority…We will never relax with inflation control.”
The Brazilian economy only grew at 1% in 2012, compared to 2.7% in 2011 and 7.5% in 201o. The finance minister expects 3-4% in 2013.
Montega believes the Real is now trading at a more realistic level after the central bank pushed down the currency 9% in 2012 and 11% in 2011.
As for unemployment, the rate came in higher than expected for the month of January, at 5.4%. This is after December’s record low of 4.6%!
The government of Brazil is currently taking steps to stimulate the economy and foreign investment:
- They are reducing taxes on car purchases, payrolls, and basic food items
- They are lower the cost of power
- They are providing more favorable financing
- Last month they got rid of the 6% IOF (tax on financial operations) tax on REITs for foreigners, which was a big move to encourage foreign investment
The central bank already has interest rates at a record low of 7.25%, but they will be meeting next week to decide if an increase or decrease should be made.
The problem in Brazil right now is the lack of foreign investment. Brazil desperately needs private investment to build up the country’s infrastructure.
Lastly, it is now official that Apple lost the iphone trademark in Brazil. A small consumer electronics company registered the name over 13 years ago. Poor Apple…