Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Buttonwood Conference: Are India and Brazil Still Global Growth Engines?

By

The Economist's Philip Coggan leads the concluding panel of the 5th Annual Buttonwood Gathering.

PrintPRINT
Moving on to Brazil, Coggan noted South America's largest economy is growing at a rate of 1.6%. Inflation is 5.3%, the current account deficit is 2.7% of the GDP, and the budget deficit is 2.5% of the GDP.

"If we're look at the BRICS as the exemplar of the countries of the future," Coggan said, "that does not sound too encouraging."

Fraga admits it's been a slow year, noting Brazil's trend rate of growth is below India's and China's. He turned to humor to illustrate the circumstances.

"I remember some years ago, hearing from a former colleague of mine at the Bank of Mexico: The good news is we're having the first normal business cycle in Mexico. The bad news is we're in a recession."

Brazil is experiencing a local recession driven by what Fraga sees as too much exuberance in the credit world in the past few years. On top of that is the "global anxiety" being driven by Europe and China.

But not all is bad in Brazil.

"Consumption has been growing at an accelerated pace....We're happy to report that the bottom half of population is actually growing at a much faster rate than the top half. So, you see development, a fantastic decline in the poverty rate, and the development of a lower middle class, which is different from a middle class in places [like the US], but it does consume."

Coggan condensed the difference between the investment opportunities in the two BRICS by explaining: "If India is the play on the emerging middle class...Brazil is seen as the play on commodities."

[Many investors have exposure to the Brazilian economy through iShares MSCI Brazil Index ETF (NYSEARCA:EWZ).]

Fraga, while not denying the role commodities like oil and iron ore play in the country's economic growth, was quick to mention there is much more diversification to the Brazilian economy.

"What we need now is to invest more," Fraga goes on to explain. "We are a low investment country, and this is the main reason why we don't grow. We have major gaps in infrastructure and education, and mobilizing capital and getting the government to be more effective in its roll."

Fraga went on to add that China has been a big consumer of commodities from Brazil, which has afforded Brazil some slack in its balance of payments.

Twitter: @brokawbrokaw
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE