Brazil To Bite The Bullet In Reviving Its Economy

By Vikneswaran Raman KUALA LUMPUR, March 12 (Bernama) -- Brazil, which was once the world's fastest growing emerging economy and a darling with investors, is now facing a bleak outlook as it has fallen victim to, among others, the slump in commodity prices and sluggish global economy. Gross Domestic Product shrank 3.8 per cent in 2015, its worst in 25 years, inflation surged to 11 per cent and budget deficit rose to 10.3 per cent. "After years of rapid growth I think Brazil is now experiencing a bit of a ownturn due to sluggish commodity prices. We are a huge commodity producer," said Embassy of Brazil Minister Counsellor Daniel Falcon Lins in an interview with Bernama. The Latin American country, with a population of about 209 million people, ships coffee, iron ore, soybeans, corn, sugar and poultry products around the world. The country experienced steady growth between 2002 and 2008, benefitting largely from the then robust global growth and demand for commodities. It registered a trade surplus of US$19.68 billion last year but exports dipped 14 per cent to US$191.134 billion. China, which is experiencing a slowdown and a major consumer of iron ore is Brazil's prime export destination. Total trade with Beijing dropped to US$66.3 billion in 2015 from a record high of US$83.3 billion in 2013. So, a slump in demand for commodity has affected prices and the economy, he said. As for the fall in oil prices specifically, he said although Brazil was the second-largest producer of petroleum in South America in 2014, behind Venezuela, its economy was not largely dependent on oil revenue. "We consume most of the oil that we produce," Falcon said, adding that its state-controlled oil firm, Petrobas, was feeling the pinch. However, he pointed out that Brazil does import gas, especially from neighbouring countries, such as Bolivia and for that purpose it has invested heavily in infrastructure to ease trade. On how Brazil planned to revive its economy, he said the authorities were discussing several prudent measures for implementation. "The government is trying to do things like reduce public spending and devalue the Brazilian Real," he said, adding that the depreciation of the currency by more than 30 per cent against the US dollar in 2015 also forced companies to streamline their operations to enhance efficiency. Brazil's deepening economic crisis has cost nearly 1.4 million jobs between November 2014 and November 2015 with signs of more people being jobless soon. "It's a process that brings social pain but a necessary one," he added. Asked if hosting the World Cup in 2014 and the Olympics in 2016, which required huge investments in terms of infrastructure had burdened the Brazilian economy, he said it was rather beneficial. "Infrastructure such as subways and metro are good for the country and they connect cities and stadiums. These facilities do cost a lot of money but the government was very focused on what they were spending on and did it wisely. "Brazilians are football fanatics, so, the stadiums benefits the local people as they are able to watch more (live) matches," said Falcon. Events such as World Cup have promoted the country in term of tourism, which encouraged more tourist arrivals to Brazil, he said. "They come, stay in hotels and spend money and the economy gets the boost (it needs)," said Falcon proudly. Hosting the World Cup not only showed that Brazil is capable of hosting world class events but its ability in ensuring security, facilities or managing the movement of people. "Our capability is proven. We have done it," he said, adding that Brazil is all geared up to host the Olympics in June. He also assured the safety of athletes and visitors to Brazil amid growing concerns over Zika virus outbreak, stressing that the government has taken all necessary measures to avoid untoward incidents. On trade bilateral trade with ASEAN, Falcon said the country enjoyed good ties with both ASEAN and Malaysia in particular. He said Brazilian companies were well represented in the region. "We export products such as auto vehicles, auto parts as well as have a presence in the agriculture industry. We are probably the largest animal protein exporter to ASEAN. But sometimes people don't know it's our company," he said. Falcon added that Brazil imported essential items such as electronic products and rubber gloves from Malaysia and exported, among others, raw sugar and meat. In 2014, Brazil's diversified metals and mining giant Vale S.A. opened a US$1.37 billion iron ore processing centre at the Teluk Rubiah Maritime Terminal in Lumut which has a capacity of 30 million tonnes per year. "Malaysia has shown strong growth and has set certain examples in many areas which Brazil would like to emulate," he added. -- BERNAMA