Brazilian Economy Is Still Intact

By Park Hyong-ki

Staff Reporter

Brazil still has potential for further growth, a visiting top executive of BNP Paribas Asset Management Brazil said Wednesday.

He visited Seoul at the invitation of Shinhan BNP Paribas (BNPP) Investment Trust Management to soothe growing agitation over global economic slowdown on credit woes and inflation. Shinhan BNPP offers funds investing in Brazil and other South American regions.

Marcelo Giufrida, president of BNPP Asset Management Brazil, said although inflation is a concern for all, the Brazilian central bank is keeping it in constant check.

``We can't say Brazil is totally immune to global inflation, but locally, it is kept highly under control through a tightened monetary policy by the central bank,'' said Giufrida.

He added that this may be viewed as a risk for investment, but its central bank's hawkish stance against inflation is backed by the general public as well as political support in the country.

``Brazil's central bank wants to keep inflation well balanced within the band rate of between 2 to 6.5 percent,'' said the president.

Brazil has one of the highest interest rates in the world. Its benchmark interest rate stands at 12.25 percent, while its benchmark IPCA consumer price inflation is around 6 percent.

Analysts there expect its central bank to raise its key rate to 14.25 percent by the end of this year as part of efforts to tame inflation.

However, Giufrida noted that its prolonged monetary tightening is not a negative factor on the economy. Its macroeconomic fundamentals are generally sound ― low unemployment rate, diversified trading and decreasing local debt.

``Local debt has been falling. This will give more space for credit markets to expand,'' said the president.

Also, the country's trading partners have become diversified as ``trade with the U.S. accounts for about 15 percent of the total,'' meaning that the effect of the U.S. economy on Brazil will decrease going forward, noted Giufrida.

He also highlighted that despite rate-increases, foreign investment continues to climb over consumption growth, showing resilience on the Brazilian market.

Analysts in Sao Paulo project the benchmark Bovespa index to reach around 80,000 to 85,000 points by the year end.

``But we can't say that there is not going to be corrections in the future,'' said Giufrida.

The Bovespa market closed up 0.10 percent at 63,946.92 at the end of June from January, after hitting a high of 73,516.81 in May. It recorded one of the highest increases among global indices.

phk@koreatimes.co.kr