While posting the best economic performance in years with a forecast growth of 5 percent in 2008, Brazil is handling the impact of the subprime crisis in the United States with confidence and prudence.
In the last couple of months, the government of President Luiz Inacio Lula da Silva has been closely watching the development of the financial turmoil and claimed that for the time being, the Brazilian economy has not been significantly affected.
The consensus among political leaders and economists in the largest South American economy is that Brazil is in great shape to handle the turbulence from abroad.
The government is confident that if it maintains the fiscal equilibrium and social policies, keeps inflation low and continues to support growth, the country is expected to move on with its development strategy.
Lula said the United States "needs to assume responsibility to avoid the crisis from growing and becoming a greater worldwide problem."
Brazilian economists believe it is possible that the current turbulence will not affect the emerging economies and they remain optimistic about the Brazilian economy.
The devaluation of the US dollar should promote a new world economic balance despite the fact that there will be a reduction of trade and moderate economic growth.
At the same time, the retraction of developed economies is worrisome for Latin America. According to a recent study by the Getulio Vargas Foundation (FGV), the expected growth of the regionin 2008 has fallen from 4.7 percent last October to 4.1 percent during the beginning of 2008.
Lia Valls Pereia, an expert from the FGV, believed that although the expected growth of the region has fallen, the crisis will be felt much more strongly in Europe than in developing countries such as Brazil, Russia, India or South Africa.
The president of Brazil's Central Bank, Henrique Meirelles, considered Brazil to be strong enough to ride out the crisis. However, he warned, "No one should believe that Brazil is totally immune."
Finance Minister Guido Mantega believed the country could come out of the crisis stronger than before. International investors may consider investing in Brazil if it proves to be capable of weathering the storm, Mantega said.
The recent increase in jobs and the minimum wage has resulted in an expansion of credit, which may reach 600 billion US dollars, he said.
And Brazil's international reserves have reached 188 billion dollars, with a debt totaling 4 billion dollars. Adding to the potential of Brazil's economy is the recent discovery of large oil reserves under the ocean, which guarantee supply in the medium term.
Most economists still predict the Brazilian economy will grow nearly 5 percent this year and 4.5 percent in 2009. Other analysts believe investment risks will be reduced in the country this year, which should attract large amounts of foreign resources.
"Brazil is already demonstrating that it is worthy of foreign investment," said Julio Gomes de Almeida of the Institute of Research for Industrial Development.
(Xinhua News Agency March 6, 2008)
