Sunday, December 2, 2012

Brazil's Economic Growth Sluggish

A Reuters article posted on the CNBC website reports that Brazil's economic growth for the third quarter was only 0.6%, half what analysts had predicted. Investment fell for the fifth quarter in a row. 

The continued slow growth is a cause for concern not just for Brazil, but for global markets as well, since it raises fears that Brazil and other emerging economies may be getting pulled into the economic downturn that has affected the rest of the world.

Analysts believe that the unexpectedly slow growth may indicate that underlying structural problems are to blame. The article cites Brazil's under-developed infrastructure, excessive labor regulations, difficulty finding qualified workers due to inferior public schools, and a complex tax code as some of the causes contributing to the slow growth and decreased investment.  

Much of Brazil's recent economic growth has been fueled by consumer spending, including making credit available to lower income workers. However, many consumers appear to have reached their credit limits.

On the positive side, Brazil continues to have impressively low unemployment at 5.3% and the government's finances are stable.  

Analysts give Dilma credit for tax breaks that she has implemented, but one analyst recommends that "instead of making piecemeal measures, the government needs to give clear signals that it will make reforms, that Brazil will be competitive in the future."

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