Brazil ripe for reforms, says finance minister
November 2, 2016, 9:44 am

Brazil must diversify its trade portfolio to include certain industrial areas where it can truly compete on a global level [Xinhua]

Latin America’s biggest economy has contracted significantly this year, with economists expecting Brazil’s gross domestic product to contract 3.3 per cent this year.

Analysts have also cut their projections for inflation and interest rates, in addition to trade surplus predictions for 2017.

The reforms are meant to straighten out public finances after years of heavy government spending lead to a major government deficit, which has effectively reduced confidence in the Brazilian economy and slowed down growth.

“There is no doubt that the resumption of growth will be a slower process than in previous crises,” he told the press.

Meanwhile, President Michel Temer called on senators to throw their support behind a proposed constitutional amendment that caps federal spending for the next 20 years.

But the leftist opposition says it needs more time to study the amendment and the austerity measures it carries. They have called on a national referendum on the amendment, which could delay its effect until next year, when Temer’s term is nearly over.

Brazil crisis no joke

But Meirelles’s comments also come just a week after a warning from Speaker of the Lower House Rodrigo Maia that Brazil faces an economic cataclysm unless Congress agrees to a number of reforms and austerity measures to cut public spending, among other reforms.

“It’s not a joke what’s happening in Brazil,” Maia told the Financial Post last week.

“The crisis is real. It’s already hit the majority of municipalities, the majority of states, and if these reforms aren’t approved it will hit the federal government too.”

Brazil is facing the worst economic crisis since the post-World War II era. It has seen its fortunes plummet from positive GDP growth to contraction and recession in the past two years.

The warning from Maia comes on the heels of economic activity plummeting in August, according to the IBC-BR index.

The Central Bank’s IBC-BR which measures economic activity in Brazil’s farming, industry and services sectors, contracted 0.91 per cent in August.

In July, the figure was adjusted from a fall of 0.09 per cent to a fall of 0.18 per cent.

The BRICS Post with inputs from Agencies