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“Brazil went through a period of great success…Now there is a more negative assessment that is going to the opposite extreme,” said Paulo Nogueira Batista, the IMF’s Executive Director for Brazil at a business seminar.
Batista said the economy is showing signs of recovery and recent speculation about Brazil’s economic crisis is exaggerated.
The Brazilian representative was reacting to a scathing report by the Economist, a London-based publication, which wondered whether Brazil’s economy had failed and why “the markets do not trust Ms Rousseff” referring to the Brazilian president as too “interfering”.
The publication belongs to the Economist Group, which is half owned by the Financial Times.
Batista cited the decreasing unemployment rate and the strength of the job market to ratify the monetary policy of the Dilma Rousseff administration.
“The fiscal fundamentals are pretty sound, and so is the monetary policy. Financial system regulation is good, reserves are high and so is foreign direct investment,” he said.
“I think Brazil is growing less than it can, but I think that now we are experiencing a more clear recovery. The figures show that the economy is warming up again,” added Batista.
The 2011 deceleration of the Brazilian economy was planned because the government believed the economy was overheating, he noted.
The surprise, he said, was not that there was a slowdown in 2011, but how difficult it has been to overcome that slowdown in 2012 and 2013.
A new Financial Stability Report (REF) from the Central Bank of Brazil has echoed Batista’s views.
The report shows Brazil’s banking sector has sufficient liquidity and resilience to withstand market turbulence.
The new report covers the first half of the year, analysing the financial market, its resistance to external shocks and its medium-term outlook.
Despite a volatile global market that impacted exchange rates and credit availability, especially in emerging economies like Brazil, the country fared relativity well, the bank said.
“The impact of financial market uncertainties in the first half of 2013, reflected in global liquidity and rise in market volatility, proved the…resilience of the Brazilian banking system,” the report said.
However, the IMF official warned against being complacent about the falling current account figures.
Brazil accumulated a current account deficit of $57.9 billion from January to August, more than the total in 2012.
“I think they should keep an eye on it, as it is not convenient to have a large current account deficit. It is a worrisome, but not alarming matter,” he said.
According to the bank report, the Brazilian banking system’s solvency stays at comfortable levels and its Basel Index remains elevated, at an average 16.9 per cent in the first half of 2013, well above the required minimum of 11 per cent.
In addition, stress tests carried out by the bank showed that the Brazilian banking system maintained its resilience even when confronted with scenarios in which macroeconomic conditions have significantly deteriorated.
Brazil’s President Dilma Rousseff had taken umbrage at the suggestions of the Economist last year that she should get rid of her Finance Minister Guido Mantega, following disappointing growth reports.
The Economist had insinuated that the finance minister misled investors with deceptive growth forecasts, urging President Rousseff to dismiss the minister.
“If so, she should fire Mr Mantega, whose over-optimistic forecasts have lost investors’ confidence,” said the article in the print edition of the magazine on December 8.
With inputs from Agencies