Economists now predicts that the growth in Brazil will be lower than 1% in the year of 2012. The prediction follows a disappointing growth of 0,6% from the previous trimester and 0,9% from the previous year. The predictions were that the growth should be the double from previous trimester. The growth is not only bad news. A growth rate of 0,6% is dismal, but it is better than the previous trimesters. This can be an indication that the trend is improving. Predictions for 2013 lies between 3 and 4%. Not ideal but indications of a strong improvement from 2012.
Even so, Brazil is one of the BRIC countries. During its high growth rate in the mid of the last decade it stayed below 5% which is not a whopping rate. To almost entering into recession in the downturn is not an indication of a long term boom. There are also warnings that the revisions for 2013 can be on the downside.
Brazil has long protected its auto industry with high import taxes for foreign made cars.
BMW has now, according to CNBC, decided to build a plant in Brazil.
More specifically it has decided to invest US$ 500 million in the state of Santa Catarina that is located in the southern part of Brazil.
Imported cars have always been considered something of a luxury in Brazil, and even the cheapest BMWs currently cost more than US$ 50,000. The companies that currently have been in Brazil for an extended time, like GM, enjoys a huge market share. On the other hand brands like Honda and Toyota are considered almost like luxury brands.
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Today the Brazilian ministry reduced the growth estimate from 3% to 2% for 2012.
CNBC also reports that John-Paul Smith argue that investment in the BRIC countries (Brazil, China, India, China) is unwise at the moment. In the case of Brazil the argument is that the governments of South America gets to involved in the internal business dealings of individual businesses. From the perspective of the politicians this is done in order to force the businesses to act in a manner that is beneficial, from their perspective, to the society as a whole and not just the individual investors.
As a whole for all BRIC countries his recommendation remains “sharp underweight”.
The Brazilian banks have reduced the growth estimate for 2012 in Brazil to 1,9%. This is a sharp decline in comparison to the 2,5% they expected as late as in June. It reflects both reduced estimate of internal and external demand.
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In the first quarter of 2012 the Brazilian economy grew of a weak 0,2%.
The growth has rapidly deteriorated the last year and it has only grown for 0,8% the last year.
As the glogal economy also has shown deteriorated growth, including in China (importer of Brazilian products), the forecast is quite bleak. Brazilian almost completely escaped the 2008 crisis, and has not had a strong downturn for almost a decade.
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Overview of the facts of Brazilian economy from Wikipedia.
The economy of Brazil is the world’s seventh largest by nominal GDP and eighth largest by purchasing power parity.
Brazil has moderately free markets and an inward-oriented economy. Its economy is the largest in Latin American nations and the second largest in the western hemisphere.
Brazil is one of the fastest-growing major economies in the world with an average annual GDP growth rate of over 5 percent. In Brazilian reais, its GDP was estimated at R$ 3.143 trillion in 2009. The Brazilian economy has been predicted to become one of the five largest economies in the world in the decades to come.
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The main financial centers in Brazil are the city and States of São Paulo and Rio de Janeiro.
The research institution FGV informs that the informal part of the economy declined half a point from 17,7 to 17,2 from 2010 until 2011. The study indicate that the decline have been steady since 2003 when the informal part of the economy made up 21% of the economy.
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