Emerging South

When I arrived in Brazil the first thing that stroke me is that all restaurants are jammed with people.  True: Embraer (planes) and Rio Vale Doce (iron) dismissed people; but national consumption doesn't seem to be affected for now.  I explained in a previous post the dynamics behind this.

A lot has been writte on Brazil last week; Karine Huet wrote a very balanced Brazil special feature in the Trends of March 5th, titled: "The B of the BRICS dances the Samba" and The Economist also dedicated an article on Brazil.

The arguments of the article in  The Economist repeat what I have been saying for the last two years:

"The reasons for Brazil's improvement are largely to do with public-sector debt, which was once a weak point but has been brought down below 40% of GDP. Foreign-currency borrowings have mostly been exchanged for real-denominated ones, so slumps in the currency no longer hurt the government’s balance-sheet. Brazil has built up $200 billion of reserves to defend the real. Its current-account deficit is small. Most important, this crisis is not pushing up inflation—Brazil’s congenital weakness. That in turn has allowed the central bank to cut rates (making public debt cheaper to service). This is the first time Brazil has been able to run a counter-cyclical monetary policy.

Yet by comparison with Brazil’s recent past, and also with what other countries are experiencing, the economy is in fair shape. The IMF forecasts that only the developing countries in Asia (which are poorer than Brazil), Africa (ditto) and the Middle East will do better in 2009. Given Brazil’s previous tendency to go into cardiac arrest whenever economies elsewhere became stressed, this is impressive."

When looking at this chart of the economical status of Europe, with more than 13 European countries having a public debt versus GDP ratio of more than 40%, which is Brazil's public debt ration one can indeed only say the status of Brazil is indeed impressive.  Belgian's public debt to GDP ratio is actually today more than twice as big as Brazil's. 
Add to that Brazil's commercial balance was positive in February, the country exported 1,767billion US$ more than it imported, things surely look not as grim as one would expect in this worldwide downwards spiral.