Brazil predicts growth at 2% by year-end

Foreign Direct Investment
| The European | 5 September 2017
Rio de Janeiro

Brazil’s economy could be growing at a pace of 2% in annualized terms by year-end, reflecting drastic corporate debt-reduction efforts and slowing inflation that is spurring spending, Finance Minister Henrique Meirelles commented recently.

Speaking at an event sponsored by B3 SA Bolsa Balcão Brasil in the resort town of Campos do Jordão, Meirelles said efforts by large and small companies alike to reduce debt and downsize their businesses will be key to helping resume growth.

Those moves, coupled with increased household spending should ensure that “the economy returns to normal,” Meirelles said. “Some sectors are showing evidence that a recovery is under way, which will surprise many out there.”

His remarks reflect optimism that President Michel Temer’s strategy of curtailing state action and allowing private investors to take up the slack has borne fruit. Meirelles said such a tack has allowed the private sector to take space in the economy from the government for the first time in 30 years.

As part of a series of policy announcements, Meirelles said a revision of Brazil’s bankruptcy protection law will create mechanisms allowing companies to borrow during their restructurings. Currently, so-called debtor-in-possession loans are hard to structure during bankruptcy proceedings.

He also told attendants at the B3 event that the odds of a congressional approval of Temer’s proposed reform to the pension system remain “real” despite recent delays.

Plans to make state-controlled power utility Centrais Elétricas Brasileiras SA a company with dispersed share ownership will be more transformational for the country than, for instance, the 1997 milestone privatization of Brazil’s telecommunications industry, Meirelles said at the event.

The Brazilian government recently floated a proposal to cede control of the utility known as Eletrobras, which has struggled for years with high debt, operational inefficiencies and a scant ability to invest.

Further information from Reuters

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