Political Risk Latin America Blog @PolRiskLatam

Guest post: Brazil to follow China’s lead

Posted in News and Articles, Political Risk by politicalrisklatam on December 3, 2010

by Tony Volpon of Nomura for Financial Times – Beyond Brics, December 3rd, 2010.

How will Brazil’s economic policy change under Dilma Rousseff? Though elected as a continuity candidate to follow hyper-popular President Lula, we think Rousseff has in mind a different “model” for policy in Brazil, and that model is made in China.

This assertion may seem absurd in view of the vast differences between these two Bric economies. China’s growth model is based on its manufacturing exporting prowess, with high savings and investment rates generating a large (too large for many) current account surplus. Brazil, in many ways, is the mirror image: a commodity exporter with very low savings, running a large (and growing) current account deficit. However, Brazil is already shifting policy in Chinese-inspired directions.

During the 2008 crisis, the Brazilian government stepped up lending from state banks to face the credit crunch, making the BNDES the largest development bank in the world, bigger than the World Bank. The recovery of the economy has not led to less official lending. (continue reading… )


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