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Export growth remains strong. In June exports grew 17.7% over the same month in 1999, while imports
expanded by 5.5% for the same period.
As a result of strong export expansion, the year-over-year trade
balance surplus reached US$ 125 million, the largest surplus in four
years. Export growth is being
driven principally by the rebound in international and regional demand as
well as the improved competitiveness of Brazilian export products.
Strong fundamentals bolster currency stability.
Stronger fiscal balances, advancement on the
government's fiscal reform programme (principally the Fiscal
Responsibility Law), low inflation, the mounting trade surplus and
improved access to international capital markets provide a strong basis
for exchange rate stability this year.
The Real has remained strong since the beginning of the
year, depreciating only 0.6% since January.
Panellists expect the currency to depreciate 2.6% nominally in
2000, reaching 1.84 Reais to the US$ by year-end. Remaining risk factors to currency stability include the
potential for declining fiscal discipline and political uncertainty
associated with the upcoming October municipal elections.
Any perceived laxity on fiscal policy will result in an increase in
inflationary expectations and will force subsequent market adjustments to
the exchange rate.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Brazil. For more details please click here.
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