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Trade
deficit likely this year. Even though the trade balance
registered a US$ 80 million surplus in February – the first since August
last year – the annual trade balance deficit remained at over US$ 1.0
billion. The key driver behind the persistence of the deficit was
the continued strong growth in annual imports, which were up 14.2% on an
annual basis over February 2000. Nevertheless, export growth also
remained health, registering a 13.7% expansion. The key drivers
behind the sustained import growth are strong fuel and primary materials,
intermediate goods and capital good imports, while consumer good imports
remain more subdued. Panellists expect the trade balance to
deteriorate further this year as economic activity picks up. In
fact, this month most participants have adjusted their forecasts to
reflect the increased likelihood of a trade deficit this year.
Furthermore, exports growth has been adjusted downward from last month,
while import growth is now expected to grow more rapidly rather than
expected in last month’s forecast. As a result, panellists now
project a trade deficit to mount.
Political
coalition under pressure. The Chamber of Deputies and the
Senate elected new leadership in mid-February. Aecio Neves, of
Cardoso’s social-democratic PSDB was elected president of the lower
chamber, while Jader Barbalho of the opposition PMDB garnered the upper
chamber presidency. The big loser in the legislative leadership
election was outgoing Senate president Antonio Carlos Magalhaes of the
right leaning PFL, a principal ally and coalition member of the Cardoso
government since 1995. Following the election, President Cardoso
eliminated two key ministers associated with Magalhaes from his cabinet
for conspiring to undermine his government. The elections in
Congress and the resulting split between Cardoso and Magalhaes is also
likely to have broken the ties between both parties. As a result of
the split with the PFL, Cardoso and his party, the PSDB, is expected to
move closer to the left leaning PMDB on economic policy, particularly with
regards to fiscal priorities in terms of social and educational spending.
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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