At the highest estimate, Argentina's economy is almost back where it was two years ago, which is to say, almost 12% below the level of 1998. If growth this year matches the budget estimate of 4% (some private analysts have predicted higher rates), it will have recovered another year of decline, reaching a level 8.4% below that of 1998. Maintaining the same rate of growth, full recovery from the recent four-year recession would only be achieved by 2006.
BRAZIL | Central bank applies brakes. Confounding almost all predictions by market analysts and sowing `apprehension and frustration' among business associations, last week the central bank's monetary committee decided to hold the benchmark interest rate at 16.5% (the bottom rung of a chain that leaves Brazilian borrowers paying up to 120%). The explanation: it was acting in the light of `uncertainties associated with the expected effects of monetary policy' and because the effects of the 10-point rate cut in recent months have not yet been fully reflected in the economy.
Business leaders said that this made no sense, and that the bank appeared to be issuing a warning signal that would lower growth expectations for this year. As we have been reporting, official growth forecasts range between 3% and 4% [WR-04-02] — on the assumption that the benchmark interest rate will be steadily lowered from the current 16.5% to 14% by year-end.
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