Weekly Report - 6 January 2004

BRAZIL | Policy mismatch emerges. There could be friction between the finance ministry and the central bank, now that they have set disparate inflation targets for this year. In 2003, the effort to bring down the inflation rate was one of the main factors holding back economic growth. This year, the government, which wants to start delivering on campaign promises and needs growth to do so, has set its inflation target at 6%. The central bank, which had set it at 3.9%, has raised it, but only to 4.5%.

It is expected that final figures for 2003 will show annual inflation at 9.1%, down from the 12.4% recorded in 2002 but above the initial target of 8.5%.

SOUTHERN CONE | Record trade surpluses. Both Argentina and Brazil report record trade surpluses in 2003. Brazil has posted for the year as a whole a surplus of US$24.8bn (89% greater than that of 2002), which resulted from record export earnings of US$73.1bn (up 21.1%) against imports of US$48.25bn (up only 2.2% as a result of the stagnation of the domestic economy). Argentina reports a surplus of US$14.66bn for the first 11 months of the year, resulting from record exports of US$26.96bn (up 14%) against imports of US$12.3bn (up 50%).

ARGENTINA | Jobless rate shrinks. The national statistics institute Indec reports that the open unemployment rate in the third quarter was 16.3% (1.7m people), down from 17.8% in the second quarter. This has been calculated with new methodology introduced in October; using the old method the rate declined from 15.6% to 14.3%. If the 1.8m beneficiaries of the heads-of-family subsidy scheme are also classed as unemployed, the rate would rise to 21.4%. Indec also reports that 1.7m people work fewer than 35 hours a week.

URUGUAY | Leaving recession behind. The economics school of the Universidad de la República predicts that Uruguay's economy will growth this year by 6% and that unemployment will fall two percentage points, to 15%. Agricultural production will provide much of the push, expanding by 9%. Uruguay's GDP is reckoned to have grown by 1% in 2003.