Weekly Report - 13 January 2004

BRAZIL | Preparing for modest growth. At a 7 January cabinet meeting to discuss growth strategies, the tone was set by finance minister Antônio Palocci, when he said, `There is no country in the world that can have sustainable growth accompanied by high inflation. Brazil will not be the one to perform this feat.' He is hoping that the economy will expand by between 3% and 4% this year, against the estimated 0.3% of 2003. `The government's aim is to work to create conditions enabling long-term growth at ever-greater rates with more stability.' Palocci expects public investment in basic sanitation and housing to help bring down the unemployment rate, currently 12%. Agriculture minister Roberto Rodrigues says his sector could create 1.3m jobs, now that the 2003/04 harvest is expected to be 5.7% bigger than the last one. The main impetus for growth this year, as in 2003, is expected to come from exports, predicted to expand by 8.3% to a new record level of US$80bn.

BRAZIL | Signs of upturn in industry. Industrial output last November was 0.8% higher than in October, with which the accumulated 11-month production rose to 0.1% over the comparable period in 2002. Best performer was the mechanical sector, up 9% thanks largely to demand for tractors and diesel engines. Worst were pharmaceuticals (-18.4%) and apparel & footwear (-12.5%). Car production in the whole of 2003 was up 2%, sustained by a 37.7% increase in export earnings, since domestic sales shrank by 3.4%.

ARGENTINA | IMF to move on review. To read the Buenos Aires media (fed by government briefings), the IMF had already given it full marks in the delayed first performance review under the US$12.5bn, three-year standby agreement. Actually, what has happened is that IMF managing director Horst Köhler has announced that the review will go ahead, on the strength of a letter of intent from Buenos Aires in which, crucially, the Argentine authorities `reiterate [...] their determination to complete a public debt restructuring that attracts broad creditor support.' Economy minister Roberto Lavagna has said that the US government helped persuade the Fund. The fact that he also received a congratulatory letter from deputy managing director Anne Krueger suggests that there was some give on the Argentine side.