Weekly Report - 30 March 2004

MERCOSUR | FTA talks with China. Brazilian foreign minister Celso Amorim announced last week that negotiations for a free-trade association with China may get under way as early as May. Amorim is just back from Beijing, where he held four exploratory meetings with top Chinese officials. Brazil's two-way rate with China has increased from US$1bn to US$8bn over the past nine years.

BRAZIL | FDI rising fast. Foreign direct investment in Brazil in February reached just over US$1bn, almost 30% more than in the same month of last year. This took the accumulated total to just over US$2bn, up 19%. This trend is in line with the government forecast of US$12.1bn for this year as a whole.

Brazil's FDI inflow had fallen from US$32.7bn in 2000 to US$10.1bn in 2003.

BRAZIL | Unemployment rate increasing. Brazil's open unemployment rate in February was 12%, up from 11.7% in January and 10.9% in December. During his campaign, President Lula da Silva had promised to create 10m jobs, but with the economy in the doldrums and 400,000 people entering the job market, his government has been unable to arrest the rise in unemployment. The `First Job' programme targeting new entrants has failed to make an impact.

ARGENTINA | Poverty rate falls. At the end of last year the proportion of urban Argentines living below the poverty line was 47.8%, a fall of slightly more than six percentage points since mid-2003, and of just under 10 points since the rate peaked in October 2002. The proportion of indigents fell in the second half of last year from 27.7% to 20.5%.

URUGUAY | Back on growth track. Uruguay's economy last year grew by 2.5%, after having contracted by 11% in 2002. Last year was the first one of growth since 1998. For this year the central bank expects 5% expansion.