Lula Says Brazil’s 3rd-Qtr GDP Grew at ‘Chinese Pace’

Lula Says Brazil’s 3rd-Qtr GDP Grew at ‘Chinese Pace’ (Update3)

Nov. 17 (Bloomberg) -- Brazil’s economy is expanding at a “Chinese pace” and quarter-on-quarter growth may have quickened to an annualized rate of about 9 percent in the July to September period, President Luiz Inacio Lula da Silva said.
Lula, in his weekly newspaper column, said the country’s $233 billion of international reserves have brought stability that guarantees funding for investment in social programs and infrastructure.
“Among several indicators that resulted from this highly favorable scenario, I can cite the surplus, in a year of crisis, of 1 million government-registered jobs and third-quarter gross domestic product, which should register growth at a Chinese pace of about 9 percent,” Lula wrote.
Brazil is scheduled to report third-quarter gross domestic product on Dec. 10.
Brazil’s economy emerged from its first recession since 2003 in the second quarter, expanding 1.9 percent from the previous three months, for an annualized pace of 7.6 percent. Brazil’s GDP contracted 1.2 percent in the second quarter compared with the same quarter in 2008, while China’s economy expanded 8.9 percent in the third quarter from the same period a year ago.
Growth in China has averaged 9.2 percent this decade, compared with a 3.6 percent annual average rate in Brazil. Finance Minister Guido Mantega said today the country’s economy may be able to achieve annual growth of between 6 percent and 6.5 percent through 2017.
A ‘Far Cry’
While Brazil’s recovery may gain momentum in the coming months, “it’s a far cry from Chinese growth rates,” said Douglas Smith, chief economist for the Americas at Standard Chartered Bank in New York.
Smith, who is forecasting 3.8 percent expansion next year, said if Chinese-like growth rates ever arose in Brazil it would provoke a return of inflation.
“There’s no way Lula could be talking about that kind of growth. It’s not sustainable,” in Brazil’s case, said Smith.
As the government and central bank pull back on fiscal and monetary stimulus measures, Brazil should grow 5 percent next year, compared with 0.2 percent for 2009, according to the latest median estimate among 100 economists surveyed by the central bank.
Managing Success
After leading an economic rebound in emerging markets, Latin America’s biggest economy has to “manage its own success” and plan its actions for a long-term horizon, central bank President Henrique Meirelles said yesterday.
To help pull the $1.6 trillion economy out of recession, policy makers this year cut the benchmark interest rate to a record low 8.75 percent, injected about 100 billion reais ($58 billion) into money markets and cut taxes on cars and consumer goods to help fuel demand.
The interest rate cuts are now influencing growth, helping to speed up Brazil’s economy, Zeina Latif, chief economist for Brazil at ING Bank in Sao Paulo, said in a phone interview.
“It will be healthy to raise rates next year, as the current level is leading to a more heated economy,” she said.
The central bank may have to start raising the so-called Selic rate as soon as April if Brazil’s recovery continues at a fast pace, Paulo Leme, Goldman Sachs Group Inc.’s chief economist for Latin America, said yesterday.
Companies such as AmBev, Latin America’s biggest brewer, and Portugal Telecom SGPS SA, co-owner of Brazil’s biggest mobile-phone company, have sought to capitalize on growth in Brazil by announcing new spending plans this year. State-owned oil company Petroleo Brasileiro SA is implementing a $174.4 billion spending plan that’s set to run until 2013.
The Finance Ministry forecasts that the country’s economy will expand 1 percent this year, while the central bank estimates 0.8 percent growth in 2009.
The real rose to 1.7117 per dollar from 1.7122 yesterday.

By Helder Marinho and Iuri Dantas