Economy

Why Brazil stands out

Brazil is on fire these days, and it’s not just on the soccer pitch.

The country’s economy is surging at its fastest pace in nearly 15 years, unemployment has fallen to levels not seen in a decade and Brazil’s central bank is ratcheting up interest rates to tamp down inflation. Last night, the Banco Central do Brasil raised its key benchmark rate three-quarters of a percentage point, to 10.25 per cent -- the second such increase since April.

The economy expanded by a whopping 9 per cent in the first quarter from a year earlier, fuelled by hot domestic demand and vastly increased investment. Its annual growth rate for the past three quarters clocks in at 10 per cent, and the government expects growth for this year of at least 6 per cent.

The torrid clip highlights what Bank of Canada Governor Mark Carney has called the "uneven" growth of economies emerging from the worst global slump since the Great Depression. While Europe’s debt crisis threatens to plunge the region back into recession, Japan continues to stagnate and the North American recovery looks increasingly fragile, many so-called developing countries are racing ahead in Asia and Latin America.

Brazil is quickly emerging as one of the key drivers of emerging-market power and by some measures boasts the healthiest of the BRIC economies. Unlike China, it has so far not had a significant problem -- yet -- with asset bubbles, and policy makers are determined to keep it that way. India has more serious inflation woes, and Russia’s economic performance remains heavily dependent on energy exports to such key slowing markets as eastern and central Europe.

(Published by The Globe and Mail – June 16, 2010)