According Brazil’s finance minister, Guido Mantega, Brazil’s economy is well shielded against any and all problems that might arise because of the U.S. debt-ceiling controversy or the European fiscal crisis.
As in the U.S., President Barack Obama is attempting to settle a broad compromise with Congress to raise the U.S. national debt ceiling for deep budget cuts, and probably tax increases, over the next 10 years, many fears that Brazilian exports and growth will be severely hampered by these moves in the US.
“I suppose they will find a way out,” Mantega said of the U.S. political negotiations. “I don’t think there will be a U.S. default or anything like it.” Mantega said that, “in any scenario, Brazil is well protected from any fallout.
Also, regarding the European fiscal crisis, which involves a number of countries with massive debt loads, Mantega said that he believes the situation is more complicated. But he expects that soon the ECB will be able to find solutions to the problems.
While speaking to the reporters last week, Mantega noted that Brazilian foreign reserves are now well above $300 billion, while the country’s net public-sector debt is equal to only about 40% of country’s gross domestic product.
When asked about the continued rising value of Brazilian Real against the U.S. dollar which is hurting Brazilian exporters, Mantega said, the pace of acceleration has slowed down. He asserted that there has been little change recently in the value of the currency. He also downplayed worries about continued intense foreign investment inflows, saying “inflows are normal and were manageable (not inflationary).
According to Brazilian Central Bank figures released Wednesday July 20th the net U.S. Dollar inflow into Brazil for the first 15 days of July was $10.5 billion. This is huge jump compared to last year where for the first 15 days of July 2010, Brazil registered a net outflow of $3.19 billion.