LATAM round-up: Brazil: economy contracts
Brazil’s economy shrank 1.2% in the third quarter as pressure mounted on the scandal-hit Lula administration. The performance, which was much worse than analysts had been expecting, came after a rise in output of 1.1% in the second quarter. Analysts suggest that Brazil’s high interest rate is stifling growth. At one point the base rate was at 19.75%, before dropping back to 18.5%. Confidence in Brazil has also been shaken by corruption scandals involving the ruling PT Party.
For the nine months to the end of September, the economy has grown 2.6% and it now seems unlikely that the government will hit its growth target for the year of 3.4%. Finance minister Antonio Palocci shrugged off the latest figures, saying that after eight consecutive quarters of growth some disappointment was to be expected.