The 2008 guide to Brazil: Policies in place to weather the financial storms
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The 2008 guide to Brazil: Policies in place to weather the financial storms

Even though it is now under pressure from the global financial crisis, Brazil can look back on 2008 as a relatively good year, with growth close to target, and look forward from a position of strength, sustained by high forex reserves and a sound policy environment. Laurence Neville reports.

Policies in place to weather the storms
Brazil to gain a new global profile?
Banks trade on their strengths
Profitability holds up – so farConsolidation to accelerate?
Real economy takes a hit
Petrobras: hope amid the storm

Although Brazil was a latecomer to the global finance crisis, by October concerns were mounting: liquidity in the banking system had almost frozen and analysts were rapidly lowering their growth expectations for 2009. Yet while Brazil has been unable to sidestep many of the problems afflicting global markets, there is a widespread feeling that it is better placed than many emerging markets to weather the storm.

At the beginning of November, Fitch Ratings lowered its outlook on Mexico to negative from stable, and also cut its outlook on Chile to stable from positive. In contrast, the rating agency affirmed Brazil’s stable outlook, citing the country’s foreign exchange cushion of $200 billion (compared to $16 billion in 2002). Fitch had upgraded Brazil to investment grade in May – a month after Standard & Poor’s.

Moody’s remains sceptical, rating Brazil as non-investment grade. Yet the original rationale for the decision by S&P and Fitch to upgrade Brazil remains largely in place, even if its financial strength is being tested.

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