MercoPress. South Atlantic News Agency

Brazil's economy “in order” and ready to take-off.

President Luiz Inacio Lula da Silva administration has put Brazil's economy “in order” and established the necessary conditions for renewed growth and the rapid implementation of proposed reforms, announced Finance Minister Antonio Palocci in a national broadcast last Friday.

Mr. Palocci said inflation in Brazil had been brought under control and the economy would resume growth, therefore it was necessary for business leaders to again invest in the country.

"Brazil is preparing to grow again ... as minister responsible for the economy, I can say with absolute certainty that we won the battle (against inflation and economic difficulties)".

A day before president Lula da Silva indicated that in order to "make the necessary structural reforms and have the money (foreign investment) that will help in implementing these policies, which will serve to effectively combat poverty in the country, we must have our house more or less in order."

Last April president Lula da Silva sent Congress two bills considered crucial, targeted to reform the pensions and tax systems. The bills are currently in the Senate after having been approved by the Lower House and the president expects to sign them by the end of the year.

Mr. Palocci compared inflation levels at the time Mr. Lula da Silva took office last January and currently, and assured the problem was "under control".

Brazil's accumulated inflation in 2002 was 12.4% and currently stands in the range of 8% very close to the government's inflation target of 8.5% for 2003. Other data reinforcing Mr. Palocci's optimism is that the local currency Real, which once stood at 3.50 to the dollar, is now at approximately 2.90 to the greenback.

The Finance Minister also emphasized international confidence in Brazil by stating that the country's risk rate has fallen from 2,400 basis points in 2002 to a current level of just 600 basis points.

Mr. Palocci pointed out that the country's key Selic interest rate, which was at 26.5% in May now is down to 19% following the fifth consecutive cut in the basic rate which has a direct effect on the cost of credit for business and consumers.

Further on Mr. Palocci urged Brazilian businessmen to "respond with investment to promote increased exports, jobs and consumption", and anticipated that November will be the turning point for the domestic economy, "a process that will consolidate in 2004".

When the tough austerity mix of budget cuts and high interest rates were decided at the beginning of his government President Lula da Silva insisted that he "had to be sure that inflation would not return and that we are going to count on foreign and domestic credibility to be able to attract foreign investment and make investments in infrastructure, which we need so badly in Brazil."

Towards the end of June the Brazilian president promised that the country would at the start of the second half of this year, reap the benefits of austerity and begin enjoying economic growth.

In spite of government optimism and an extraordinarily dynamic export sector with record overseas sales, Brazil was considered in recession in the second quarter of 2003.