MercoPress. South Atlantic News Agency

Brazilian Central Bank declares recession over.

The threat of recession is behind and the Brazilian economy is ready to begin growing at an annual rate of 3%, said this week Central Bank president Henrique Meirelles.

"The worst is behind us," Meirelles told a joint session of the budget committees from both houses of Congress.

With inflation under control and fiscal stability ensured, South America's largest economy has the capacity to grow "3 percent or more in 2003" and at even higher levels in the future, added Mr. Meirelles

However Mr. Meirelles admitted that a policy of high interest rates during most of the year limited economic growth in 2003 to only 0.6%.

"After just ten months in office, the administration of President Luiz Inacio Lula da Silva has managed to overcome the economic crisis afflicting Brazil and reversed the negative expectations of foreign investors", said Mr. Meirelles.

To everybody's surprise Lula da Silva who had a long-held antagonism towards the International Monetary Fund and Brazil's foreign creditors, that caused investors to tremble, on taking office not only respected standing agreements but pledged even tighter austerity policies.

President Lula da Silva increased the budget surplus target agreed to with the IMF from 3.75% to 4.25% of GDP and during his first months in office raised interest rates to ward off a possible new outbreak of inflation.

But despite the optimistic outlook from Mr. Meirelles, Brazilian Vice President Jose Alencar and one of the country's main textile industrialists called for steeper interest rate reductions to help recover growth, particularly with the domestic economy.

"Until that happens, there may be growth, but not the sort of growth Brazil needs," said Mr. Alencar.

The Brazilian Central Bank cut interest rates five successive times since May, but many in the business sector say further reductions are needed.

Mr. Meirelles a former Bank of Boston CEO and Mr. Alencar have been at logger heads over interest rates since the Lula da Silva administration took office.