MercoPress. South Atlantic News Agency

Good prospects for Brazilian bonds. Above inflation target

In spite of the inflation target setback, Brazil's prospects in the sovereign bond market are encouraging, “but the Central Bank is not in a hurry; the situation is becoming ever more favourable for Brazil”, said Alexandre Schwartsmann head of International Affairs of Brazil's Central Bank.

Mr. Schwartsmann revealed that Brazil has several loan proposals from international banks, "but is in no hurry to issue new bonds". Mr. Schwartsmann also indicated that so far this year the Brazilian Central Bank has purchased 8 billion US dollars in the Brazilian spot market and international reserves now stand above 20 billion US dollars.

The Brazilian press also published this Sunday that the Finance Minister has plans to send a bill to Congress early next year granting the Central Bank operational autonomy. The government's aim in reviving the bill that has been on hold since last April is to head off questions about freedom of action by the bank.

Comments last week by Jose Dirceu, President Luiz Inacio Lula da Silva's chief of staff, that interest rates could again fall this month causes dissent within the government reported the Sao Paulo press. Henrique Meirelles the Central Bank president said he objects any pressure from within the government for changes in monetary policy.

Since taking office last January, the Lula da Silva administration has been split among those who favour and apply orthodox policies (Finance Minister Antonio Palocci and Central Bank president Meirelles) and those who feel the economy, employment and the domestic market, needs boosting by easing credit. These are led by Brazilian vice-president and one of the country's main textile industrialists Jose Alencar.

Brazil above inflation target

Brazilian inflation accelerated modestly during November reaching 0,34%, according to the Brazilian Geographic and Statistics Institute.

The Ample Retail Price Index was above the 0,29% estimated by several local economists and market analysts. Accumulated inflation in the first eleven months of 2003 thus reached 8,74%, considerably less that a year ago when it stood at 10,22%, but above the government's target for the whole of the year, 8,5%. This means that for a second year running Brazil will not comply with its agreed inflation target, given the fact that there's still another month ahead December, when prices tend to rise because of Xmas shopping.