MercoPress. South Atlantic News Agency

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Headlines:
Consumer prices contained in Brazil; Petrobras invests in oil and gas rigs; Brazilian industry expands 7,6%; Palocci insists with fiscal surplus.

Consumer prices contained in Brazil

Consumer prices in Brazil experienced a 0,44% increase during October, a slight surge over September (0,33%), accumulating 5,95% in the first ten months of 2004. According to the latest release from the Brazilian Statistics and Geography Institute, IBGE, consumer prices in the last twelve months reached 6,86%, slightly above the 6,70% of the September last twelve months. For the second months running food prices dropped, -0,19% and -0,23%, mainly fresh vegetables and fruit. However beans, a Brazilian staple soared 11,69%. The big boost in October comes from fuel prices with gasoline increasing 1,45% and alcohol for vehicles 5,25% (in Brazil most fuels are mixed with alcohol from sugar cane). Clothing also experienced an upward move, 1,12%. Regionally, Goiania was the city which during October experienced the highest consumer price index increase, 1,08% because of soaring electricity service costs (8,44%), while Recife had the lowest variation, 0,09%.

Petrobras invests in oil and gas rigs

The Brazilian Development Bank, BNDES, approved a 387 million US dollars loan for the building of a giant submersible P-52 oil and natural gas rig which will have a final cost of 895 million US dollars. Two companies licensed to explore and extract hydrocarbons offshore Brazil, Fels Setal S.A. and Technip Engenheria S.A. teamed in a joint venture FSTP Pte. Ltd, which ordered the building of P-52. The contract was awarded to Petrobras Netherlands (a subsidiary of the Brazilian oil company in Holland). Of the total 895 million US dollars bill, 758 million will be invested in the construction and equipment of the rig and 137 million in electricity generating and compressed gas modules. BNDES is also involved in financing the construction of two other oil rigs for Petrobras, P-54 and P-51, and will advance 400 million US dollars for each of them.

Brazilian industry expands 7,6%

Brazilian industrial production during September increased 7,6% compared to the same month a year ago, but remained stable at August 2004 levels, reports the Brazilian Geography and Statistics Institute, IBGE. This is the first time after six months running that industrial production remained unchanged. Last September the Brazilian Central Bank raised the basic SELIC rate for the first time since February 2003. However IBGE industry analysts refuse to blame interest rates arguing that deceleration does not mean "tendency reversal", but rather stability. Silvio Sales from IBGE points out that industrial survey show employment and salaries in industry continue to expand while idle capacity is contracting even further. "In the first nine months of this year industrial production accumulated 9% expansion and 7,2% in the last twelve months; regarding quarters, the third Q compared to last year jumped 10,5% and 2,6% over the second Q of 2004", underlined Mr. Sales. Taking into consideration industry's twelve main sectors, food and beverage increased 3,1 and 5,6% respectively, with tobacco contracting 28,1% and chemicals 1,2%.

Palocci insists with fiscal surplus

Brazilian Finance Minister Antonio Palocci admitted before the powerful Sao Paulo State Federation of Industries, FIASP, that the fiscal load (taxes paid by Brazilians) which stands at 35,68% of GDP will actually end this year at 37,2%. "We have a first world, undelivered and unreturned, fiscal load", complained Paulo Sakf president of FIASP. However Mr. Palocci argued the fiscal increase could be tracked to a greater expansion of the Brazilian economy and higher rates to help finance social security and old age pensions. According to Mr. Palocci in the first nine months of 2004, tax revenue was 17,2% above the same period last year. Further on Mr. Palocci insisted that a strong fiscal situation was needed to ensure future social investments and gains, and revealed that in the nine months of 2004, budget surplus was 12 billion Reales (4 billions US dollars approx.) above the agreed target with the IMF. "I would be the happiest person in the world" if those resources could be invested in other areas, but a fiscal balance is essential for stability and social advancement. "Our commitment is not with an IMF program, maybe next year we won't have a stand by agreement with the IMF, but we will continue with budget surpluses. Brazil needs the surpluses, not the IMF", underlined Mr. Palocci. The Brazilian minister also rejected claims of insufficient investments saying that fixed capital investment expanded at an annualized rate of 11,8% in the last twelve months, in line with the 5,5% growth of the economy in the same period. "Our growth faces challenges, not threats. Yes we are concerned with oil, world expansion and with reforms, but capital investment remains strong".