• Posted on Friday, August 19, 2011
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Brazil to reassess policy during global economic slowdown

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On a day when U.S stock indexes plunged, Brazil’s Central Bank President Alexandre Tombini said policy makers will reexamine the impact of a slowdown in the global economy on Latin America’s largest country when they meet later this month.

“Surely the global environment that has become more challenging recently as well as the economic activity indicators that we have seen in Brazil will all be taken into account when we consider the next steps for monetary policy” at an Aug. 30-31 meeting , Tombini said in a Thursday conference call with journalists.

The worsening global environment, he said, is “a situation we will have to reassess.’’

Brazil, South Florida’s most important trading partner, has enjoyed robust growth — largely fueled by strong prices for its soybeans, iron ore and other commodities — in recent years. But sluggish world growth has begun to push down the price of commodities, and the Brazilian economy shrank in June.

After Tombini’s remarks, the yield on the most-traded interest rate futures contract maturing in January 2013 plunged to a 10-month low of 11.51 percent as traders bet the central bank would cut borrowing costs this year.

The real also fell .7 percent to 1.599 to the dollar and the Bovespa stock index slumped. In the United States, stock indexes experienced their biggest drops since Aug. 8 when Standard & Poor’s cut the U.S. credit rating.

But Brazil appears better poised to weather a global slowdown than in 2008. Tombini said there is more liquidity and larger international reserves (currently $351 billion). “We do have these two buffers,’’ he said.

Brazil’s public debt as a percentage of gross domestic product stands at 39.7 percent compared to 45.5 percent in 2007 prior to the global financial meltdown. “We have a clearly declining debt in Brazil. Our situation is comfortable,’’ said Tombini.

To read the complete article, visit www.miamiherald.com.

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