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August 04, 2011



As expected, a simplistic and one-sided portrayal.

1 - Brazil is not overheating; economic growth this year will be quite modest and industry is practically stagnated. As for consumer spending, a 5% annual growth in retail sails in quite lukewarm for what had been seen in the country for some time. I suggest you take a look at IBGE's and private agency's data - in the last few years it wasn't uncommon for retail sales to grow over 10%. That's a very standard number for a "hot" developing country. A 5% growth, by contrast, is indicative of cooling consumption, in line with the government's succesful attempts to restrict credit growth. Since the beginning of this year, the FT and other financial press outlets have lobbyied for interest rates hike by promoting an image of Brazil as a "overheating": but the only argument - a weak argument, for that matter - for the overheating thesis is the annual inflation numbers. GDP growth, credit growth, and monthly inflation - neither of them lend any credibility whatsoever to the "overheating" perception. Even the job market, which has so far managed to avoid a rise unemployment, is creating significantly less jobs than yester year.

2 - The New York Times story is a response to news **in Chile**. The New York Times, and specially its Latin American editor, Alexei Barrionuevo, are very fond of writing superficial, numbers-free, stereotyped stories on the region based on speculation and personal anecdotes, often on "trendy" subjects. I won't even bother reading until the end considering the background of Mr. Barrionuevo.

3 - Defaults are not in a nine-years high. Instead, it is annual default **growth** from January-June 2011 that is highest in 9 years. That is only natural considering that the first half of the previous year had the largest economic growth since the 70s and this year, by contrast, has been largely one of cooling - self-provoked cooling. Much of the defaults rise, as explained by Serasa Experian, is due to seasonal, not structural, events - namely, credit tightening by the government, interest rates hike, and new taxes on borrowing and other financial transactions. And even though, as you reported, 63% of households were indebted in July, the percentage seems to be decreasing as of late, as 64.5% of households were indebted a month before. That is, the trend for consumer credit is towards greater sustainability as its growth moderates. Perhaps bad news in the US may be preclusing you from taking a lighter view of other countries ("tristeza gosta de companhia"), but your coverage is still superficial and biased.

(I'll print this screen as proof that I have indeed posted a message.)

Jose Afonso

Dear Rachel,
Take a look at this movie - http://www.youtube.com/watch?v=SsGQNawYq6o&feature=player_embedded - and you'll find good news about Brazilian economy. Brazilian bank laws and rules are extremely restrictive.

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