TheEconomist

Brazilian economy tends to grow less than the rest of world, said International Monetary Fund (IMF).

Instead of 4,7% forecasted by a government-funded researche institute on economics, IMF says Brazil is going to close this year around 4,4% of Gross National Product (GNP) expansion.

Should be the contrary, because Brazil is a large emerging economy (may be the 10th world largest), but the fact is that the world economy as a whole is predicted to growth about 5,2% (instead of former 4,9% in IMF expectations).

But Brazil is in good company: also US economy is shrinking in IMF predictive figures: US should not growth more than 2% ( expected before: 2,2% ).

So what? Forgetting the US huge twin deficits, what should do a 10th world-largest economy like Brazil?

There´s a very delicate economic fine-tunning which can be broken down at any moment in case local monetary authorities do the wrong thing in the wrong moment.

Or in case of eruption of the first real 21st century world economic crisis, like we´re already used to in the 80s and 90s.

 That´s the only real menace to Lula´s second term administration in Brazil: an external crisis.

If you´re doing business (or have any other link) with Brazil, watch at least two points when upgrading your information on this country:

# 1. Do not fly to or from Brazil: stay where you are, use phone lines and internet, instead of personal contact if you need to meet your business partners, staff, relatives and so on.

We´ll let you know when we ourselves start flying again inside our country, ok?

We´ve being using jeeps - because roads also are in very bad situation for the same reason jets falls over Amazonia and Sao Paulo: no investment in the last 2 decades and a ready-to-go US$ 1 trillion GNP emerging economy in a political wetern-type mass democracy for 22 years now.

# 2. Interest rates paid by  Brazilian federal bonds - one of the most really interesting investment options in the world - will probably stop its way down,  since there´s now an orange light on the world economic outlook after the overfinancing bubble disclosing in the US economy, reflecting on Asia and Europe markets this Friday, 27.

In case of US problems impact on Asia and emerging markets, Brazilian exports like raw materials for China, Korea and Japan will suffer from price lowering,  coming from lower imports from asian economies. 

In the political front, Lula´s government started to draw its future this week, following the national crisis over the TAM Air Bus exploding in Congonhas, Sao Paulo downtown airport: the new Defense minister is not jut a tall gaucho from the South pampas, but also a former head of the Supreme Court, Fernando Henrique Cardoso´s minister of Justice and now the manager in charge of solving Brazilian air crisis.

If minister Nelson Jobim succeeds, Lula, his party PT and allied PMDB will have got the ideal solution for a candidate to run for President in October 2010.

Lula is the only leader that could unite PT and PMDB but Constitution doesn´t accept third terms.

SP Stock Exchange opened in good shape reflecting the US GNP disclosure. Dollar is a little bit lower again - it´s about 1,85 reals for each US dollar (yesterday it was 1,92).

The problem is the country risk, which went up again: from 185 points last week to 220 points yesterday and 230 points  this Friday.

Brazil´s Finance Minister Guido Mantega went out from his usually calm evenings in Brasilia to call today a press conference just to say “it´s ok”.

Yeah, I thought, but who said it isn´t ok just because Sao Paulo Stock Exchange sank some three percent points? Wasn´t that just like London, Paris, Frankfurt.. all on the footsteps of US house financing falls - 6% less new house sold and the like?

That was still not enough to call a press conference just to say: “hi, it´s everything going very well here, see?”

There might be something behind.

And so Mantega laid his not so subtle warning: for now the US house financing problems do not represent any sort of menace or danger to Brazil´s stable economy.

Foreing reserves are on an all-time record pinacle of US$ 156 billion, reminded Mantega. Balance of payment´s currence accounts were positive for Brazil on half a hundred billion dollars in the last six months, which shows we don´t need any commercial credit lines in case of world-wide crisis begun with US, followed by Asia, then the rest of us.

This is the point: Lula found a house repaired by Berkeley PhD Pedro Malan (today Unibanco´s chairman) back in 1994 with presidents Itamar Franco and then Fernando Henrique´s Real Plan, to end 30-year long high inflation rates period that had started after the second oil shock in late 70s. 

Guido Mantega was like a heterodox economics teacher at Sao Paulo University when he asked Malan to write an article for a book he was coordinanting at that time - can´t remember him writing papers against the fundamentals of Real Plan economic policy, but was a PT teacher.

Like Lula´s first unlucky Finance minister, now representative Antonio Palocci (PT-SP), Mantega has been following almost strictly the blueprints laid down by Malan´s eight years period.

Fernando Henrique was reelected in 1998 and kept the economic team, which faced international crisis at that year ending with another agreement with IMF followed by a real huge devaluation.

Now real was in his best shape after the 1999 devaluation: the exchange rate was about 1 dollar for 1,8 reals, for exporters sadness.

Today, with NYSE fall reflecting on Sao Paulo stock market´s down to 3 negative points, as well as on other domestic financial markets in Brazil: the real was devaluated  about 8% in just few hours, closing at 1,92 reals for one US dollar.

But everything is ok and in case it isn´t ok Lula´s Finance minister says he´s prepared to take care of it all. 

No worry, then - even when Emerging Markets Bond Index Plus (EMBI+) for Brazil was going up 21 points today, reaching again the 205 mark - highest since last december, according to JP Mogan´s “country risk” for emerging economies like Brazil.

That was the opposite of what it was supposed to happen, to Finance Ministry´s view of the universe.

Mantega team expected - they still say they keep on waiting - for improving Brazil´s rate for investors in such a way that this year international risk estimating agencies would probably graduate the country to never-reached-before Investment Grade.

That means no extra price over the US Treasury bonds levels of risk.
Now, they´d like to wait to see what´s going on the next hours and days, specially  in the Asia huge markets where any small jumping up could be perceived as a 3.5 points earthquake for world´s emerging economies.
Brazil could suffer, in case the American house-financing problem spreads to Asian market, creating a real crisis over there.

In this case, Mantega explained this evening to newspeople in Brasilia, Brazil could face serious problems with raw materials exportations to China and Japan, for instance, as the prices would fall as the importers face troubles and reduce demand. 

Yeah, but nobody thinks this is actually going  to happen - it´s just in case, you know, in hard times here in Brazil. Last week it was the Congonhas airport air tragedy with 199 deaths (total 350 including the collision over Amazonian sky with the american Legacy executive jet 10 months ago).

It´s a lot of troubles to face, so much that in Brazil nobody´s paying much attention to economic indicators inside the US house market…

Would it be, say, high technology virtual markets, ok - but old real estate stuff?

Yeah, let´s wait for China first.  Still no news down here. Which means good news for money owners around.

Yet.