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The low growth, which was less than half what markets expected,marked a third consecutive quarter of weak activity in the world ssixth-largest economy. It will also increase pressure on PresidentDilma Rousseff to enact much bolder reforms that could reclaimBrazil s mantle as a favourite of global investors. That reputation has faded since mid-2011 as Brazil failed to copeadequately with the challenges posed by its boom over the pastdecade. An overloaded transport system, an expensive andunderqualified labour force and chronically low levels ofinvestment have combined to hold back the economy. The data released by the government on Friday showed that, despitenumerous stimulus packages enacted by Ms. Rousseff since late lastyear, investment shrank in the first quarter. Some business leaderssay that much more dramatic steps such as an across-the-boardsimplification of Brazil s byzantine tax code are necessary toget the economy back on track. The government needs a growth plan. It s not enough to carry outisolated measures because they don t take us anywhere, saidMiguel Daoud, director for Global Financial Advisor, a consultingfirm. The worst-performing sector in the first quarter was agriculture,which has been damaged by a severe drought in southern Brazil.While industry did better than some expected, separate and moreup-to-date data released on Friday suggested a meaningful recoveryin that sector also remains far off. Taken together, the data seem likely to spark more interest ratecuts by Brazil s central bank and cause another wave of downwardrevisions to the economic outlook. Economists had already expectedgrowth of just under 3 per cent this year in line with growth of2.7 per cent in 2011, and a far cry from the booming 7.5-per-centexpansion in 2010. These are signs that, really, GDP [this year]may end up belowwhat people are expecting, what the government s expecting, saidRodrigo Melo, chief economist at Maua Sekular, an asset managementfirm in Sao Paulo. Several other big emerging markets are also sputtering, threateningto deprive the global economy of one of its only sources of fastgrowth. India reported its slowest quarterly pace of growth in nineyears on Thursday, while South Africa may also struggle to reach3-per-cent growth this year. Payroll data released in the United States on Friday also added topessimism about the global economy. Brazil s problems are to some extent a reflection of problemsabroad, including a slowdown in China, its biggest trading partner,and a loss of confidence in the euro zone. Ms. Rousseff has blameda monetary tsunami of cheap money in Europe and the UnitedStates for making Brazil s currency overvalued and causing itsexports to become uncompetitive. Yet other Latin American countries have generally held up better,with the International Monetary Fund forecasting the region as awhole will grow 3.7 per cent this year. That suggests that morelocal factors such as a lack of investor confidence areplaying a big role in Brazil s woes. Finance Minister Guido Mantega said on Monday that the economyshould accelerate in the second half of this year as interest ratecuts and measures to stimulate credit and relieve high industryinventories take effect. Private economists also expect some improvement. But a deeper lookat Friday s data shows several problems, particularly the chill ininvestment, that could limit Brazil s prospects going forward. Spending on capital goods declined 1.8 per cent compared with theprevious quarter, the IBGE statistics agency said. Investment overall fell to 18.7 per cent of GDP compared with 19.5 per cent in thefirst quarter in 2011. The plunge in investment is the issue that appears of mostconcern to us, underscoring that, not only the destocking cycle ishurting the economy, but also that confidence is deteriorating, Mauricio Rosal, an analyst for Raymond James, wrote in a researchnote. The farm sector contracted 7.3 per cent compared with the previousquarter after dry weather over the past season dragged down outputfrom Brazil s two most important crops soybeans and sugar cane. Industrial output expanded 1.7 per cent from the last quarter of2011, IBGE said. Yet the HSBC purchasing managers index forBrazil, a survey released separately on Friday, showed thatmanufacturing activity contracted for a second consecutive month inMay as output and new orders fell. Household consumption, the driving force of Brazil s economic boomover the past decade, expanded 1 per cent in the first quarter fromthe previous quarter. Gross domestic product had been expected to expand 0.5 per cent ona quarter-on-quarter basis, according to the median forecast of 29analysts polled by Reuters. Latin America s largest economy grew 0.8 per cent in the firstquarter compared with the year-earlier period, IBGE said. That wasbelow expectations of growth of 1.3 per cent, according to themedian forecast of 25 analysts in the poll. More related to this story Brazil's biggest lender urges lower interest rates. We are high quality suppliers, our products such as China Mens Stainless Steel Pendants , Stainless Steel Cufflinks for oversee buyer. To know more, please visits Womens Stainless Steel Bracelets.
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