The government of Lula da Fight to the crisis. Do you help today's central bank?

Lula's government fight the crisis. Do you help the central bank today?

Buenos Aires, Argentina

January 21, 2009

Already in an article last week, "Lula Will reverse the negative picture of the Brazilian economy in 2009? I spoke about the difficulties for those who are going through the Brazilian economy, with a sharp drop in the level of activity, no less a leap in the level of unemployment and grim prospects for the external sector.

The deteriorating economic outlook in Brazil have affected investment plans of companies further deepening economic slowdown. According to the site realizes Argentine "Reporter?, Because of global financial instability, more than 30 Brazilian and foreign companies suspended or postponed their investments in that country, for a total of U.S. $ 28,000 million. That is, the suspension of investment plans do not respond to problems in the Brazilian economy but the global economic problems pointed to where such investments.

The situation remains alert to the Brazilian government in order to offset the negative impact of declining investment plans, lower domestic consumption and weaker external demand is studying the possibility of launching new stimulus programs in key sectors like construction, agribusiness and the automotive industry. On the other hand, from the Brazilian government is considering increasing funding of projects in steel and infrastructure.

From the perspective of monetary policy, which becomes important at this time of crisis for its ability to stimulate domestic demand, today we know the decision of the Committee on Monetary Policy Central Bank of Brazil on its benchmark interest rate . Since the market has already anticipated a cut of at least 50 points. For the market, monetary policy will be less rigid during this year than was anticipated at the beginning of it.

In relation to the conduct of monetary policy in 2009 in the weekly poll conducted last Monday, the Central Bank of Brazil, the market cut its forecast for inflation and interest rate for the Brazilian economy by lowering the Selic rate at the end of 2009 to 11.25% from 11.75%. On the inflation measured by the Price Index Consumer (IPCA), the forecast for this year fell to 4.8% from 5% (the goal of the Central Bank of Brazil is located at 4, 5% with two points of tolerance for both sides).

From some quarters, it is claimed that the Brazilian Central Bank carried out a further aggressive monetary policy of waiting for the market in order to stimulate the economy. For example, Benjamin Steinbruch, vice president of the influential Federation of Industries of Sao Paulo (Fiesp), said: "The BC must have courage and make a cut of at least 1.75 percentage points in the base rate. No more excuses for orthodoxy?.

Before the crisis, the Lula government seeks to exploit the relations with countries with complementary features to the Brazilian economy to avoid the weakening of trade relations at a time where it is urgent to support external demand. One of these countries with which Brazil is seeking to strengthen its strategic alliance is China. Thus, for the second half of the year, Brazilian President Lula da Silva will visit the Eastern country with a delegation of entrepreneurs who exhibit the competitive advantages of the Brazilian economy.

Worth to note that for Brazil, the Chinese market is of great importance in relation to exports of commodities such as steel and soybeans, so it is very important to strengthen ties with this economy to sustain the demand for these commodities.

The foreign minister of Brazil, Celso Amorim confirmed that as part of an alliance between the two countries, will seek joint investment in renewable energy such as ethanol production and scientific research to develop second-generation ethanol and as industrialization to produce soybean oil.

While Brazil's economy is facing difficulties, they have affected the country's economic performance in the short term but have not made economic prospects and long term.

Is that the Brazilian government is conducting an orderly economic policy that preserves the strength of macroeconomic fundamentals.

And a sign of confidence about the strength of the medium and long term of the Brazilian economy is represented by the recent approval by the Brazilian Senate for the creation of Sovereign Wealth Fund (FRS), which will be approximately U.S. $ 14,000 million and to allow the country to buy foreign assets and foreign companies. Undoubtedly, the creation of the sovereign fund will not lower geopolitical implications for Brazil and shows where the vision is oriented government of Lula da Silva.

The strength of macroeconomic fundamentals in the medium and long term of the Brazilian economy and the potential development of their domestic markets does not go unnoticed by the companies whose area of ​​action the domestic market. Is that companies are aware of the potential for development that has the Brazilian economy once the crisis that leads them to make strategic decisions to reposition and be prepared to gain volume and market share. In fact, before this it affects so deeply the Latin American country, it emerged as one of the future world powers, with a president who exhibited the development ambitions of the country (and in fact, has not given up it).

One of the entities is still committed to the Brazilian economy strong despite the slowdown in growth is Banco Santander (BVSP: SANB3; NYSE: SAN). Banco Santander is convinced of the growth potential in Brazil can achieve once passed the turbulence of the crisis. That is why the president of the global entity, Spanish Emilio Botin, confirmed the bank plans to invest 2.558 million reais (about U.S. $ 1,100 million) by 2010 in Brazil, despite the financial crisis international level.

Loot Speaking about "Brazil is a great country that joins a fantastic market to agricultural potential, mineral, technological, industrial and services that make it undoubtedly one of the most promising global powers?.

During this period, Santander will seek to open up 400 new branches and expand and improve the range of services offered.

For Banco Santander is a key advantage of this period of uncertainty to grow and reposition themselves in a market with great development potential. The bet continues to be interesting and can generate large profits for the subsidiary of the Spanish financial institution.