Brazil GDP grows at half forecasted pace as investment dives

Attacking Bottlenecks

Rousseff has started addressing longstanding bottlenecks, promising on Sept. 11 to take Brazil into a “new phase” of development, one focused on boosting competitiveness. In recent months the government has eliminated payroll taxes for dozens of industries, overhauled the electricity sector to cut rates by as much as 28 percent and unveiled plans to auction control of ports, roads and airports. Finance Minister Guido Mantega told Globo News TV on Nov. 12 that for growth to double next year investment must accelerate.

“This is very welcome, though unfortunately what brought Brazil to this state of affairs of weaker investment is something that built up over years,” Andre Loes, chief Latin America economist at HSBC Bank Brasil SA, said before today’s report. “It’s going to take time for these measures to show results.”

Retail Sales

Auto makers, a mainstay of the economy, will invest $22 billion over the next three years, Mantega said on Oct. 4. His comments came as the government offered tax breaks for carmakers to expand production. Among the companies benefitting are Volkswagen AG and Honda Motor Co Ltd.

Vehicle sales reached a record 420,080 units in August on the back of sales tax reductions that Rousseff in October extended to year-end. Retail sales rose for the fourth straight month in September and jumped 8.5 percent from the year before. Underlying the strong performance is strong credit growth of 16.6 percent in October and unemployment that has remained near record lows all year.

Still, industrial production in the third quarter fell 2.8 percent from a year ago, the worst performance among the BRICs.

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