Antonio Palocci, finance minister, Brazil
Brazil’s economy is showing signs of life, with analysts predicting growth of 3.5% in 2004. Initial estimates indicate growth of between 0.4% and 0.6% last year but the signs are clear: industrial production is accelerating; exports are up with a trade surplus of $23bn forecast for 2003; while foreign direct investment is predicted to jump from $8bn last year to about $13bn in 2004.
The story of 2003 centred on President Luiz Inácio Lula da Silva, or more particularly his seemingly startling about-turn from leftwing firebrand to orthodox, responsible president. Dispelling fears at the time of his election that he would spend recklessly to achieve growth, Lula and his economic team did the opposite, applying the brakes to inflation and public spending.
A key member of this team is Finance Minister Antonio Palocci. It has been Mr Palocci who has had to hold a hard line, repeating a miserly no to requests for more funding for public services. It is this fiscal discipline – which is crucial to steering Brazil out of its economic predicament and in the face of critical public service spending demands – that earns Mr Palocci The Banker’s endorsement as Americas finance minister of the year.
In December, Brazilian lawmakers passed new pension laws, paving the way for savings of up to $19bn per year. Tax reforms are also in process. At the end of the third quarter, the country’s primary budget surplus was running well ahead of target.
What is remarkable is that Brazil has reversed its economic fortunes in little more than a year. In November, the country struck a new standby deal with the IMF, but – crucially – Mr Palocci declared that Brazil would only draw on the facility if necessary, in effect declaring an end to years of dependence on IMF bail-outs that stretch back to 1998.
“It’s a sort of insurance policy against the ever-present risk of external shocks and unforeseen difficulties,” Mr Palocci was reported as saying. “We believe we should, after a long period, propose an end to this series of deals with the fund.”
Mr Palocci insisted there were “real and effective” signs that the next economic recovery would be on the back of sustainable growth. The IMF has heaped praise on the government while Brazil has seen a strengthening in investor interest on the back of ratings upgrades.
