03/02/2009 14h58
Economists and Central Bank see momentary crisis
Valor Econômico - 03/02/2009
Among economists of financial institutions prevails the conviction the Brazilian crisis is momentary. The deep fall of the industrial production in the last quarter of last year resulted from an already ended process of strong lack of intention of keeping products in stock. The country will soon resume its growth. And that's where danger lies. The resumption of the domestic demand at a pre-crisis level will allow passing to the prices the skyrocketing increase in the price of dollar. The devaluation of the Real in the foreign exchange was not forgotten, it is there, constricted, waiting for a future opportunity. That is why the Central Bank Copom (Monetary Policy Committee) will not make radical cuts in the Selic (Special System of Clearance and Custody) rate. It should make two other one-point cuts in the March and April meetings and, so, carry out a technical evaluation stop. According to member reports, that was the synthesis of the meetings held Thursday and Friday between the Central Bank (BC) and economists of the market. Such meetings, which are held behind door from the press and the public in general, are part of the legal structure of the systems of inflation goals. Among the fundamental parts of this regime are the Copom meetings, the minutes of such meetings, the Focus Report and the Quarterly Inflation Report. And its purpose is to getter subsidies from the market for the later writing of the Report that the BC directors meet with representatives of banks, assets, brokers and advisers. The meetings, therefore, take place in the same quarterly basis as the Report to which they are associated to. And, in them, the BC representatives hear more than they speak. In the Friday meetings held in São Paulo, the BC was represented solely by the director of Economic Policies, Mário Mesquita. He asked questions to analysts regarding three issues: activity, foreign sector and inflation. And the answers were mostly optimistic in relation to the activity and pessimistic in relation to inflation, in line with the thought developed by former directors of the BC, currently in the private sector. The prevailing analysis is that the main effects of the American crisis over the Brazilian economy were the contraction of credit and a strong inventory burn. These two impacts are transitory. For that reason, the government should be prepared for a stage of future peak of inflation, when the companies feel comfortable to transfer to the prices the increase of the cost of production caused by the depreciated exchange rate. Few are those who disagree with that scenario. One is the chief-economist of Gradual Investimentos, Pedro Paulo da Silveira. For him, there is one component of the crisis that is not temporary. That is investment. Since this item affects basic variables (like construction, stocks, working capital and employment) it provides the crisis of a more permanent character. For the economist, Brazil is currently undergoing a severe recession. The GDP shall fall 0.5% this year. In Silveira's opinion, neither the market, nor the BC has to be concerned with the exchange pass-through. What concerns is the inactivity of the reduction of the investments for 2010. In line with his diagnosis, Silveira defends cuts in the Selic above the consensus. For him, the Copom should increase the lowering speed to 1.5 point right in the meeting of the 11
th.
