FORUM ECONOMICO DE RIO

Henrique de Campos Meirelles• Pedro Moreira Salles• Paulo AntonioSkaf • Wednesday 15 April14.30-15.15
The moderator, Emilio Lozoya Austin, Director, Head of Latin America, World Economic Forum, highlighted the timing of the 2009 World Economic Forum on Latin America, which is taking place between the G20 summit in London at the beginning of the month and on the eve of the Summit of the Americas, to take place at the end of the week in Trinidad and Tobago. He announced that a declaration from the Forum will be addressed to the participants at the Summit of the Americas.
• “It seems that, relative to other parts of the world, Latin America is affected in a different way than in the past,” said Lozoya Austin. Henrique de Campos Meirelles, Governor of the Central Bank of Brazil, also highlighted such differences. “During past crises, Brazil took a lot of time to recover and the crisis extended for a long period of time,” he said. Today, in spite of the seriousness of the current global recession, he argued that Brazil will likely grow above the world average, and will probably emerge sooner from this crisis than many other countries. He added that, even though the future still looks uncertain, recovery may already be underway in several sectors, including the automotive industry and retailing.
• However, Brazil may not avoid recession, according to Paulo Antonio Skaf, President, Federação das Industrias do Estado de São Paulo (FIESP), Brazil. He expects Brazil’s GDP to contract between 1% and 1.5% in 2009 due to the prolonged credit crunch. He said the Central Bank of Brazil has taken some measures to boost liquidity, but it has not been enough to revive credit. “You can have liquidity without credit. You can have money in the banking system, but it does not mean it necessarily reaches the companies’ coffers,” he said. Skaf called for a steep cut in base interest rates, which would put real interest rates towards 3% (annual), while the current Selic rate is at 11.25% (with inflation at around 4.5%). Meirelles said that the trend is already a declining one, and that the Central Bank needs to maintain a sense of balance. He emphasized that it is “the first time in decades that the Central Bank can pursue an anti-cyclical monetary policy.”
• A key element of the resilience of the Brazilian economy is the strength of its financial system. “The Brazilian banking system is well prepared to come back to the market once this [crisis] process is over, which we imagine will happen probably during the next 12 to 18 months,” said Pedro Moreira Salles, Chairman of the Board, Banco Itaú Unibanco, Brazil. • Countries with strong domestic consumer markets are in a better position to recover than those depending on exports. Slawomir Skrzypek, President of the National Bank of Poland (NBP), said that consumption is the main driver to keep GDP growth in his country, which he forecast to reach around 1% this year. Brazil also relies on its large domestic market of 190 million consumers to fuel economic activity.
• Skrzypek reflected on 20 years of change in Eastern Europe since the fall of the Berlin Wall. “The labour market in Poland is now much more flexible than in some other European countries. It is a good point from which to recover when the economy gets back on the path of sustainable growth,” he said.