Brazil’s Pereira: Economic Recovery is Gaining Traction

WASHINGTON–Brazil’s economic recovery is gaining traction, Brazilian Central Bank International Affairs Director Luiz Pereira said Friday, but he would still like to see more “virtuous” growth in the country.

Consumer demand has fueled growth in Brazil in recent years, while investment and industrial production have declined.

That pattern is starting to change, with services growth slowing and industry and investment starting to revive, Mr. Pereira said at a conference in Washington.

“There’s not a collapse in services, it’s just moderating, and you have a slow pick-up of the industrial sector,” he explained. “These movements are showing good prospects for the Brazilian economy in the future.”

There are still risks to growth in Brazil stemming from the global economic situation, Mr. Pereira warned.

Brazil’s central bank voted Wednesday to raise its benchmark interest rate to 7.5% from 7.25% to help fight accelerating price increases. The 12-month inflation rate in March breached the upper limit of the bank’s target range of 2.5% to 6.5%.

Mr. Pereira was one of two members of the monetary-policy committee that voted against raising the rate, though he declined to say why when asked.

There are several factors that are favorable to slower price increases, such as a moderation in credit growth and an expected bumper crops of several foods that had added to price pressures in 2012, Mr. Pereira said.

Nevertheless, the dynamics for inflation are still unfavorable, and the increase in interest rates should help slow price increases, he said. Policy action on inflation was required, and the discussion at the central bank over interest rates was more focused on the timing of an increase rather than whether to raise rates, he said.