Business and Finance

The biggest threat to Brazil’s economy next year is the acceleration of growth beyond 6.5 percent, Banco Safra de Investimento said.

“As long as growth estimates stay between 5.5 percent and 6.5 percent, it is still possible for the central bank to manage the growth-inflation issue,” Cristiano Oliveira, chief economist at Banco Safra, said in a telephone interview from Sao Paulo. “Above that, it will be difficult.”

Banco Safra — wholly owned by Joseph Safra, the world’s 62nd richest person, according to Forbes magazine — forecasts the central bank will raise the benchmark interest rate to 10.75 percent by the end of 2010 from a record low of 8.75 percent.

Consumer spending and capital expenditures will boost growth in Latin America’s largest economy to 5.6 percent next year, following an estimated 0.2 percent contraction in 2009, Oliveira said. Brazilian economists project a 5.1 percent expansion in 2010, according to a weekly central bank survey of about 100 financial institutions published today.

Increasing imports and profit remittances by multinationals to headquarters abroad will widen next year’s current-account deficit to “at least $54 billion,” Oliveira said. Brazilian economists expect a record $40.8 billion shortfall, according to the central bank survey.

The current-account deficit will be more than offset by $62 billion in foreign direct and portfolio investments, lifting the real to 1.65 per U.S. dollar by the end of next year, Oliveira said. The currency gained 1.2 percent at 1.7415 per dollar at 1:50 p.m. in New York, compared with 1.7630 on Dec. 24.

Source