The Economy 09/01/12
Brazil has overtaken the UK as the world’s sixth largest economy; in Venezuela goods vanish off the shelves; while Chile takes pre-emptive measures against the economic crisis.
According to the Centre for Economics and Business Research (CEBR), Brazil`s GDP reached US$ 2,518 billion surpassing UK`s, which ended at US$ 2,481 billion. As a result, Brazil became the sixth largest economy. The study corroborates an earlier report based on International Monetary Fund data which stated that the Brazilian economy would overtake the UK in 2011. The news was celebrated among government officials who called the GDP increase of “PIBÃO” (big GDP).
However the figure could be deceptive. Despite the achievement, Brazil faces challenges such as social inequalities, poor educational levels, poor health system, lack of investment in research, decrease in competitiveness and expensive living costs. Furthermore, in comparison to the UK, the average income in Brazil is US$ 10,710 while in the UK it is US$ 36,144. Brazilian Finance Minister Guido Mantega stated that Brazil can take up to 20 years to achieve European living standards.
Brazil`s GDP was privileged by commodities exports, especially to China, its main trading partner. On the other hand, Brazilian manufacturers complain that their industries are being affected by cheap mass-produced goods from the Asian giant.
In Venezuela the index of scarcity, which measures the lack of products on the market, reached 15,2 percent in December compared to the 13,4 in the previous month, according to the Venezuelan Central Bank. Last time the index reached such a level was in May, 2008. This means that it is getting more difficult for the population to get products such as milk, oil and coffee, among others.
The scarcity index is not the only problem that Hugo Chavez has to face on his road to reelection next October. Inflation in Venezuela is one of the highest in the world, although it has slowed to 1.8 percent last December, it totaled 27,6 percent in 2011. The figure overcame all government predictions which were between 23 and 25, which was later adjusted to around 27 percent.
Caracas, the capital, was the city with the highest inflation in the year, registering a cumulative 29 percent, while the processed food sector recorded a 38.1 percent increase nationwide.
The Chilean government announced that it will inject US$ 1,700 million in the Economic and Social Stabilization Fund (FEES) and also issue US$ 6,000 million in public debt during 2012 to address any deterioration of the crisis affecting Europe. With the injection of new resources, the FEES` amount will reach 15,000 million dollars.
Finance Minister Felipe Larrain stated that the measures are part of a contingency plan which seeks to protect employment, investments and access to credit in the financial system.
The Stabilization Fund was created under Michelle Bachelet administration (2006-2010) with funds of copper sales in order to address periods of economic uncertainties.