By John S. McClenahen South America's biggest economy and largest exporter looks better and better economically. Brazil's inflation-adjusted economic growth should reach 3.4% this year, compared with only 1% in 1999, projects Merrill Lynch & Co., New York. In 2001, output should reach 4.4%. Increased industrial production promises to be a major factor. Indeed, it's made a major difference in the recovery so far from the country's January 1999 currency devaluation. Brazilian factories produced more in this year's first three months than in any other first calendar quarter since 1975, when the Brazilian Institute of Geography and Statistics began tracking economic data. Brazil's economy has now grown every month since August 1999.