Despite Economic Progress, Brazil Faces Challenging 2003

By John S. McClenahen Brazil's battered economy, the largest in South America, has looked surprisingly better during the past few months. And there are signs that recently elected President Luis Incio Lula da Silva wants to maintain fiscal and monetary discipline. However, says BNP Paribas, 2003 "will be a challenging year." Labor unions, public-sector employees and businesses will put pressure on Lula da Silva and the Labour Party to ease off economically, the Paris-based bank predicts. "Lula da Silva will have to support his team's implementation of tighter monetary and fiscal policies in order to stabilize the economic environment and investors' perspective." BNP Paribas forecasts 1.4% inflation-adjusted GDP growth in 2003 and 3% in 2004, both higher than the 1.1% expected for 2002.

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