Governor of Minas laments zero GDP growth

The governor of Minas Gerais, Antònio Anastásia, called the news that GDP growth in the third quarter was zero, “sad.”

Speaking to business leaders at the Rio de Janeiro Commercial
Association (“ACRJ”), Anastasia pointed out that the country is in a
hurry and sometimes forgets to consolidate gains in important areas such
as education, health, security and management planning (especially in
the government).

“All these things take time, they are not for today, but the result of
groundwork that must take place now. If we had done our homework a few
years ago, with the same spirit we have today, we certainly would not be
dealing with zero growth in the third quarter. It is a sad moment for
us. Even countries in the middle of the international crisis grew more
than Brazil,” stated the governor.

[Background note: third quarter growth (July to September) in Brazil,
compared to the second quarter (April to June), came in at zero,
according to the government statistical bureau (“IBGE”). A downturn in
the industrial sector was expected (it was down 0.9%, compared to the
second quarter), but a decline in the services sector (down 0.3%), along
with a sharp drop in consumer spending caught market observers by
surprise (consumption accounts for around 60% of Brazil’s GDP). The
bright spot in third quarter results was the farm sector, which grew
3.2%, compared to the second quarter. As a result, forecasts for final
2011 GDP growth have dropped below 3%]

Governor Anastasia also spoke of problems in the export sector where
there is a concentration in raw material, such as iron ore and farm
produce.

“We managed to turn things upside down,” said the governor. “Just a few
years ago, 60% of our exports were manufactured goods and less than 40%
in commodities. Today it looks like 70% of our exports will soon be
commodities. We export iron ore to China where they turn it into steel
and export it back to us. And that happens because it is cheaper than
buying steel from Usiminas, a Brazilian domestic steel mill, that is
located right next to iron ore deposits. This is due to economic
policy.”

The ACRJ president, Antenor Barros Leal, declared that he also saw
distortions in the country’s trade balance. “Today, in December 2011, we
are about to reach a $100 billion international trade deficit in
manufactured goods. We import everything from automobiles to blenders.
We need to become exporters of goods with technology, innovation and
Brazilian creativity.”