Brazil's President Dilma Rousseff poses with children of her employees as she participates in the singing of Christmas carols during a yearend party with members of her staff and employees of Planalto Palace in Brasilia on Dec. 16.UESLEI MARCELINO
Brazil has plenty of room to lower interest rates to bolster its economy in the face of a worrisome global slowdown, President Dilma Rousseff said on Friday, insisting that the country is on track to grow up to 5 per cent next year.
Ms. Rousseff, speaking at a breakfast with a select group of political reporters in the presidential palace in Brasilia, also voiced concerns that the financial crisis emanating from Europe is deepening and called the global outlook for 2012 "unfavorable."
Still, she expressed confidence that Brazil – the world's seventh-largest economy – is well prepared to weather the storm, citing the country's vast domestic market, growing middle class of free-spending consumers and strong public finances.
"I can say I'm optimistic because we have our own resources to confront this moment," Ms. Rousseff said. "The trend for the Brazilian economy is one of expansion."
Ms. Rousseff, a career technocrat who had never run for political office before last year's election, has spent much of her first year as president managing an economic slowdown and trying to put the brakes on above-target inflation.
Brazil's economy ground to a halt in the third quarter, official data showed last week, and a flurry of recent indicators suggest the South American giant is off to an even slower start in the fourth quarter.
Ms. Rousseff's government has sought to rekindle the economy by lowering interest rates three times since August, easing credit restrictions to boost lending, and offering tax breaks on home appliances and some key foodstuffs.
She did not say if the government planned additional measures aimed at stoking consumption. But when asked about the likelihood of more interest rate cuts, she said: "We have room to manoeuvre in monetary policy," a luxury she said Europe and the United States don't have because rates there already are near record lows.
Brazil's benchmark lending rate currently stands at 11 per cent after falling 1.5 percentage points since August, when Central Bank president Alexandre Tombini surprised markets with an easing cycle that now looks prescient. The bank has signalled that more "moderate" rate cuts are likely.
The growing global economic malaise has prompted some economists to reduce their 2012 growth forecasts for Brazil to as low 3 per cent. But Ms. Rousseff struck a more upbeat tone, insisting that Latin America's largest economy would surprise on the upside.
"My scenario is between 4.5 and 5 per cent growth," she said.
Asked about inflation, a spectre that has haunted the Brazilian economy for decades, Ms. Rousseff said consumer price increases would continue their recent easing trend.
"We are certain that it will remain under control," she said, adding that the annual inflation rate will gradually move back below the target ceiling of 6.5 per cent.
Annual inflation slowed to 6.64 per cent at the end of November after peaking at a six-year high of 7.31 per cent in September, and could end 2011 above the target ceiling for the first time since 2003.
Ms. Rousseff's relative lack of political experience has been put to the test in her first year in office. She has struggled to manage relations within her 16-party ruling coalition, leading her to opt for a less-ambitious legislative agenda instead of sweeping economic reforms that many analysts say are needed to ensure Brazil's competitiveness in the long run.
She has also had to deal with a steady drumbeat of corruption allegations within her cabinet that forced six ministers to resign since June, including one of her closest aides, chief of staff Antonio Palocci. A seventh minister quit after criticizing Ms. Rousseff's inner circle.
Ms. Rousseff has remained popular despite the scandals, successfully portraying the resignations as proof of her impatience with the corruption and cronyism that plague Brazilian politics. A new opinion poll released on Friday showed her personal approval rating at a lofty 72 per cent, almost unchanged from 73 per cent early in her term.
The wave of ethics scandals, however, does not appear over. Trade Minister Fernando Pimentel, a long-time friend and close confidant of Ms. Rousseff's, is facing accusations of using his political connections to curry favour for clients when he was a private consultant before joining the government.
Ms. Rousseff offered a spirited defence of her minister on Friday, saying "Pimentel doesn't have anything to do with what they're accusing him of." He has denied any wrongdoing.
The exodus of ministers has complicated Ms. Rousseff's plans for a cabinet shuffle that was expected in early 2012, forcing her to make some changes ahead of time and bring in interim officials in other instances. She suggested on Friday that the cabinet shuffle likely wouldn't be far-reaching.