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Brazil bucks global economic downturn

The high food and commodity prices hurting most countries are buoying Brazil, a top exporter of minerals, soy, beef, chicken, and grains.

By Andrew DownieCorrespondent / July 15, 2008

More money: High food and commodity prices have boosted Brazil's economy, giving more people the disposable income to buy items such as cars, homes, and electronics.

Mauricio lima/afp/getty images/Newscom


São Paulo, Brazil

When Carl's Jr. looked at expanding its international fast-food franchise operation earlier this year, several emerging markets were muted. But after a trip to São Paulo and Rio de Janeiro in June, company officials made sure Brazil was on the list.

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Why? The country's young, meat-eating population is growing, which is important to the American chain, says Mike Stout, director of international franchise sales.

But Carl's Jr. also had other motives that speak to Brazil's newfound economic robustness.

"Disposable incomes are increasing and more and more people are moving into the middle class," Mr. Stout said in a telephone interview from St. Louis, shortly after a two-week visit here. "The economy is growing and inflation is stable. From a business perspective, we love the market."

Add to that lower interest rates and easier credit, and you have the reasons Brazil is emerging as an investment magnet. Direct foreign investment to Brazil doubled last year as companies as diverse as real-estate developer Tishman Speyer and agricultural machinery producer John Deere looked to the Southern Hemisphere as a place to do business.

It is a remarkable turnaround for a nation accustomed to boom and bust and strengthens Brazil's place as Latin America's economic powerhouse. Although many countries in the region are doing well – Latin America is enjoying one of its best periods of economic growth in 40 years, the United Nations reported last month – Brazil is outpacing its neighbors. Moreover, the good times seem set to roll: As the rest of the world tightens its belt in fear of a downturn, Brazilians are putting their hands in their pockets and pulling out cash.

"I've definitely been spending more, on clothes, shoes, books, travel," says Neusa Neves, a retired teacher who was poring over coffee-table books in a store window on São Paulo's main street recently. "Things are much better and we are going through a good phase."

Enjoying steady growth

There are several factors behind the nationwide spending spree, economists say. High food and commodity prices – Brazil is one of the world's leading producers and exporters of minerals, soy, beef, chicken, and grains – have brought in cash and created jobs.

Prudent economic policies have kept inflation to below 5 percent and annual growth at about the same rate. The currency is at its strongest level against the dollar since 1999 and investors are so sure Brazil is on the right track that it was recently given "investor grade," a Wall St. qualification that confirms its status as a good place to invest.