Loading ...News - Brazil, Mexico Central Banks Should Cut Rates, OECD Recommends
June 24 (Bloomberg) — Central banks in Brazil and Mexico should lower borrowing costs to bolster their economies, according to a report from the Organization for Economic Cooperation and Development.
Mexico’s gross domestic product may shrink 8 percent in 2009, while Brazil may contract 0.8 percent, the Paris-based group said. Chile’s GDP may decline 1.6 percent this year, more than twice government forecasts, the OECD said.
Brazil’s economy is already showing signs of recovery after the global crisis sapped demand for the country’s exports and reduced prices, and activity in Mexico and Chile may begin to accelerate at the end of this year, the report said. Mexico is the only Latin American country among the OECD’s 30 members.
“With a nascent recovery hopefully in sight it would be tempting to relax the extraordinary policy effort of the past nine months,” the OECD said. “Tempting, but wrong.”
Mexico’s economy is contracting as fear of swine flu keeps tourists away following an outbreak earlier this year. The lack of tourists has exacerbated declines in industrial production and exports to the U.S., the OECD said. President Felipe Calderon’s stimulus package was “relatively modest,” the group said.
The Mexican central bank would be able to further reduce borrowing costs had the government not kept gasoline prices artificially low last year, meaning inflation has slowed less in Mexico than in other countries, it said.
Brazilian Central Bank President Henrique Meirelles can keep lowering the so-called Selic rate “in the coming months,” the report said. Brazilian inflation may slow to 4.2 percent this year from a pace of 5.9 percent last year, it said.
Chile’s Outlook
Chile’s economy should begin to recover in the second half of the year, a rebound that could be threatened if rising unemployment leads to non-payment of loans, the OECD said.
Chilean Finance Minister Andres Velasco is leading a delegation of lawmakers at the group’s meeting of ministers in Paris today and tomorrow. Chile hopes to meet the criteria for membership by an OECD council meeting in December this year.
The 30-country OECD, founded in 1961, advises countries on how to boost their economies and raise living standards, pooling experience from members including the U.S., the U.K. and Canada. Its members must abide by minimum standards on avoiding corruption and information sharing.
Brazil is one of five countries with which the organization has said it wants to deepen links
Source: Bloomberg.
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