Brazilian Monetary Policy Committee (COPOM) decided unanimously, in the meeting ended on Wednesday (18), a decrease of 0.75 percentage point in the Selic rate, which changed interest rate in Brazil from 9.75% to 9% per year. The decision was in line with market consensus, which expected a cut in the same proportion.

Reducing the basic rate of interest is part of a strategy adopted by the government to protect the domestic economy of the international financial crisis, which threatens the consumption and growth of local industry. The slowdown of China's economy and growth still weak in the economic activity in Brazil were also factors for the downward adjustment in the interest rate.

This is the sixth time that the basic interest rate was reduced during the administration of President Dilma Rousseff, reaching the lowest level since March 2010 when it reached 8.75%. Since August 2011, the Selic rate has already fallen 350 basis points.

Even with the adjustment of the Selic, Brazil has the second ranking position in nominal interest rates, according to a study prepared by the economic analyst of the Broker Cruzeiro do Sul/ Apregoa.com, Jason Vieira, in partnership with the financial market analyst Weisul Agrícola, Thiago Davino, involving 40 countries. Brazil is second only to Venezuela, where the nominal interest rate is 15.65% per year.

Official Released Note:

"The Monetary Policy Committee considers that, at present, it remains limited the risks to the inflation trajectory. The Committee further notes that, until now, given the fragility of the global economy, the external sector has been disinflationary.

Thus, moving forward with the process of monetary conditions adjustments, the Committee decided unanimously to reduce the Selic rate to 9.00% pa, without bias."

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Brazilian finance minister, Guido Mantega announced on Tuesday (04/03) new incentives to increase the competitiveness of domestic industry. The package is part of the Plano Brasil Maior that aims to reduce Brazil's cost of production and labor, and generate more jobs.

In total, 15 sectors will be benefited including Textile, Garment and Leather, Furniture, Plastics, Electrical Equipment, Auto Parts, Bus, Marine, Aviation, Capital Goods, Mechanical, Hotels, Call Centers, IT (Information Technology) and Chips Production.

According to Mantega, other sectors may be included if there is interest from companies. "We are open to include new sectors".

About the changes

Among the measures announced are payroll tax reduction, deferral of payment for PIS / Cofins, stimuli to production via government procurement in various sectors, measures to reduce the cost of trade finance and a new automotive regime, aimed at expanding the production of automobiles in the country.

"The new measures of the Program Brasil Maior is to ensure the continued growth of the country and respond to problems created by the international crisis. This year, it is possible to grow 4.5% and continue the growth trajectory", Mantega ended.

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The Brazilian GDP (Gross Domestic Product) in 2011 recorded an increase of 2.7% compared with 2010, reaching R$ 4.143 trillion. The data was released by the IBGE (Brazilian Institute of Geography and Statistics).

"In this comparison, agriculture (3.9%), services (2.7%) and industry (1.6%) grew. GDP per capita stood at R$ 21,252, showing an increase of 1.8%, compared to 2010", said the IBGE.

In turn, in the last quarter of last year, the Brazilian activity showed growth of 1.4% compared to the same period last year.

Domestic and foreign demand in the year

Of the total GDP in 2011, the rate of investment (gross fixed capital weighted by GDP) was 19.3% of GDP, lower than the rate in the previous year (19.5%). The savings rate reached 17.2% in 2011 against 17.5% in 2010.

About the components of domestic demand, consumption expenditure of households grew 4.1% in 2011, posting the eighth consecutive year of increase. "The expense of the Government Consumption rose 1.9% and Gross Fixed Capital, in turn, expanded by 4.7%", added the IBGE.

In the external sector, exports grew by 4.5%, while imports expanded 9.7%. "It contributes to this the currency appreciation that took place between 2010 and 2011. The exchange rate (measured by the average annual exchange rate R$ / US$ of buying and selling) ranged from 1.76 to 1.67", concluded IBGE.

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The Brazilian Monetary Policy Committee of the BCB (COPOM) decided to reduce 0.75 pp the Selic rate to the level of 9.75%, surprising most of the market, which was betting on a decrease of 0.5 percentage points, but confirming the expectation of a more aggressive drop, fed in recent days. There were 5 votes in favor and 2 for the reduction of 0.5 pp. In the post-meeting note, the institution said it is following up on the process of adjusting monetary conditions.

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