Emerging Market Inflation

Discussion in 'Economics' started by ShoeshineBoy, Feb 19, 2008.

  1. This link


    states the following

    "Unlike many of its neighbors, Brazil has managed to keep inflation low and relatively stable at 4.46% last year. In contrast, Latin American neighbor Argentina registered 8.5%, just over Chile's 7.8%. Among other emerging-market powerhouses, Russia had 11.9% inflation at year-end. "

    Why aren't more people concerned about these numbers? I know China has high inflation. Is there some economic reason we think these economies can sustain 7-10% inflation without being burned?

    For example, the link below states "In Slovakia, for example, which reported strong GDP growth Thursday, "there's no way they can keep growing at such a rate," Rendell said.
    Christensen agreed: "Growth was very strong in Slovakia, and in our view too strong. That is generating inflationary pressures down the road." ".

    Why does strong growth necessitate "inflationary pressure"?
  2. Btw, a sister link points out the that Hungary and Eastern Europe is in this same inflationary range. In fact, it says that Hungary is probably headed to stagflation:


    "Stagflation refers to the double whammy of soaring inflation and falling economic growth.

    Hungary's inflation was 7.1% year-over-year in January, well above the central bank's target of 3%, while GDP growth slowed to 0.8% year-over-year in the fourth quarter, according to official data released Thursday.

    The latest macroeconomic numbers confirm "that the Hungarian economy is in stagflation and there are very few signs that growth is picking up," said Lars Christensen, senior analyst at Denmark's Danske Bank.

    "This stagflationary situation in Hungary is something we're likely to have repeated in a number of eastern European countries," Christensen said. "There is a theme there. Large imbalances lead to inflationary pressures and that eventually leads to busts in the boom."

    Among the most vulnerable countries are the Baltic states -- Latvia, Lithuania and Estonia, Romania, and Bulgaria, while Slovakia and the Czech Republic appear to be in a more solid position, Christensen said..."

    And here's a link that claims that inflation in China is rocking the Asian markets:

  3. jlbonani


    It is just awesome think about Brazil nowadays, not just because this is the country that I live or either the country that I born, but overall the country that is really improving and increasing.

    I hate when people tells me things about Brazil trying to compare it to China, India, and other ones.

    Hey, listen to me, we are totally different. This country it isn't just the country of the sampa and soccer but also the country of the future with record after record of soybean, corn, sugarcane and other commodities produced here.

    This is the country with the biggest pure water reserves around the world, this is the country of the biggest and most important forest in the world.

    And now, recently one of the biggest exporter of crude oil and also refined fuels.

    Well, so why in this world people still insist comparing Brazil to those countries like China, India, Russia...?
  4. aradiel


    Ditto, I am happy that for the first time I can be proud of the economics advancements of my country, not only about the blessings mother nature gave to Brazil.

  5. kowboy


    Will you share more about the economy of Brazil?

    I read somewhere that the total money supply (M3) has increased about 14.3% average over the last ten years. However the government published cpi is 4.5%, but averaged 8% over that last 5 years. What's your view of this and can you have an inflating money supply without equal true inflation numbers?

    What are the best sectors to invest in Brazil?

  6. The China and India stock markets tanked and Brazil came after. Because Brazil is so commodity driven, Brazil actually was somewhat de-coupled from these two BRIC countries. For example, if you look at EWZ (Brazil's ETF) it double peaked in mid May and about Jun 1 and then headed down about 10% to where it is today. India, say INP, has been falling pretty much all year, although recently it's gotten a little uptrend. China started falling even earlier if you look, in late '07 and has fallen more in the 50% range.

    As the proud natives above pointed out, this shows the incredible resiliency of the Brazil economy and its relative strength compared to the other BRIC economies of late.

    But, all of that said about Brazil, some caution is in order in the short term: Brazil did start falling when commodities started collapsing a couple of months ago showing its one vulnerability. Brazil will definitely be effected if commodities collapse further, which imo is fairly likely.

    My two cents, and I completely admit I have no crystal ball, is wait and see if the commodities market is going to have a temporary set back. The problem with commodities driven economies: it looks like virtually the entire globe is struggling either with 1) inflation or 2) a slowing economy. France, Germany, the US, Russia, Italy, Spain, Australia are all slowing down and so the question is this: how long will they keep slowing?

    If this global slowdown last for a year or more, then commodities have probably not hit their temporary low and you may get a better buying opportunity for Brazil.

    Remember: that's just my two cents that's probably worth three cents...

    And, of course, long term Brazil is going nowhere but up!
  7. jlbonani


    Kowboy! in reality there are a lot of opportunities down here in Brazil.

    We have good markets, not just commodities like shoeshineboy told us.
    He didn't remind us about one thing. Those stocks that are always starring on the Brazilian skies like PETROBRAS, VALE, EMBRAER, USIMINAS, CSN, AMBEV, GERDAU, IPIRANGA PET., our loved VOTORANTIM, BANKS (the biggest ones), ans so.
    Well I can stay siting here all day long telling you about those companies and other ones, but unfortunately I can't do it, I've got to go back to work.
    But think about it kowboy, those companies are really horses that move the Brazilian economy today.
    Another think is, if you want to invest in a solid, consistent financial market that is highly structured and regulated I won't advise you to open an account in any other BRIC country but Brazil.
    Do you want to invest in India, take look at this number, 40% of its population is dying on street.
    China = wow poor China, expending money with those huge structures for olympic games and stuff, but the reality is more than 1/2 percent of its population lives under the poverty line, wow that's really cool, they've got a gold medal for that. 80% of its rivers are totally polluted. And Here it goes another gold medal, the country is about to explode in a deep political conflict, it really menaces the entire Chinese society.
    Russia = well, what can I say about them, no free world dudes. At least they aren't communists anymore.
  8. Because most of what any government declares as "growth" is actually money-pump inflation.

    Brasil's true inflation rate likely at least DOUBLE what the government says it is.