Measuring Brazil's economy
Statistics and lies
Mar 10th 2011
from the print edition
THE release of last year’s economic figures on March 3rd was cue for much crowing in Brazil. The economy grew by a blistering 7.5%, a rate unmatched since 1986. Since the currency started 2010 strong and ended it stronger, a GDP of 3.675 trillion reais converted at the year’s average exchange rate into $2.089 trillion. This meant that Brazil overtook Italy to rank as the world’s seventh-biggest economy (see chart). And income per head in Brazil has surpassed that in Mexico.
The president, Dilma Rousseff, welcomed the figures, but warned Brazilians not to expect a similar rise in 2011. Worried about overheating, her government is trimming 50 billion reais from this year’s budget. On March 2nd the Central Bank raised interest rates by half a percentage point for the second time this year. The aim is for growth to ease to a more manageable annual rate of 4.5-5%.
But her finance minister, Guido Mantega, could not resist a little boosterism. Brazil had grown fifth fastest of the G20 countries, he said, adding that, if its GDP were calculated taking into account purchasing power, it had overtaken Britain and France, too. Some of his listeners inferred that it had become the world’s fifth-biggest economy. (But the same trick bumps Russia and India up from tenth and 11th respectively to fourth and sixth, leaving Brazil seventh overall.)
It was a confusing performance, and many were duly confused. The following day Brazilians were told by some of their newspapers that they were living in the world’s seventh largest economy, and by others, the fifth. Jim O’Neill of Goldman Sachs, who coined the BRIC acronym in 2001, sent an e-mail to clients in which he asked why Brazil’s ascension to the top five had attracted so little comment.
Converting currencies by purchasing power, rather than market rates, is useful when comparing living standards in different countries. But measuring GDP in current dollars shows an economy’s international clout—and by that yardstick, Brazil needs no statistical smoke and mirrors. Even the modest 4.5% growth Ms Rousseff hopes for is likely to be more than France or Britain manages in 2011. And with interest rates and the price of its commodity exports rising, there is no sign of the real weakening much. Brazil did not break into the big five last year. But it may well do so during this one.