RIO DE JANEIRO, June 24 (UPI) -- Brazil is feeling the heat from the eurozone crisis with the first impact showing up as lower foreign direct investment into the country, Central Bank figures showed.
The bank's statistical release this week predicted that contraction in FDI could exceed 15 percent even though Brazil remains on a path of healthy growth and most economic indicators remain sound.
Analysts said FDI levels showed Brazil's impressive allure after the Central Bank reduced its FDI inflow estimate from $45 billion to $38 billion.
May 2010 figures showed Brazil received $3.5 billion FDI in that month alone, $2.3 billion more than in April 2010, a record.
The Latin American giant's robust economic performance was music to the ears of President Luiz Inacio Lula da Silva, whose Workers Party hopes to capitalize on the bonanza to sail through the October election with a majority vote for Dilma Rousseff, his erstwhile chef de cabinet and protege.
Lula himself is constitutionally barred from running, having served two terms already. Despite his imminent departure, Lula's approval ratings exceed 85 percent.
Year-on-year figures showed that Brazil's economy expanded nearly 11 percent in the period ending April 2010 but, with FDI slowing down, analysts said growth during the remainder of 2010 could come under pressure.
The bank's economic activity index showed a 10.86 percent growth rate in April compared to April 2009. The index rose 0.27 percent in April from March.
However, the Central Bank warned that lower FDI could impact growth.
FDI cash inflows in the first five months of 2010 totaled $11.4 billion, an increase over $11.2 billion last year.
Altamir Lopes, head of the bank's economic department, indicated that uncertainty about the eurozone would remain a factor in Brazilian economic performance in the coming months.
June FDI so far totals $900 million, and figures received overall this year wouldn't be sufficient to finance the current account deficit, currently estimated to reach $49 billion, statistics officials said.
Lula's government strategists believe a continued healthy performance in the economy in the run-up to the Oct. 3 election is critical to securing a clear lead for Rousseff. Although she is currently leading against opposition Social Democratic Party candidate Jose Serra, a former governor of Sao Paolo, Lula's political strategists have their sights set on a clear first-round win, rather than having to go through the agony of a second round.
In a March poll, Rousseff trailed with 33 percent to Serra's 38 percent, so Lula's team is taking no chances in case there is another downward swing before October.
In most recent polls, 73 percent of those surveyed recognized Rousseff as Lula da Silva's "candidate" but also that the eurozone fallout is a new reality that Lula's team has to cope with.
With FDI concerns and Brazil's continued dependence on huge commodity exports, Brazilian economic strategists want the government to broaden its trade horizons.
Trade leaders want the government to review relations with regional trade blocs, including Mercosur, if they appear to be inhibiting Brazil's outward reach.
