Brazil unemployment rate at 7-year low

Brazil's unemployment rate dropped to its lowest point in seven years, officials said Thursday — but analysts warned joblessness is expected to rise as businesses struggling to obtain credit in a global financial crisis begin laying off employees.

The government took steps to address those concerns: Finance Minister Guido Mantega announced on Thursday that the government would pump $42 billion in new funds into Brazil's National Development Bank, or BNDES.

The jobless rate stood at 6.8 percent in December, compared to 7.4 percent in December 2007, Brazil's IBGE statistics agency reported. The rate was 7.6 percent in November 2008.

December's reading was the lowest unemployment rate since 2002, when the government began using the current method of calculating joblessness.

The low rate comes despite the loss of 654,000 full-time jobs last month — but is largely due to the hiring of temporary holiday workers, analysts said.

Forecasts are for increasing unemployment as those part-time workers lose employment and as Brazil's economy slows in the midst of the global crisis.

"Those lost jobs in December will be reflected in January's unemployment figures," said Thais Zara, chief economist for the Sao Paulo-based economic consulting firm Rosenberg & Associados.

Zara had no forecast for how much unemployment would rise, but said it would be "substantially worse."

On Wednesday, Brazil's central bank issued its biggest interest-rate cut in five years, slashing its benchmark rate to 12.75 percent.

Credit has been tightening for Brazil's biggest companies, which have been signaling that layoffs could be coming soon if they cannot find financing.

"Businesses that count on resources from the international market and are not finding them because of the global financial crisis will be able to fall back on the BNDES," Mantega said.

According to the minister, the BNDES will have $166 billion at its disposal this year to loan to Brazilian businesses that are not able to find credit on the international market. Last year, the bank lent $37.5 billion.

Economists surveyed by the central bank have revised their 2009 growth forecasts to 2.5 percent from 4 percent in recent months. Some analysts predict an even greater slowdown as the world crisis stalls demand for the commodity exports on which many Brazilian companies rely.

Exporters of everything from cars to minerals to food have been laying off employees, while others have sent workers on paid vacations and idled plants because Brazilian labor laws make firings too costly.

Mantega told reporters Thursday the BNDES would put a priority on loans for the gas and energy sector, along with industry and the government's infrastructure projects.

Especially important is the ability of state-run oil company Petroleo Brasileiro SA to continue development of massive new offshore oil discoveries, which could hold up to 80 billion barrels of oil and could require up to $600 billion over the next 30 years.

"It's important to us that Petrobras' entire plan remain viable," Mantega said. "If it isn't possible with external resources, we'll make it happen with internal resources."

http://www.google.com/hostednews/ap/article/ALeqM5g9ep4hNDgPwvJZwiW2_kn2HLk6rAD95SD4BG0