A survey of 14 economists by Dow Jones Newswires resulted in a median forecast of 2.38% for year-on-year first-quarter economic expansion. Actual fourth-quarter growth was 1.4%. The government's IBGE statistics agency will release data for first-quarter GDP on May 29.

"Agriculture will turn in a good performance for the quarter, mainly due to a big soybean harvest," said Alessandra Ribeiro, an economist at the Tendencias consulting group. "In addition, overall business investment will show signs of a recovery, helped along by government efforts in this area."

Brazil's economy grew only 0.9% in 2012, the slowest pace since the global financial crisis, versus a 2.7% advance in 2011. In the wake of 2012's disappointing performance, the government adopted tax and other incentives to fuel investments in key areas of infrastructure and manufacturing.

Rising investments helped boost demand for capital goods during the first quarter. However, they will only result in an expansion of industrial output several quarters down the road. In the meantime, the industrial component of GDP is likely to remain stagnant. Even as GDP grew 0.9% in 2012, the industrial sector shrank 0.8%. First-quarter industrial output, meanwhile, suffered from declining oil output, due to a series of maintenance problems on offshore oil platforms.

In recent years, Brazil's economic expansion has been based mainly on consumption, anchored by continued salary hikes for employees in the services sector and low unemployment, but economists have pointed to the exhaustion of this model, which is now generating demand-led inflationary pressures.

"Consumption is growing faster than production, so we end up with persistent inflation and high imports," said Armando Castelar, a Getulio Vargas Foundation economist. "While many, including the government, are forecasting 2013 growth of 3.0% or more, a figure of around 2.5% would seem more realistic."

Current inflation of 6.5% has already triggered one interest rate hike, with more increases likely. Brazil's base rate is a towering 7.5%, with economists forecasting at least 8.25% by the end of the year.

"Although the first quarter could post a recovery in investments, we are seeing a drop in business confidence, and this could crimp the recovery in the next few quarters," said Itau bank Chief Economist Ilan Goldfajn. "Confidence is directly linked with the decision to invest."

Write to Rogerio Jelmayer at rogerio.jelmayer@dowjones.com

Copyright © 2013 Dow Jones Newswires

Thu May 23, 2013 8:35am EDT

* Wages drop 0.2 percent from March as prices weigh

By Silvio Cascione

SAO PAULO, May 23 (Reuters) - Brazil's jobless rate rose slightly in April for the fourth straight month but remained near record lows, suggesting that tight labor conditions bolstered a gradual recovery and fed into inflation, statistics agency IBGE said on Thursday.

Brazil's jobless rate rose unexpectedly to 5.8 percent from 5.7 percent in March. The number was above the median forecast of 5.6 percent in a poll of 23 economists.

Despite the uptick, that was the lowest jobless rate for the month of April since the beginning of the data series in 2002. In April last year, Brazil's jobless rate stood at 6.0 percent.

Although Brazil's economic slowdown in the past two years had muted impact on the labor market, the pace of job creation has slowed in recent months, suggesting that the unemployment rate will not fall further in coming months.

Brazil's economy added a net 196,913 payroll jobs in April, the Labor Ministry said on Tuesday, down from 216,974 a year earlier.

The IBGE report showed the number of Brazilians with jobs in the six major metropolitan areas surveyed stood at 22.9 million, unchanged from March and from April last year. The tally of people who unsuccessfully looked for work remained unchanged as well at 1.4 million. (Report, in Portuguese:)

Real wages, or salaries discounted for inflation, fell 0.2 percent from March to an average of 1,862.40 reais ($908) a month. That was up 1.6 percent from a year earlier.

The unemployment rate, as calculated by the IBGE, tallies jobs in the formal sector, where employees are legally registered, as well as off-the-books jobs in the so-called informal sector.

Growth has slowed in both the EM giants, as the impact of euro zone woes and a sluggish U.S. economy is felt in countries with previously robust economies. However, Shearing said that Brazil's and China's difficulties were largely rooted in country-specific, but contrasting, problems.

(Read More: China's Economic Outlook Just Keeps Getting Worse)

"For Brazil, the issue is that consumer spending, which for years was the driver of growth, can no longer continue to increase at rapid rates," he said.

Shearing noted that the Latin American powerhouse has one of the lowest investment rates in the emerging world, at under 20 percent of GDP. In comparison, investment accounts for nearly half of GDP in China, and 35 percent in India.

"Brazilian households spend roughly a fifth of their income servicing debt – far more than overleveraged U.S. households did before the financial crisis. This debt burden has understandably started to take a toll on their spending," he said. U.S. consumer debt servicing reached 14 percent of income in 2007, the peak of the housing boom.

(Read More: Some Murmur Bubble as US Home Prices Rise Fast)

Brazil suffered a minor bank run last weekend, sparked by false rumors that the country's social security fund, the Bolsa Familia, was to be canceled. Economists such as Shearing viewed the panic as symptomatic of a consumer credit bubble.

"Credit cannot continue to be a driver of Brazil's growth. Banks like Caixa bank have been lending massively to the housing sector and there is evidence of a housing bubble. Defaults are on the rise and consumer confidence is declining. What we are seeing is credit-fueled growth starting to reach its limits – it is unsustainable," Shearing told CNBC on Tuesday.

(Read More: Forget Bank Runs, Credit Crazy Brazil Is Heading for Trouble)

In Thursday's report, Shearing said low rates of investment versus consumption meant the Brazilian economy was suffering supply constraints.

"Looking ahead, it needs to rebalance away from consumption, and towards investment. But this will require structural reforms, in particular to raise domestic savings, which will prove unpopular, and are unlikely at least until next year's elections are out of the way," he said.

In contrast, over-investment remains a problem in China, in Shearing's opinion.

"China's new leadership has made a great deal of the need to push through significant economic reforms to reorient the economy towards consumer spending, in order to secure sustainable and strong growth over the medium term. But that is easier said than done," he said.

(Read More: China President Takes Charge of Sweeping Economic Reform Plans: Sources)

In a red light for those bullish on an EM-led recovery, Shearing forecast BRICs' slowdown in 2013-14 will knock half a percent point of global growth.

"Moreover, because this slowdown is due mainly to structural factors, it will not be reversed unless each country steps up reform," he said. According to Capital Economics data, emerging markets have been responsible for three quarters of global growth over the past five years, and now account of over half of global GDP.

(Read More: Russia's Economy Could Be Next Big Underperformer)

Shearing added that outside of the BRICs, there were still some positive growth stories in the emerging world.

"One region on which we are particularly upbeat is Africa. Here, rapid economic growth has been made possible by greater political stability… We are also optimistic on the prospects for much of South East Asia – including Indonesia and in particular, the Philippines. Elsewhere, we are also fairly bullish on the outlook for Mexico," he said.

(Read More: These 'Growth Stars' Could Shine as China Slows)

—By CNBC's Katy Barnato

The move had previously been approved at a board meeting of institutions participating in the FGC fund, which is a private institution organized by Brazilian banks that offers guarantees on certain deposits and funding aid to members if necessary.

The increase in the size of deposits covered, to 250,000 Brazilian reais ($122,500) per depositor, from BRL70,000 previously, brings Brazil's guarantee level up to that in many other countries with economies similar to Brazil's, the Council said in a note.

It will also "help level the playing field in Brazil by improving the sense of security investors feel in relation to all banks, both large and small," said Carlos Eduardo Lofrano, executive director of the Brazilian Association of Banks (ABBC), before the approval was announced.

In addition to raising the limit for coverage, the Council said it would extend the protection to the country's LCA farm credit securities.

The National Monetary Council is Brazil's highest-ranking economic policy-making body.

The latest move by the Council comes in the wake of high-profile bank interventions made by Brazil's central bank over the past three years, starting with mid-cap Banco Panamericano that was finally sold off in late 2010.

In October 2012, with default rates rising, the central bank took over operations at Banco BVA SA, a small Rio de Janeiro-based bank, due to concerns about its financial position and inability to comply with regulations. Before that, it intervened in Banco Morada, Banco Cruzeiro do Sul and Banco Prosper. The last two were liquidated in 2012.

The central bank also investigated fraud allegations at Banco Schahin, which was then sold to mid-size rival Banco BMG, but didn't announce a direct intervention.

Currently, the central bank is in an ongoing intervention process at BVA.

The Council chose the right moment to approve the measure after the situation at those banks had been brought under control, said Adauto Lima, chief economist at Western Asset Management in Sao Paulo.

"This is a good time for these measures because there are no real problems in the market right now," he said.

The timing indicates the decision was based on technical analysis, rather than on a need to reassure depositors, he added.

--Luciana Magalhaes, Rogerio Jelmayer and Tom Murphy contributed to this article.

Write to Gerald Jeffris and Jeffrey T. Lewis at brazil@dowjones.com

Copyright © 2013 Dow Jones Newswires

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Brazil's Federal Police say nine people have been arrested on suspicion of sexually abusing Indians girls in the northern state of Amazonas.

The force says two women and seven men in the city of Sao Gabriel da Cachoeira are in custody for the alleged sexual exploitation and abuse of Indian girls between the ages of 11 and 15.

Federal police inspector Fabio Pessoa says investigators have identified 16 girls who were exploited by the group but adds that more girls may have been victimized.

Pessoa says the girls were offered money and food in exchange for sex. He says the amount of money each girl received depended on her age and whether or not she was a virgin.

The arrests were announced Thursday.

Yet the multilateral trade regime that has served us so well is now under serious threat. The system only works if, from time to time, WTO members come together and agree a new “trade round” — a series of highly complex, mutually dependent deals, which lower trade barriers across various sectors.

Achieving a new round is extremely tough. It involves thousands of cross-sector trade-offs and WTO rules require unanimous agreement among all member states. But what a country loses in one form of commerce, it may gain in another — so allowing the global trade “pie” to keep growing.

A new trade round, as the WTO’s out-going director general Pascal Lamy has so rightly observed, is “a global insurance policy against protectionism”. Unless such rounds are agreed relatively frequently, then numerous individual negotiations get stuck in a bureaucratic war of attrition, rules become outdated and the WTO grinds to a halt, so stymying world trade.

That’s where we are now. In 2001, in the aftermath of the 1999 Seattle trade riots, and then the 9/11 attacks, WTO members met in the capital of Qatar to start negotiating the Doha round. Admitting that other parts of the world were gaining in economic power, and rattled by terrorism, Western leaders pledged Doha would be the “development round” — acknowledging they could no longer dominate bodies like the WTO and ride roughshod over the rest of the world.

Since then, two asset bubbles have burst and the world has twice plunged into recession. In 2009, following the “sub-prime” collapse, global trade flows plunged 12.5pc, the sharpest drop since the 1930s. Since then, we’ve seen only a lukewarm recovery, with trade growing by 5pc in 2011 but just 2.5pc last year — a major reason why the global economy remains so sluggish.

The world now badly needs a new trade round. Yet 12 years on from Doha, the talks remain gridlocked. Were the 159 member states to sign a deal, thousands of reciprocal trade liberalisation agreements would kick in. The benefits, in terms of commerce and poverty reduction, would be felt by billions. As the world economy falters, we remain locked in the first failed multilateral trade negotiation since before the Second World War.

Enter Roberto Azevedo. We’ve had a WTO boss from a “developing country” before, in the shape of Thailand’s Supachai Panitchpakdi, appointed in 2002. He didn’t complete his four-year term, though, and was anyway a creature of the West. So too was Herminio Blanco, a Mexican educated at Chicago University, who was Azevedo’s main rival.

The Brazilian, of course, is his own man. That’s because Brazil has lately transformed itself from a commercial backwater into a Latin American colossus. Having overtaken the UK, it is now the world’s sixth largest economy. Brazil has benefited not only from high prices for its vast commodity wealth — including world-ranking supplies of iron ore and sugar — but also from voracious regional demand for its cars, auto parts and other relatively high-tech goods.

Brazil is also the B in the BRIC grouping, of course, the increasingly powerful alliance including Russia, India and China. Between them, these countries now account for 30pc of the global economy, more than the US and UK combined. Controlling over half the world’s currency reserves, they’re also all net creditors, not least to large “advanced” nations desperate to sell sovereign debts.

Sick of being pushed around by the West in crucial rule-making organisations like the WTO, these large emerging markets, with many smaller countries following them, have exerted more and more pressure to have their say. And now they’ve come together to appoint a WTO supremo who the Western world really didn’t want.

Ever since the Cancun summit in 2003, the start of this WTO diplomatic rebellion, Western trade diplomats have painted Brazil as a “trouble-maker”. The country has certainly insisted on highlighting the injustice of American and European agricultural subsidies and been more willing to speak its mind than, say, the Chinese.

More recently, Brazil has also railed against the Western world for weakening the dollar, pound and euro through massive “money-printing”, a move which harms Brazilian exports by pushing up the real. In response to such “currency wars”, Brazil hasn’t messed about, hiking duties on dozens of imported products — including cars and iron-based products.

Having bought into the WTO’s multilateral system, many increasingly powerful emerging markets are furious at what they see — rightly, in many cases — as continued Western intransigence. There are now alarming signs such nations are going their own way, cutting bilateral trade deals between themselves that specifically exclude the West.

The bottom line is that, as Westerners, “we” have more to lose than “they” do. That’s because “they” are fast-growing, “they” have fiscal strength, “they” will soon account for the lion’s share of the global economy. Over the coming decade, such realities will become increasingly apparent.

Brazil is in an extremely strong position. Trade accounts for just 25pc of its economy, and it has practically the entire “non-Western” world in its corner. Western leaders should now bite the bullet and make whatever sector-specific sacrifices are needed to complete the Doha round. The reality is that, from our perspective, the terms can only get worse.

Liam Halligan is chief economist at Prosperity Capital Management. The views expressed are his own .

Analysts and traders surveyed by the South American country's central bank said they estimate GDP will increase by 2.98 percent in 2013, anticipating for the first time that growth will not surpass 3 percent.

The government, however, still forecasts growth of 3.5 percent. Last year, the economy grew just 0.9 percent.

In her weekly radio address President Dilma Rousseff touted that 4.1 million jobs were created since the start of her tenure in January 2011.

"The number is extraordinary and its importance is even greater when we compare our situation to that of developed countries, especially European countries, where unemployment has risen to stratospheric levels," Rousseff said.

Brazil's unemployment level stood at 5.7 percent in March, the lowest for that month in 11 years.

Officials at Sindaport, which also represents port guards and some other types of workers, couldn't be reached immediately for comment. The Santos port authority didn't respond to a request for a comment.

Sindaport had planned to call workers together last Friday to consider a strike over wage disagreements, but postponed a possible vote until after meetings this week with government officials and the management of Santos.

A strike by Sindaport could stop

The announcement on Sindaport's website calls on workers from nine different unions to vote on Friday, including Sintraport, which represents dock workers.

Sintraport Secretary General Wagner Honorato said his organization doesn't plan to hold a vote on a strike, and will instead just meet to explain to union workers the details of a recent port decree.

Write to Jeffrey T. Lewis at Jeffrey.lewis@dowjones.com

Copyright © 2013 Dow Jones Newswires