BRASILIA, July 29 (Reuters) - Brazilian Finance Minister Guido Mantega said on Tuesday that an International Monetary Fund report that warns of the vulnerability of the Brazilian economy makes no sense.
In a report about risks to the global economy, the lender included Brazil in a list of emerging market countries with higher vulnerabilities. The IMF said that sluggish expansion in the developing world was increasingly likely due to structural, not cyclical, factors.
“The report’s conclusions that Brazil is fragile makes no sense,” Mantega told reporters, adding that the lender is only repeating mistaken predictions made by market economists in recent months.
In a separate report also published on Tuesday, the IMF said Brazil’s external position is “moderately weaker” than fundamentals. The lender also said that the Brazilian real was overvalued by between 5 percent and 15 percent in 2013 and that forex intervention should not be used to resist currency pressures.
“Brazil has the confidence of international markets and it’s a solid country from the point of view of its currency exchange” Mantega said.
Mantega said that the country’s current account deficit - country’s widest measurement of foreign exchange flows - should improve next year.
Brazil’s external deficit hit a record $81 billion last year due to a drop in global prices of key exports such as soy and iron ore and robust demand for imports.
Fewer dollars in the local market has put downward pressure on the real.
The Brazilian central bank has intervened daily in foreign exchange markets since last year to keep the real from weakening too much and further stoking already high inflation.
Mantega said that inflation in Brazil continues at “comfortable” levels and that government policies to control prices have been successful.
Annual inflation in Brazil hit the 6.5 percent ceiling of the government’s target in June and some analysts say it could continue to climb in coming months. (Reporting by Nestor Rabello; Writing by Alonso Soto; Editing by Eric Walsh)