2005 Annual Report
Executive Summary | Value Creation
The global situation
The Brazilian economy in 2005 performed below expectations, growing approximately 2.5%, or half the previous year’s figure. Despite a good trade balance, the appreciation of the Brazilian real against the U.S. dollar negatively affected the export sector’s results.
The international situation was favorable, although at lower levels than seen in 2004, with the worldwide economy continuing to grow at a robust pace (4.3%). The volume of international trade increased 7% while the price of nonoil commodities rose 8.6% (compared with 18.5% in 2004).
The average price for eucalyptus pulp was $594/ton (list price), about 12% higher than the previous year.
Compared with the positive external environment, two factors were primarily responsible for the weak domestic performance: the country’s monetary policy and the political crisis. In the case of the former, interest rates remained high in order to contain rising inflation from the third quarter of 2004. The political crisis affected the confidence of businessmen and consumers in view of the risk of changes in economic policy, mainly the possibility of fiscal austerity. However, its most negative effect was to paralyze discussions in the National Congress about fundamental reforms to make new investments feasible and allow resumption of sustained growth.
Unless noted otherwise, currency numbers are in U.S. dollars rounded to next integer. Tonnage refers to metric tons.