RIO DE JANEIRO, Brazil -- In just two months, economic panic has given way to euphoria in Brazil as a flurry of good news has people believing the worst is over.
Stock markets are surging, the currency is stronger, inflation is lessening and investors are slowly returning. The crisis may not be over, but there's a growing sense that Latin America's largest economy is recovering."I believe we've seen the worst in Brazil," James A. Harmon, president and chairman of the U.S. Export-Import Bank, told a group of international bankers in Miami on Wednesday.
Merrill Lynch agrees. The U.S. investment bank picked Brazil as its favorite Latin American equity market for the second quarter.
It's a dramatic change from a month ago. Brazil's currency, the real, was in free fall, investors scurried to pull their money from banks, and President Fernando Henrique Cardoso went on national television to plead for calm.
It was the low point of a crisis that began with an abrupt devaluation of the real on Jan. 13. In three weeks, the currency plunged 46 percent, and the government seemed powerless to stop it.
Today, the government's challenge is to keep the new-found ebullience in check and convince Brazilians that the battle for economic stability isn't over.
On Friday, Finance Minister Pedro Malan warned against the premature optimism pervading markets and predicted the turbulence will persist for months.
Still, it's hard to resist so many positive signs.
After losing $1.82 billion last year, Brazilian stock markets are enjoying a new bull run. The Bovespa index of the Sao Paulo Stock Exchange, Latin America's largest, surged 15 percent in the first week of March alone.
Inflation, which was about 2 percent last year but threatened to roar back with the devaluation, is way below initial predictions.