06/03/2012 World Business Report

world's sixth-biggest economy, and a trip to the Geneva Motor Show.

Sally is in the driving seat with Hello, and a warm welcome. You're

with World Business Report. I'm Sally Bundock.

Here are the headlines: How Brazil's economy is set to

overtake the UK as the world's sixth-biggest.

And from the Geneva Motor Show, we'll ask the boss of Jaguar Land

Rover about the future of car manufacturing in Europe.

I'm Rico Hizon in Singapore. Australia's central bank keeps

rates on hold, but leaves the door Good to have you with us. Growth

figures out today could show Brazil's economy overtaking the UK

to become the world's sixth-largest. The South American giant is

currently enjoying a boom because of high food and oil prices. Many

economists predict the growth will last for some years to come.

However, there are warnings for investors who see Brazil as the

next place to pile into. The old joke about Brazil is it's

the country of the future, and always will be. In the past, its

vast mineral wealth and agricultural wealth have tended to

be cancelled out by high inflation and government debt, high levels of

poverty, and lawlessness. But Brazil's economy has been booming

over the past decade, and after a mild recession in 2008, it's

rebounded - and its growth has continued to outstrip the average

growth of the OECD group of developed economies. If we look at

the last eight years, of economic Brazil, everything is going

fantastic for this country - from foreign investment, from macro-

economic policy, from the middle class, and a very stable government.

Brazil's 200 million consumers are an increasingly important export

market for the frustrated manufacturers of developed

economies. Western investors are increasingly interested in the

stocks of Brazil's corporate giant, like oil producer Petrolpros.

Analysts warn Brazil is a much more risky place to invest than

developed economies. Brazil is an exciting investment area, there's

no doubt about it. It is also much more volatile. We look at the

volatile market returns in the UK last year, when the FTSE was down

around 2%. The Brazilian index was down around 22%. Over the longer

period, the Brazilian equities have really done very, very well, but

they are definitely more volatile, and hence for higher-risk investors.

Brazil's economy has never been on such a roll. The question is, how

long will the good times last? The worry is rising prices, with many

economists criticising the central bank for reducing interest rates

while the inflation rate still tops 5% per annum. There's always the

fear inflation could run out of control again.

The governor of Australia's central bank says interest rates are

appropriate for the moment, as the bank left rates on hold at 4.25%.

Let's go to Rico Hizon in Singapore, with more on that. Nice to see you,

Rico. Sally. Tell us about this latest move by the Australian

central bank. Well, they seem to be quite upbeat

about the local economy, Sally, despite the external weakness in

the eurozone and the still- recovering economy in the United

States. It is the second consecutive month rates have been

kept on hold following two rounds of 0.25% rate reductions in

November and December, Sally. The bank did not hold a meeting in

January. The central bank of Australia remains upbeat on

economic outlook thanks to a huge boom in resource inments, as mining

companies rush to meet the demands of China and India. And with

inflation, Sally, still well contained within the RBA's long-

term target band of 2% to 3%, when you talk to analysts, they suspect

there could be scope for perhaps one more cut in the coming months.

Most economists note that the only change to the central bank's stand

was the call for better productivity, which is the only way

to keep inflation low. But there were some contrarian views, Sally,

with this latest decision by the Australian central bank. They say

that to leave rates on hold at levels many times higher than most

of the developed world is simply unjustifiable, as most Australians

in the country simply cannot afford for the Aussie dollar to remain as

high as it is now. They say, if it stays this high for much longer, it

will have a devastating effect on jobs and the structure of the

economy, especially in the non- resource states. Sally. As you say,

it's quite a tricky balancing act. China is, of course, Australia's

biggest trading partner. China only saying yesterday they're reducing

their growth prospects? Absolutely. We saw China basically downgrading

its economic forecast for 2012 from 8% to 7.5%. Still, the Aussie

mining companies are very bullish. I spoke with one analyst earlier

this week, and he said that despite prices coming off, it is still a

very profitable for Aussie mining companies such as Rio Tinto, BHP

Billiton, and they will still be making money, despite a slowing

economy in China. The margins, they say, are still very wide, and those

margins still make a lot of money for the Aussie mining companies,

which are basically the linchpin, the backbone, of the Australian

economy. Sally. Thanks very much indeed, Rico in Singapore. Let's

have a look at some other business stories now. Disruptions are

expected on the London-to-Paris Eurostar service this morning. A

number of trains have been cancelled after a cable fell on the

high-speed line in France, causing major delays last night. Eurostar

told passengers with tickets for cancelled trains to exchange them

for another day if at all possible. Greece is scrambling to complete

its debt swap with private bond holders by Thursday of this week.

The Finance Minister warned that the creditors -- warned creditors

this was the best deal they would get, and he would not hesitate to

use new laws to force them to act if they did not do so voluntarily.

A dozen financial institutions from the group will help negotiate the

deal. They have already agreed. -- the deal they have already

agreed. The British Retail Consortium has

warned any revival of sales on the UK High Street is an illusion. It

says like-for-like sales fell 0.3% in February, compare would the same

time last year. The group says, while food sales rose because of

people stocking up in the cold weather, sales of non-food goods

continued to fall. Japanese car-maker Nissan is to

build a new model at its Sunderland plant in the north-east of the UK.

It will create up to won it two,000 jobs. The car will go into

production in the middle of 2013. After an investment programme worth

nearly $200 million. Eurozone growth figures out later

this morning are expected to confirm initial estimates of a 0.3%

contraction in the fourth quarter of last year. It would be the first

quarterly fall since the second quarter of 2009.

Europe's top car executives have descended on Geneva for the annual

motor show, where a whole host of new cars will be unveiled. It

starts today against a backdrop of austerity in Europe, which means

finding buyers for new models won't be easy. Let me tell you new

information about this. America, Japan and emerging markets are much

more prosperous for the industry. Jaguar, Land Rover, now owned by

India's Tata Motors, is comang among the companies to showcase two

new vehicles. There are reports of a possible tie-up with one of

China's largest car firms, Cherry Automobile. There are rumours that

suggest the deal could be worth $2.7 billion. We are struggling

right now to try and connect up with the Geneva Motor Show, which

does kick off today. I was hoping to speak to, as I said earlier, the

CEO, Ralph Speff. We'll try and continue to see if we can link up

with him. In the meantime, I want to tell you about the financial

markets. Of course, one of the key questions I was going to ask him

was whether they are going to do a deal with Cherry Automobile of

China. If they were to do that, that would mean they would have

local production very close to Shanghai, and of course chine saw

one of the most exciting car markets in the world at the moment,

with enormous growth and future growth in that market. If we can,

we will talk to him in the next few minutes. If we can't, I will talk

you through the markets. Maybe we'll talk to him later on BBC

World News. We do have him, apparently! The wonders of modern

technology. Let's now speak to Ralph Stepff, the chief executive

of Jaguar Land Rover. Good to see you. I'm relieved you can join us

on the programme. We've talked about you coming up all morning.

Cherry Automobile of China - a lot of rumours and speculation you're

about to do a deal with them. Is that true? Yeah, there are a lot of

rumours in the market. It's absolutely true that we have to

have a local partner in China to produce and to get a licence to

develop vehicles in China. We are in discussions over the government.

Whenever we are prepared and, at the right moment we can inform you

about that, I can't reveal the day any -- reveal today any news.

right. We will watch with great interest to hear more on that. You

make most of your vehicles here in the UK. How important, still, is

the European market to you? Because obviously it's a market that's

struggling in terms of sales. Europe is a very important market,

especially for our customers. They do like the very special

combination - the unique combination - of the very special

design, engineering excellence, and last but not least, authentic

vehicle s. This gives us an advantage all around the world.

Clearly you say Europe is very important, you make most of your

cars here in the UK, but you want to make cars in China. You've also

talked about it a desire to make cars in North America, Brazil.

You've just opened a new plant in India. Does this mean you're going

to reduce your production here in the UK? Eventually? No, we are a

British company. We are producing the majority of our cars in the UK.

By the way, there's even an opportunity coming up - because our

vehicles are so highly sought after - to increase production even

further. Where will you do that? have opportunities to do it in one

or the other location. Nevertheless, we could go to China. China is the

most important market in the world. There's more than 80 million

vehicles. That's clear that we also have to be in China. But we are

producing, in China, and we will produce in India and in Brazil, not