Brazil ‘in need of economic reform’

Mr Lampl, who runs the group’s $1.5bn (£950m) Dublin-based Global Emerging Markets fund, made the comments after Brazil last week reported a slump in economic growth in the third quarter.

Brazilian economic output in the third quarter was the same as in the second quarter, and just 2.1 per cent compared to a year earlier – lower than was expected by economists. This compares to the 7.5 per cent growth seen in 2010.

The Brazilian central bank also suggested that it would continue to cut its interest rates, following a 50 basis point cut earlier this month to 11 per cent, as it expected inflation rates to remain stable.

Mr Lampl said he had “great concerns” about the structure of the economy.

“What I don’t like is that there is very little initiative with regards to economic reform,” he said. “The president [Dilma Rousseff] has been very diligent in fighting corruption but there is no drive to make the economy more flexible and to tackle the complex taxation laws.

“I would like to see productivity improve but I don’t see that unless there is a restructure.”

The manager said Brazil’s inflation would remain at the top end of the central bank’s 4 per cent target, which has a leeway of 2 percentage points either side.

Ewan Thompson, manager of the £34m Neptune Emerging Markets fund, said it was “intriguing” to see the country cut its interest rates given inflation remained high. He added it was possibly “a little bit early”.

“It raised a question mark for the markets because inflation is high enough that they don’t need to cut rates,” he said.

“But the central bank said the lag effect of its previous hikes will still be coming through and given it sees a slowdown in global growth they want to be prepared and cut rates to support the economy.

“It could prove not be such a bad decision given the economic momentum is slowing.”

Nick Robinson, manager of the £68m Latin America Equity fund, added: “The GDP figure shows things are slowing down faster than people expected.

“But it does seem to vindicate the interest rate move made by the central bank at the end of August.”

Both Mr Thompson and Mr Robinson said they expected further rate cuts, down to 9 per cent, before the cutting cycle ends.