UPDATE 2-Brazil '07 GDP seen rising at decade's fastest pace

Fri Mar 7, 2008 9:12am EST
(Adds GDP expansion fastest in decade, international reserves)
By Elzio Barreto and Daniela Machado
RIO DE JANEIRO, March 7 (Reuters) - Brazil's economy likely grew between 5.2 percent and 5.3 percent in 2007, the fastest expansion in more than a decade, led by booming consumer demand and investments in factory expansion, Finance Minister Guido Mantega said on Friday.
Brazil's economy, the largest in Latin America, has benefited from record-low borrowing costs that fueled a "credit revolution" and sparked expansion of the real estate industry and consumer demand for appliances and other goods, he said.
The 2007 expansion would be the fastest since gross domestic product rose 5.9 percent in 1994.
Brazil has also taken advantage of a surge in foreign direct investment and dollar inflows from exports to boost foreign reserves to all-time highs, helping in part to insulate the country from turmoil in international credit markets.
"Brazil is experiencing today one of its best moments," Mantega told an audience of banking executives meeting in Rio de Janeiro. "The subprime crisis hasn't arrived at the beaches of Copacabana."
Capital investments in factory machinery surged 13 percent in 2007, boosting output capacity and paving the way for future growth without stoking inflation, Mantega said.
"This high rate of investments will guarantee stable growth" going forward, Mantega said. "Demand is growing, but so is supply."
Industrial production growth in 2008 should surpass 6 percent, he added.