Brazil reported more modest growth of 5.4 per cent in 2007, yet the figure is still well above the less than 2.5 per cent growth Brazilians had been used to for most of the past two decades. The government could also celebrate the fourth consecutive year of annual growth of more than 3 per cent. Sustainable growth, so elusive for so long, may finally be at hand.

The size of Brazil's trade surplus may be falling, but the value of its exports is still rising. Again, commodities are the cause - not only of export earnings but also of much of the enormous $34bn in foreign direct investment recorded last year.

But Brazil's domestic market is now just as significant for growth more as its export sector, as rising employment, wages and credit drive a consumption boom, fed partly by rising imports, partly by domestic investment. Guido Mantega, finance minister, announced that the "myth" of potential growth - the rate at which an economy may grow without provoking inflation - had been buried. Paulo Nogueira Batista, Brazil's representative at the International Monetary Fund, joined in, saying last week's figures revealed how wrong people were to say that difficult structural reforms (of pensions, tax, labour) were a pre-condition for growth.

There are indeed strong reasons for arguing that commodities prices and international liquidity can take more credit for Brazil's recent growth than public policy. But the central bank quickly poured cold water on the idea that Brazil can sustain current rates of domestic demand in the absence of structural reforms. In the minutes of its latest meeting on interest rates the bank's monetary policy committee admitted to having considered an increase in rates in response to rising inflationary pressure. That was enough to send market rates immediately higher.

Jonathan Wheatley