Brazil’s Unaffordable Homes

July 30, 2014

Vanessa Barbara – The New York Times, 7/30/2014

SÃO PAULO, Brazil — I live in Mandaqui, a district six miles from downtown. The nearest subway station is roughly two miles away, or about 30 minutes by bus, since they’re slow and scarce. It’s not the best place to live if you don’t have a car. Even so, the average price per square foot here recently soared to $250. Real estate in prime areas of the city can now cost as much as $465 per square foot.

In the last six years, housing prices in São Paulo have increased by 208 percent, and the cost of rent has increased 97.5 percent in the metro area. According to the website Numbeo, which compiles user-generated data, a 970-square-foot apartment here costs the equivalent of 16 years of an average family’s total income. By comparison, this cost-to-income ratio is eight in New York, 6.9 in Berlin and only three in Chicago. Someone making the minimum wage in Brazil ($325 a month) can afford to rent only a three-room shack in the crime-ridden Favela Paraisópolis ($280), leaving him practically nothing left over to live on.

Brazil is experiencing a severe housing shortage. According to the Inter-American Development Bank, one in three families lives in inadequate housing. The country has an estimated shortage of 5.8 million units, of which 90 percent is concentrated on lower-income families. According to research by the João Pinheiro Foundation, 442,710 households in São Paulo spend 30 percent or more of their income on rent. These families are in danger of joining 44,699 other households living in precarious conditions and 83,011 in which more than three family members are squeezed into the same bedroom — an overcrowding solution to a dead-end situation.

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Brazil farmers say GMO corn no longer resistant to pests

July 29, 2014

Caroline Stauffer – Reuters, 7/28/2014

Genetically modified corn seeds are no longer protecting Brazilian farmers from voracious tropical bugs, increasing costs as producers turn to pesticides, a farm group said on Monday.

Producers want four major manufacturers of so-called BT corn seeds to reimburse them for the cost of spraying up to three coats of pesticides this year, said Ricardo Tomczyk, president of Aprosoja farm lobby in Mato Grosso state.

“The caterpillars should die if they eat the corn, but since they didn’t die this year producers had to spend on average 120 reais ($54) per hectare … at a time that corn prices are terrible,” he said.

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Central Bank of Brazil lowers bank reserve requirements in bid to boost liquidity

July 29, 2014

Arvid Ahlund – Central Banking, 7/28/2014

The Central Bank of Brazil (CBB) has lowered reserve requirements for banks in a move to inject 45 billion reais ($20 billion) into the country’s stagnating economy ahead of presidential elections later this year.

The CBB, which raised interest rates by 375 basis points to 11% in the year to April to fight above-target inflation, said on Friday the new measure “aimed at improving the distribution of liquidity in the economy” following a “recent moderation in credit” and a “decrease in the level of risk in the financial system”.

The change effectively allows banks to use as much 50% of the reserves it holds against deposits on new loans or the acquisition of loan portfolios, potentially translating into 30 billion reais ($13.4 billion) in additional credit creation.

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Appalachian’s Energy Center will help improve life for Brazil’s catadores

July 29, 2014

ASU News, 7/28/2014

A community-based landfill gas project in Brazil piloted in 2009 by the Appalachian Energy Center located at Appalachian State University will soon become reality.

The Green Methane Committee in Fortaleza/Maracanaú, Brazil, which the Appalachian Energy Center helped form and train, will receive approximately $750,000 from the Brazilian Ministry of the Environment – National Fund on Climate Change to construct a system to collect and utilize methane gas from the Maracanaú Landfill. The Appalachian Energy Center also helped plan this landfill gas collection and utilization system.

The gas will be used at an Energy Park that will be constructed adjacent to the landfill where catadores (Brazilian waste pickers) will gather plastic and glass recyclables from the waste stream before they end up in the landfill, providing more profit for these workers.

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Brazil: When To Sell After The Rally?

July 29, 2014

Shuli Ren – Barron’s, 7/29/2014

Brazil’s equity market has had a stunning performance since mid-March. The iShares MSCI Brazil Capped ETF (EWZ) has gained around 30% since then. This ETF is up 16.7% this year.

Part of the rally is propelled by optimism in the state-owned sector. Investors bet that high-profile names such as Petrobras (PBR) and Electrobras (EBR) will operate better once a new government is ushered in after the October presidential elections. Last week, Barclays upgraded Petrobras to Buy for this precise reason. Petrobras outpaced the Brazil ETF, gaining 27.2% this year. Electrobras rose 17%. State-owned Banco de Brasil (BBAS3.Brazil) advanced 24%. Brazilian iron ore producer Vale (VALE), whose fate is tied to China, is the only high-profile underperformer, not even breaking even this year.

But some investors are skeptical of the Brazilian rally, asking “when to sell” Brazil. In a report published today, strategist Geoff Dennis suggested the time is “now.”

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Brazil’s Real Falls as Ukraine Turmoil Saps Emerging-Market Bid

July 29, 2014

Paula Sambo and Filipe Pacheco – Bloomberg Businessweek, 7/29/2014

Brazil’s real dropped the most among major Latin American currencies as turmoil in Ukraine dried up demand for emerging-market assets.

The real declined 0.2 percent to 2.2279 per U.S. dollar at 9:42 a.m. in Sao Paulo. Swap rates, a gauge of expectations for interest-rate moves, increased six basis points, or 0.06 percentage point, to 11.33 percent on the contract maturing in January 2017.

Investors sought refuge in the dollar as the European Union and the U.S. prepared new sanctions against Russia while President Vladimir Putin’s administration formulated its response to international pressure over the conflict in Ukraine.

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Brazil Sugar Production Up, but Don’t Expect It to Last

July 29, 2014

Alexandra Wexler – The Wall Street Journal, 7/24/2014

Sugar-industry executives and analysts are calling for the biggest decline in Brazil’s sugar output over a decade. But the numbers coming in from the harvest are showing that the world’s No. 1 producer is churning out sugar well ahead of last year’s pace. What gives?

The apparent paradox can be explained by dry weather in Brazil, where the top-growing regions experienced the worst drought in decades from January through April. Ongoing dry conditions are making it easier for growers to harvest cane, inflating the early harvest totals. The blistering pace of the harvest means that mills are likely to run out of sugar cane to crush far sooner than is typical.

That means Brazil’s sugar harvest will be short, and likely sweet for prices.

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Brazil President will Ask Zero Tariff for Mercosur Partners

July 29, 2014

Prensa Latina, 7/29/2014

Brazilian President Dilma Rousseff will request today at the 46th Meeting of Head of States of the South Common Market (Mercosur) to apply zero tariff since 2015 to part of the trade with Peru, Chile and Colombia.

An official statement confirmed on Monday the attendance of Rousseff to this summit, in which she will request to forward the enforcement of the agreement of freeing business taxes for those three partner nations of Mercosur.

The agreement to implement the zero rates in the commercial area is sealed and its implementation is scheduled for 2019, but Brazil would like to discuss with the other members its implementation from 2015, emphasized in recent days Antonio Jose Ferreira Simoes, deputy secretary general for South America in the Foreign Affairs Ministry.

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Plans for minors on the rise in Brazil’s pension industry

July 29, 2014

Ulric Rindebro – BN Americas, 7/28/2014

Demand for savings plans designed for minors are on the rise in Brazil’s private pension plan industry.

These plans are sold as retirement plans but parents who buy them mainly use them to finance their children’s’ higher education, pension plan provider Brasilprev’s intelligence and client administration manager Soraia Fidalgo told BNamericas.

In 1997, Brasilprev was the first company in Brazil to launch a pension plan for minors.

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Santander stirs Brazil election storm with client note

July 28, 2014

Guillermo Parra-Bernal – Reuters, 7/28/2014

Spain’s Banco Santander SA finds itself in an unwanted spotlight in Brazil after its local subsidiary irked the government by circulating a client note saying that the re-election of President Dilma Rousseff would likely push asset prices lower.

In a monthly column to wealthy clients entitled “You and Your Money,” Banco Santander Brasil SA said a drop in Rousseff’s popularity had helped spark a recent rally in the Brazilian stock market – a common view among economists and investors who believe the government’s heavy-handed policies have contributed to Brazil’s current economic slump.

The note then went on to say that the market rally could fizzle if the president’s popularity stabilizes or rebounds in opinion polls ahead of October’s election, an assertion that angered government officials and members of the ruling Workers’ Party.

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