Real Drops to Lowest Since 2008 as Rousseff Leads in Voter Polls

October 24, 2014

Paula Sambo and Filipe Pacheco – Bloomberg, 10/23/2014

Brazil’s real fell to the lowest since December 2008 after polls showed President Dilma Rousseff led candidate Aecio Neves three days before the election runoff.

The real declined 0.5 percent to 2.50 per dollar at the close of trade in Sao Paulo after earlier today falling 1.2 percent. The Ibovespa tumbled 3.2 percent, leading losses among major stock benchmarks and erasing this year’s gain.

“Investors are more and more pricing in a victory for Rousseff,” Andre Perfeito, the chief economist at Gradual Investimentos in Sao Paulo, said by telephone. “Many traders are still cautious, but these polls show she is ahead, and people are considering that in trading the currency.”

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What Will Happen Monday, After Brazil Election?

October 24, 2014

Dimitra DeFotis – Barron’s, 10/23/2014

The Brazil equity market has tumbled nearly 8% this week and has slipped into negative territory for the year.

The iShares MSCI Brazil Capped ETF (EWZ) is down more than 8% this week, and has fallen more than 7% year to date. Among Brazil equities, even shares that should be somewhat more immune to Sunday’s election have been hit hard in recent days, including airplane maker Embraer (ERJ) and meat producer BRF (BRFS and BRFS3.Brazil).

The odds are with Brazil’s incumbent Pres. Dilma Rousseff, if ever so slightly, to win Sunday’s runoff presidential election and defeat Aecio Neves, a former governor who is more conservative and the investor favorite. Here’s Societe Generale’s Benoit Anne on anything denominated in Brazil’s currency. He is on the sidelines at this juncture, even if the election outcome is a binary one:

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Market Forecasting Dilma Win In Brazil On Sunday, Turns To Post-Election Scenarios

October 24, 2014

Kenneth Rapoza – Forbes, 10/23/2014

The market is now forecasting that incumbent Dilma Rousseff will be re-elected president in a squeaker on Sunday. Although rival Aécio Neves could pull off an upset if enough of Marina Silva’s voters choose him or opt-out of voting for anyone, his victory would now be seen as a surprise. Downside risks remain in Brazilian equities.

Neves came from polling in third place behind Marina Silva to clobbering her in the first round on Oct. 5, thus guaranteeing him the No. 2 contender spot against Dilma. Polls have suggested that at least 60% of Marina’s voters would chose Neves on Sunday, but he needs a little more than 65% providing the rest of Marina’s voters choose Dilma. So far, that has not been the case as only around 20% of Marina’s voters said they would vote for Dilma on Sunday, meaning the current crop of undecided voters will call the shots.  Recent polls show a technical tie.

It is worth noting that the market’s forecast is not exactly the market’s preference.  At this stage, investors are broadly looking for change in Brasilia, even more so than the average Brazilian.

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Brazil Stocks Sink As Jim Chanos Slams Petrobras

October 22, 2014

Kenneth Rapoza – Forbes, 10/21/2014

Sometimes all it takes is a celebrity investor to say something bad about a market and the investor riff-raff go running for the door. On Monday, famed investor and regular CNBC guest Jim Chanos said Brazilian state owned oil company was not an investment, but an investment scheme. He was referring to what most Petrobras watchers already know — that the company is used by the government as a revenue stream, and as a means to control inflation as it keeps a lock on gasoline prices.

Chanos said this on a day when Petrobras shares had down their usual mega-drop, falling 6% in a day. Less than 12 hours later, the stock opened 6% lower on Tuesday following Chanos’ guidance. He’s laughing all the way to the bank this week.

And while every broker and trader on the Bovespa floor in São Paulo needs something to tell newswire reporters about the wild drop in Brazilian equities today, it is very unlikely that the recent poll by Datafolha showing incumbent Dilma Rousseff neck and neck with challenger Aécio Neves is any reason for investors to sell Brazil. Business Insider gets it. Linette Lopez wrote in a headline today that Chanos Tanked Brazil.

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Brazil’s Rousseff pulls ahead of Neves as election nears

October 22, 2014

Anthony Boadle – Reuters, 10/22/2014

Brazilian President Dilma Rousseff pulled ahead of opposition candidate Aecio Neves in another poll on Wednesday and looks like a slight favorite heading into what is expected to be the country’s tightest election in decades.

The Datafolha poll was the fourth in three days to show Rousseff approaching Sunday’s runoff vote with a slight edge over Neves, who had stirred investor enthusiasm by promising business-friendly policies to revive a sluggish economy.

Brazil’s stocks and currency have sold off this week as Neves lost momentum in a race that he was recently leading. The benchmark Bovespa stock index hovered above a four-month low on Wednesday, and the real seesawed near its weakest level since 2008.

 

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Economic Affairs Dominate Brazil’s Latest Presidential Debate

October 20, 2014

TeleSUR, 10/20/2014

Candidates Dilma Rousseff and Aecio Neves held their third televised presidential debate late on Sunday, a week before the second round run off election. Both candidates avoided personal attacks and addressed key issues on the economy.

​One week before Brazil’s presidential election run-off, current President and candidate Dilma Rousseff held a televised debate with her rival right-wing candidate Aecio Neves, late on Sunday. Both candidates centred the discussion on inflation, unemployment, and the economy in general.

Rousseff attacked Neves for his plans to appoint, a former president of the Central Bank, Arminio Fraga, as Finance Minister. Fraga headed the Central Bank the last time Neve’s Social Democratic Party was last in power, headed by Fernando Cardoso. Dilma reminded Neves that Fraga had been partly responsible for the high inflation levels during that government.

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Brazil’s Rousseff Admits There Was Wrongdoing at Petrobras

October 20, 2014

Paulo Trevisani – The Wall Street Journal, 10/19/2014

Brazil’s President Dilma Rousseff said Saturday that there was embezzlement at government-controlled oil producer Petróleo Brasileiro SA .

The company, known as Petrobras, has been at the center of a corruption scandal allegedly involving people connected to Mr. Rousseff’s Workers Party, or PT.

“I will do all I can to reimburse the country,” Ms. Rousseff said during a news conference at the presidential residence late in the afternoon. “There was” deviation of public money, she said according to a transcript of the interview published on her official campaign website.

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