How Argentina’s Debt Crisis and Brazil’s Civil Unrest are Eclipsing Latin America Opportunities

August 21, 2014

Tim Pennington – International Business Times, 8/21/2014

News stories emanating from Latin America rarely frame the region’s economy in a positive light.

This summer’s excellent World Cup – while not eclipsed on the field – was against a backdrop of strikes and civil unrest in Brazil’s major cities. Similarly, Argentina’s President Cristina Kirchner and her government were forced to default on their debts for a second time in thirteen years.

The negative image that these high-profile stories create does not do justice to the economic transformation taking place in Latin America or the investment opportunities the region now offers to business.

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Petrobras Would Make The Most Of Brazil’s Escalating Natural Gas Demand

August 21, 2014

Khuldune Shahid – Seeking Alpha, 8/21/2014

Petroleo Brasileiro Petrobras (NYSE:PBR), or Petrobras, announced on Tuesday that it had extended its agreement with Bolivian state-owned firm YPFB, which would continue supply natural gas to a thermoelectric power plant in Brazil till December 31, 2016 as a part of the Gas Supply Agreement (GSA). The deal has also provided clarification with regards to the various interpretations of the GSA via inter-party compensations.

The agreement between PBR and YPFB is of advantage for both the concerned parties, because not only does it offer short-term incentives, the deal also provides the Brazilian company the opportunity to enhance production and exploration of Bolivian natural gas. The deal ensures that any natural gas that PBR would extricate would be liable for preferable allocation to Brazil.

The deal’s positive impact on PBR’s Q3 numbers isn’t going to be tangible, with the Brazilian firm set for a $268 million loss. Even so, the calendar year’s result should witness positivity for PBR with an expected $128 million profit.

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Brazil’s Central Bank Takes Action As Economic Outlook Worsens

August 21, 2014

Kenneth Rapoza – Forbes, 8/20/2014

Brazil’s Central Bank injected another $12 billion into the economy on Wednesday following analyst projections that this year’s GDP will print at just 0.79%.

This is the second time the Central Bank has provided some form of stimulus to lenders. In July, it provided around $21 billion to banks to induce lending.

Brazilian equities have been on a tear lately no matter what the economic fundamentals suggest. The iSharesMSCI Brazil (EWZ) exchange traded fund is up 6.07% in the past five days, clobbering the benchmark MSCI Emerging Markets index by roughly 500 basis points.

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Silva Economy Adviser Warns Against Brazil Currency Intervention

August 20, 2014

Paula Sambo – Bloomberg, 8/19/2014

Policies to control inflation with a stronger real pose a threat to Brazil’s economy, Eduardo Giannetti, who is economic adviser to potential presidential candidate Marina Silva, said.

“The currency intervention in Dilma’s government was to contain domestic prices,” he said today at an event in Sao Paulo about the administration of Dilma Rousseff, cautioning that he was speaking on his own accord and not as Silva’s adviser. “That is an action that generates distortions and is a worrying framework for the country.”

Silva, 56, became the wild card in Brazilian politics after her running mate, presidential candidate Eduardo Campos, died in a plane crash last week. She replaced Senator Aecio Neves as second in polling for the Oct. 5 vote and is statistically tied with Rousseff in a possible runoff, according to public opinion research company Datafolha.

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Brazil Eases Credit Rules to Inject $4.5 Billion in Economy

August 20, 2014

Matthew Malinowski and Karen Eeuwens – Bloomberg, 8/20/2014

Brazil’s central bank has eased rules on reserve requirement for a second time this quarter in a bid to boost credit in a slowing economy.

The bank published the rules in today’s Official Gazette, altering rules for payments on non-cash deposits. The changes will channel about 10 billion reais ($4.5 billion) into credit, the bank said in a statement published on its website. The move follows the bank’s decision in July to free up 30 billion reais, according to the statement.

President Dilma Rousseff’s administration is struggling to contain above-target inflation without causing growth to deteriorate further. The central bank has kept the benchmark interest-rate at the highest level since 2012, after lifting the key rate by 375 basis points in the year through April. The moves haven’t improved the economic outlook, according to analysts surveyed by the central bank, who forecast growth will slow and inflation will accelerate this year compared to last year.

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‘Made In Brazil’ Under Pressure, Study Shows

August 20, 2014

Kenneth Rapoza – Forbes, 8/19/2014

Brazil is more than samba and soccer. But the airplanes it makes and the soybeans it grows are coming under increasing cost pressures, making a number of manufacturers there lose ground to competitors in the U.S.

A new study by the Boston Consulting Group (BCG), made public on Tuesday, said that Brazil was one of a handful of 25 major exporters that was losing its competitive edge to other countries in the Americas.  In this case, the U.S. and Mexico are often beating Brazil to the punch.

“Improving the productivity of each worker is becoming an increasingly important factor in manufacturing competitiveness across the globe,” said Michael Zinser, a BCG partner. “This is especially true as the once-considerable wage gaps between developed and developing economies continue to shrink.”

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Haitian Migrants Turn Toward Brazil

August 20, 2014

Emily Gogolak – The New Yorker, 8/20/2014

At 7:30 on a recent morning, dozens of people were already outside the Brazilian embassy in Port-au-Prince, Haiti, a white stucco building in the suburb of Pétionville. Often there are hundreds, some with visa appointments, and many more waiting in hopes of one. Workers hurried up the slope to the upscale enclave from the dusty downtown below; Jalousie, a shantytown of pastel-painted cinderblock homes, hovered above. “Today makes one year and six months that I’ve been coming here every day,” said Saintadele Ladouceur, a thirty-nine-year-old mother of two. She is from Delmas, one of the Port-au-Prince districts hit hardest by the earthquake in 2010.

The 7.0-magnitude quake, which leveled much of Port-au-Prince and its surroundings, killed an estimated two hundred and thirty thousand people, and left more than a million and a half homeless. It was, as Paul Farmer has put it, an “acute-on-chronic” event: there were countless chronic problems in Haiti, but they became acute after the earthquake. The World Bank estimates that about eighty per cent of the population lives on less than two dollars a day.

At just past eight o’clock, a call of “Silence. Silence. Silence!” rose from the crowd outside the embassy. The phone lines had opened, and anyone with a cell phone was trying to get a visa appointment. The embassy does not have an online system for the visa process because applicants have limited access to computers. Embassy officials also decided that it would be better to give everyone a chance each day than to set appointment times weeks or months in advance. There was a collective sigh of frustration: a busy tone. The officials told me that, on an average day, they miss more than twelve hundred calls. With a staff of six, they can take no more than forty appointments daily.

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Lula urges Brazilians to give Rousseff a second term

August 19, 2014

Fox News Latino, 8/19/2014

Former President Luiz Inacio Lula da Silva, one of Brazil’s most popular politicians, came all-out Tuesday in favor of the campaign to reelect his successor, Dilma Rousseff, assuring voters they can support her without qualms.

With the campaigns for the Oct. 5 elections starting Tuesday on television, the ideal medium for getting political messages across in Brazil, Lula burst onto the small screen with a powerful message in favor of a second four-year term for his political protege.

“Everyone knows that my second term was better than the first” and “that’s how it will be with Dilma,” Lula said, appealing to what Brazilians remember about his 2003-2011 tenure.

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Brazilian Economic Policy Secretary Optimistic About Growth

August 19, 2014

Paulo Trevisani – The Wall Street Journal, 8/19/2014

True to its habit of offering a steady flow of rosy economic forecasts, the Brazilian government is expecting the second half of 2014 will be better than the first, a top official said Monday.

Brazil’s economy expanded by a meager 0.2% in the first quarter of this year compared with the previous quarter. Second-quarter results aren’t out yet, but analysts expect them to be about as bleak.

That’s disappointing for officials hoping the economy would grow faster this year than the modest 2.5% pace clocked in 2013. In the central bank’s latest weekly survey of about 100 private-sector economists released Monday, the group projected gross domestic product would rise 0.79% this year, down from its prior forecast of 0.81%.

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China Touts Its Importance In Brazil

August 19, 2014

Kenneth Rapoza – Forbes, 8/18/2014

Chinese diplomats in São Paulo reminded the locals just how important that country is to Brazil.  And doesn’t Brazil know it.

Four years ago, China became Brazil’s leading trading partner, surpassing the U.S..  So far this year, Brazilian companies, led by commodities exporters, shipped $28 billion worth of goods to China compared to $20 billion to the U.S.

The two BRIC economies “should further advance current ties to make the partnership a model for interaction between developing countries,” Chinese Consul General Chen Xi reportedly said in São Paulo on Aug. 11 during an event to celebrate the 40th anniversary diplomatic ties between China and Brazil. The ceremony was co-hosted by the City Council of Sao Paulo and the Brazil-China Friendship Association. It was attended by about 200 that included entrepreneurs and Chinese and Brazilian officials, the China Daily reported from Brazil’s biggest city.

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