Silva Melds Dishwasher Past With Growth Vows for Brazil Vote

August 25, 2014

Raymond Colitt – Bloomberg, 8/25/2014

Forty years ago, Marina Silva was a maid washing dishes in the jungle city of Rio Branco. Today, she is a presidential contender, counting on her personal history to appeal to poorer Brazilians even as she adopts economic positions friendly to business leaders and investors.

Silva’s entry into the contest as a replacement for Eduardo Campos after he died in a plane crash has upended the race, with polls showing her attracting previously undecided voters. To win, she needs to do more: siphon support from President Dilma Rousseff among the poor, who have benefited from 12 years of social welfare under the ruling Workers’ Party.

Silva’s pledges to slow inflation, grant central bank autonomy and undo fiscal policies that led to a sovereign credit downgrade target a different audience: supporters of Senator Aecio Neves, who appeals mostly to more affluent Brazilians. Her personal background positions her to meld this economic-growth agenda with an appeal to poorer voters, said Rafael Cortez, a political analyst at research company Tendencias Consultoria Integrada.

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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 Attacks Rousseff’s Record to Start Brazil Presidential Bid

August 21, 2014

Maria Sergio Lima – Bloomberg, 8/20/2014

Marina Silva began her campaign as the Brazilian Socialist Party’s presidential candidate by criticizing incumbent Dilma Rousseff’s management of Latin America’s biggest economy while also pledging allegiance to positions taken by predecessor Eduardo Campos.

A week after Campos died in an Aug. 13 plane crash, the PSB yesterday chose Silva, 56, to take over his candidacy and tapped Beto Albuquerque to be her running mate. According to the first poll taken since Campos’s death, Silva would push the Oct. 5 election to an Oct. 26 second-round ballot.

In her first news conference as the PSB’s candidate, Silva decried the low growth, inflation (BZPIIPCY) and high interest rates that undermine the reduction of inequality and hamper Brazil’s economic development. Saying she has long “defended fiscal responsibility,” Silva repeated her commitment to inflation targeting, a floating exchange rate and the primary surplus while calling Campos a “defender of formal central bank autonomy.” She also declared that government mistakes in energy policy had proven expensive for Brazilians.

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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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Brazil Equities Due For Correction

August 18, 2014

Kenneth Rapoza – Forbes, 8/15/2014

Investors may be cheering the likelihood of Brazil’s incumbent Dilma Rousseff being kicked to the curb in the October presidential election, but that will not be enough to push the iShares MSCI Brazil (EWZ) exchange traded fund over $50. That’s because the fundamentals of this economy are not sound.

Brazil may have been a technical trade for a while. Or even a FIFA World Cup trade. But the Dilma trade can’t last for long. Brazil will start getting expensive. And fundamentals will return to the fore. This economy has seen its better days.

The June IBC-Br — a monthly Central Bank proxy for quarterly GDP — came in at a -1.5% month over month, ending the second quarter on a bad note. As a reminder, industrial production during that month decreased 1.4%  and broad retail sales dropped 3.6%.

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Brazil’s Swap Rates Decline After Economy Contracted in June

August 15, 2014

Filipe Pacheco – Bloomberg, 8/15/2014

Brazil’s swap rates fell after data showed the economy shrank in June by the most in 13 months, adding to speculation policy makers will limit further increases in borrowing costs.

Swap rates on contracts maturing in January 2017, a gauge of expectations for interest rates, dropped six basis points, or 0.06 percentage point, to 11.54 percent at 9:20 a.m. in Sao Paulo, and were down 12 basis points this week. The real climbed 0.2 percent to 2.2622 per dollar, extending the advance this week to 0.9 percent.

Brazil’s seasonally-adjusted economic activity index fell 1.48 percent in June from the previous month, the central bank said in a report posted on its website today, the biggest drop since May 2013. President Dilma Rousseff is struggling to revive Brazil’s faltering economy, which is forecast by analysts to grow at the slowest pace since 2009, two months ahead of presidential elections.

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Brazil July inflation slows more than economists forecast

August 8, 2014

David Biller – Bloomberg, 8/8/2014

Brazil’s consumer price increases slowed more than expected in July, as transport and food costs fell in the world’s second-biggest emerging market.

Inflation (BZPIIPCM) as measured by the benchmark IPCA index decelerated to 0.01 percent, the slowest in four years, from 0.40 percent in June, the national statistics agency said today in Rio de Janeiro. That was below all estimates from 46 economists surveyed by Bloomberg, whose median forecast was 0.10 percent.Annual (BZPIIPCY) inflation slowed to 6.50 percent, versus a median estimate of 6.60 percent.

While consumer price increases slowed more than expected, inflation at the top of the target range is hurting consumers’ purchasing power less than two months before presidential elections. President Dilma Rousseff has worked to contain inflation by capping government-regulated prices, while the central bank undertook the longest rate-raising cycle in the world of its benchmark Selic rate.

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