Brazil economists forecast 2013 growth below 3% for first time

Raymond Colitt – Bloomberg, 05/20/2013

Brazil’s economy will grow below 3 percent in 2013, economists predicted for the first time in a central bank survey of about 100 analysts published today.

Latin America’s largest economy will grow 2.98 percent this year, down from the previous week’s projection of 3 percent. It would be the first time in a decade that Brazil grows below 3 percent for three consecutive years.

Brazil’s economy has struggled to recover from last year’s expansion of 0.9 percent as accelerating inflation undermines consumer demand. While economists raised their 12-month inflation forecast to 5.64 percent from 5.57 percent, they maintained their projection for inflation this year and next at 5.8 percent, according to the survey.

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Brazil throws troubled ethanol industry tax breaks, credit

Alonso Soto, Reese Ewing – Reuters, 04/23/2013

Brazil’s government threw its sugar-ethanol industry a lifeline on Tuesday, by cutting taxes and sweetening credit for the struggling sector it hopes will resume investments in new biofuel plants to bolster output.

Finance Minister Guido Mantega, who announced the measures, said he expected a recovery in the ethanol industry could also help curb stubborn consumer inflation by bringing down fuel prices and reducing Brazil’s dependence on gasoline imports.

The reduction of the so-called PIS/Cofins – payroll and social security taxes – and interest rates on loans is expected to help ethanol groups such as Louis Dreyfus, Bunge , Cosan and others offset production costs that have risen steadily in the last decade.

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Fraga says he’s disturbed by Brazil’s focus on consumption

Julia Leite, Blake Schmidt – Bloomberg, 04/22/2013

Arminio Fraga, Brazil’s former central bank president, is concerned by the government’s push to foster growth by encouraging consumers to spend more on credit.

The speed of loan growth in Brazil merits “some monitoring,” Fraga, founder of Gavea Investimentos Ltda., said in remarks at an event organized by the Brazilian-American Chamber of Commerce in New York. Brazil is using state-owned banks aggressively to promote its goals, said Fraga, who was president of Brazil’s central bank from 1999 to 2002.

“The excessive emphasis on consumption disturbs me,” Fraga, 55, said. “You’re borrowing a lot now, but time will come that people will have to pay. You need to do some things on the fiscal and monetary front and also pay attention, with a prudential mindset, keeping an eye on what these loan portfolios look like.”

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Chart of the week: Brazil’s foundations, undermined

Jonathan Wheatley – Financial Times, 04/22/2013

Brazil’s central bank is in tightening mode again, raising its policy interest rate last week after a long cycle of loosening that began in August 2011. It is worried that inflation is on the rise and less worried, apparently, about slow growth.

But behind recent numbers on inflation is another set of numbers on retail sales, which fell in February for the first time in a decade. If that turns into a trend, the very foundations of Brazil’s recent growth story will be undermined. Chart of the week takes a look.

The blue line on the chart below shows retail sales by volume, seasonally adjusted. As you can see, they have been rising almost without interruption for the past decade, undeterred by the global crisis of 2008-09 that sent so many markets around the world into a tailspin. More so even than global demand for Brazil’s abundant export commodities, it is domestic consumer demand that has underpinned Brazilian growth for the past several years.

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Brazil central bank admits difficulty in taming stubbornly high inflation

MercoPress, 04/04/2013

The Central Bank is monitoring the evolution of the economic scenario to evaluate the need for other measures to battle inflation,” Tombini said.

He said the Central Bank will analyze upcoming inflation data for March to decide on future steps.

Annual inflation in the month to mid-March climbed to 6.43%, dangerously close to the ceiling of the official target range of 6.5%. Economists have raised their forecasts for inflation, suggesting policymakers will need to raise interest rates to keep price expectations under control.

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Brazil bank prioritizes inflation fight

Erin McCarthy, Brian Baskin – The Wall Street Journal, 02/24/2013

The Brazilian central bank’s priority is fighting inflation, and not spurring growth, its president said in an interview before policy makers meet to set interest rates, even as Latin American’s biggest economy struggles to escape a long stretch of slow growth.

Brazil’s economy expanded around 1% in 2012, down from 7.5% as recently as 2010. At the same time, annualized inflation hit 6.2% in mid-February, close to the maximum the government has said it would tolerate.

Analysts say the perception of dueling policies aimed at stimulating the economy and tamping down inflation have created confusion in the market, causing the Brazilian real to gyrate from multi-month lows to highs in the space of a few months.

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Brazil central bank head defends inflation policy stance in Davos

Guillermo Parra-Bernal – Reuters, 01/24/2013

Brazil’s central bank is committed to bringing down inflation, its president said, as he defended the government against criticism it had abandoned cornerstones of its economic policy.

Policymakers are not ruling out the use of traditional monetary tools to contain rising consumer prices, central bank President Alexandre Tombini told an audience at the World Economic Forum in Davos, Switzerland late on Wednesday.

Tombini said the central bank is committed to bringing inflation down to 4.5 percent this year. In the 12 months to mid-January, it accelerated to 6.02 percent from 5.78 percent one month before, putting it near the top of the bank’s target range of 4.5 percent plus or minus 2 percentage points.

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Brazil’s ‘poor’ middle class, and the poor that no longer serve them

Kenneth Rapoza – Forbes, 01/22/2013

Let me preface this by saying that this is not a jab at Brazil. This is actually a story that shows how Brazil’s rising tide is lifting all boats. The poor have more opportunities than ever before. They are earning more money (for some, how’s 56 percent sound?). And for the middle class that used to depend on them to wash their dishes and make their lunch, those days of luxury are over.

Bemvindo a vida Americana, meu bem!

Ask an expat what they love most about living overseas and they will inevitably tell you this: the taxes and the maid service. That’s right. Maids. And not for the rich, mind you, but for middle-of-the-road, beer-from-a-can drinking, 2.5 GPA achieving riff-raff professionals. Whether they’re living in Dubai, Mumbai or Brazil, they all love their maids. It’s a luxury they cannot afford back home.

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Rousseff targets 2013 growth revival as Brazil election looms

David Biller, Raymond Colitt – Bloomberg, 01/21/2013

Brazil’s President Dilma Rousseff, at the midpoint of her term, faces a pivotal year as she seeks to revive economic growth in preparation for an election run in October 2014.

With the economy advancing at a quarter of the pace she targeted shortly after taking office, her administration has enacted more than two stimulus measures a month in the past year. If the world’s biggest emerging market after China doesn’t rebound soon, Rousseff, 65, may face an electoral battle even though she currently enjoys a record approval rating.

The flagging economy threatens her prospects and has prompted the biggest opposition party to name its likely candidate, said Andre Cesar, director at consulting firmProspectiva. Gross domestic product grew in the first half of Rousseff’s term at an average annual rate of 1.87 percent, the slowest two-year pace since 1998-99.

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Brazil inflation rate prompts concerns

Joe Leahy – CNN, 01/11/2013

Brazilian consumer prices ended 2012 near the top of the central bank’s target range for the third year running, prompting concern from economists that the country is stuck in a phase of low growth and high inflation.

Brazilian inflation in December was 5.84 per cent against a year earlier — well above the middle of the central bank’s target zone of 4.5 per cent plus or minus two percentage points — despite economic growth last year that was estimated to have been only about 1 per cent.

“This tolerance about inflation means industrial costs and other costs are going up and the country is [becoming] increasingly uncompetitive,” said Alberto Ramos, an economist at Goldman Sachs.

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