BR Partners Offers Debt Restructuring as Brazil Stalls

August 27, 2014

Cristiane Lucchesi and Jonathan Levin – Bloomberg, 8/27/2014

BR Advisory Partners Participacoes SA, the investment bank and asset-management firm founded by Goldman Sachs Group Inc.’s former Brazil chief executive officer, is creating a debt-restructuring advisory business as the country’s economy stalls.

Claudio Citrin joined as a managing director to build the new division, said Andrea Pinheiro, who founded Sao Paulo-based BR Partners in 2009 with Ricardo Lacerda, Goldman Sachs’s former Brazil CEO. Citrin, 52, previously worked as an executive at Spinnaker Capital Ltda for about 14 years, overseeing hedge fund investments in Latin America.

Demand for restructurings may rise amid estimates Brazil has slipped into recession. Credit Suisse Group AG lowered its second-quarter gross domestic product forecast to negative 0.5 percent from negative 0.2 percent this month, and said revisions to the first quarter might also show a contraction. The corporate delinquency rate rose 4.9 percent in the 12 months through June compared with a year earlier, according to data provider Serasa Experian.

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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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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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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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Brazil to help out pressured electric companies

August 8, 2014

Paulo Trevisani & Priscilla Oliveira – The Wall Street Journal, 8/7/2014

Brazil’s government is again offering help to struggling power distributors caught between rising wholesale costs and controlled retail prices.

The Finance Ministry said on Thursday that it is making available 6.6 billion Brazilian reais ($2.9 billion) in credit lines to the sector. The funds will come from private and government-controlled banks.

The fresh money is meant to cover a gap in the power companies’ accounts, as a prolonged drought significantly reduced generation capacity in Brazil’s mainly hydroelectric generated power grid.

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Brazil denies any ‘stagflation’ and forecasts economy with ‘reasonable’ growth level in 2015

August 7, 2014

Merco Press, 8/6/2014

“We certainly cannot speak of a crisis,” Tombini told lawmakers at the Senate’s economic affairs committee. “I want inflation to be lower than it is now, but it remains under control.”

Tombini’s remarks are at odds with the view of some economists and investors, who have noted recently that inflation is running above the central bank’s target range and economic growth has ground to a near halt.

President Dilma Rousseff’s main contender in the October presidential election, Senator Aecio Neves, has recently described this outlook as one of “stagflation”.

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IN DEPTH: Brazil’s power struggle

August 6, 2014

Alexandre Spatuzza – Recharge News, 8/6/2014

It may come as a surprise to those only loosely following Brazil’s fast-growing wind industry, but there is a deep-seated crisis in the country’s power sector that could affect the outcome of the presidential election in October — and, in turn, the election result could have a big impact on the energy industry, including wind and solar.

President Dilma Rousseff, who is seeking re-election, faces a range of issues that analysts believe will dog her campaign — slow economic growth, rising inflation, high government spending, and liquidity and supply problems in the power industry. The latter will be the first item on the agenda of whoever wins the presidential race, say analysts.

Under Rousseff and her predecessor Luiz Inácio Lula da Silva — both of the centre-left Workers’ Party — the energy industry has gone through a series of upheavals that have reduced the income of generation, distribution and transmission companies, leaving them without the liquidity they need to make investments.

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