Brazil’s Rousseff looks weak, but so do her election rivals

April 16, 2014

Brian Winter – Reuters, 4/16/2014

With Brazil’s economy struggling, a scandal at its state-run oil company and nearly three-quarters of voters saying they want change from their government, President Dilma Rousseff looks vulnerable in her bid for re-election this October.

But for her to lose, somebody else has to win. And her two main rivals have big, potentially fatal flaws of their own.

Senator Aecio Neves and former governor Eduardo Campos, who are both running on centrist, pro-business platforms, have failed to make significant headway in polls and still badly trail the left-leaning Rousseff despite her recent struggles.

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Fitch reaffirms Brazil’s credit worthiness

April 14, 2014

Kenneth Rapoza – Forbes Magazine, 4/14/2014

Unlike the credit analysts at Standard & Poor’s, Fitch believes Brazil’s still BBB investment grade.  The rating agency reaffirmed Brazil’s sovereign credit rating on Monday.

“The deterioration in some of Brazil’s sovereign credit fundamentals so far is within the tolerance of the ‘BBB’ rating and the authorities have engaged in policy corrections that should help reduce imbalances,” Fitch said in a press release today.

Last month, Standard & Poor’s reduced Brazil’s credit rating to BBB-, which is the final notch on its investment grade scale.  Days later, they cut the outlook and credit rating for over two dozen Brazilian financial institutions.

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Central Banker Tombini says Brazil well-prepared for QE pullback

April 10, 2014

Pedro Nicolaci da Costa – Wall Street Journal, 4/10/2014

Brazil has built up enough domestic buffers against rapid shifts in capital flows to allow it to withstand a pullback from unconventional interest rate policy in the world’s largest economies, Central Bank Governor Alexandre Tombini said.

Mr. Tombini agreed in part with Indian central bank chief Raguram Rajan, who argued during a Brookings Institution speech that aggressive monetary easing in advanced economies had made life harder for developing countries.

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Fitch wants Brazil’s next government to adjust policies

April 10, 2014

Walter Brandimarte – Reuters, 4/10/2014

Fitch Ratings on Thursday said it expects Brazil’s next government to support the country’s credit rating by making policy adjustments to improve its fiscal performance and boost investor confidence.

In a conference call with investors, Fitch analyst Shelly Shetty said low growth rates and a deterioration in fiscal accounts are the firm’s main concern about Brazil, which remains rated at BBB with a stable outlook.

Her remarks suggest Fitch is willing to give the benefit of the doubt to the next Brazilian president, to be elected in October. They also may help to allay fears Brazil would soon suffer another sovereign downgrade, following Standard & Poor’s decision to cut the country’s rating to near junk level last month.

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“It is time to restructure the tax system in Brazil rather than simply fix its flaws”

April 9, 2014

Instituto Millenium, 4/8/2014

Year in, year out, the urgently necessary tax reform continues to be delayed. The complexity of Brazil’s tax system erodes industrial competitiveness and affects the poorest sections of society, who need better quality public services and lower taxes. Collection increases every year. According to the “tax meter,” in 2014 alone, Brazilian society has paid more than BRL $400 billion to tax authorities. Worse yet, they do not see returns in goods and services and cannot understand where the money goes.

To discuss the complexities of the tax system, the Milennium Institute interviewed José Roberto Afonso, economist and researcher at the Brazilian Institute of Economics (Ibre/FGV). An expert on the subject, José Roberto does not believe it is possible to twerk the current system and make it efficient, “What we need is another tax system, after all, the current one is almost 50 years old, and the world and Brazil have changed.”

Read the full interview in Portuguese here.

Brazil inflation expected to hit highest rate since August

April 8, 2014

Regerio Jelmayer – The Wall Street Journal, 4/7/2014

Brazil’s inflation problem will be back on the front pages this week as the official consumer price index is expected to move above 6% per year, reaching its highest level since August 2013 and pushing up the chances of more interest rate increases.

A survey by The Wall Street Journal of 12 economists showed 12-month inflation rising to 6.08% for the 12 months ended March, up from 5.68% at the end of February. Some see inflation headed above the 6.5% upper limit of the government’s target range.

Behind the price push? Higher airfares during Carnival is one, temporary problem. More worryingly, however, is a shock from food prices that is proving resilient, amid one of the worst droughts in 40 years. And there may be more further down the line, too.

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They razed paradise and put up a soybean lot

April 8, 2014

Lucy Jordan – Global Post, 4/7/2014

 It might not look like much, but this little green bean is both villain and hero in Brazil’s Cinderella story.

Soybeans helped turn this South American nation from a country of peasants into the world’s seventh-largest economy. They’re also blamed for the destruction of vast swathes of rain forest, causing habitat loss and bloody land conflicts.

Brazil predicted this year it was going to out-bean world soy leader the United States. A nasty drought may have put the kibosh on that, but this country’s output is still expected to reach some 94 million tons, coming up close behind the US’s 99 million tons.

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World Cup to generate $27.7 bn in Brazil, government says

April 8, 2014

Agencia EFE, 4/8/2014

The Brazilian government forecasts that the 2014 soccer World Cup will generate around 62.1 billion reais ($27.7 billion) in revenues, three times what was injected into the country’s economy during last year’s Confederations Cup tourney.

The estimate is based on a report published Monday by the Tourism Ministry concerning the economic impact of the Confederations Cup.

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U.S. investors look to profit on Brazil rate hike

April 7, 2014

Ashley Lau & David Randall – Reuters, 4/4/2014

Brazil’s decision to hike its key interest rate to 11 percent, its highest level in two years, has some yield-hungry U.S. investors smacking their lips.

After all, they argue Brazil has an upside and may carry less risk than the other BRIC countries of RussiaIndia and China. Hopes that Brazil’s next president to be elected in October will rein in spending and adjust macroeconomic policies sparked a rally in domestic markets in the past few days.

The big question is whether Brazil’s currency, the real, will sink further and wipe out returns on real-denominated bonds. For some the danger is modest enough to handle, especially for the sweet double digit yields.

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