Brazil’s Longer-Term Swap Rates Rise on 2015 Inflation Outlook

July 28, 2014

Filipe Pacheco and Paula Sambo – Bloomberg, 7/28/2014

Brazil’s longer-term swap rates climbed as economists surveyed by the central bank raised their inflation forecasts for 2015, adding to speculation that policy makers will resume raising borrowing costs next year.

Swap rates on contracts maturing in January 2018 increased one basis point, or 0.01 percentage point, to 11.41 percent at 9:52 a.m. in Sao Paulo. The real was little changed at 2.2294 per U.S. dollar.

Economists increased their inflation forecast for 2015 to 6.21 percent from 6.12 percent a week earlier, according to the median of about 100 estimates in a central bank survey published today. President Dilma Rousseff is facing a combination of slower economic growth and above-target inflation as the October election approaches.

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Economy In Gutter, Brazil More Expensive Than Europe

July 28, 2014

Kenneth Rapoza – Forbes, 7/27/2014

Brazil’s economy might be growing near zero, and it’s currency isn’t as strong as it was in the heyday of the U.S. housing bubble of 2008, but that hasn’t stopped the country from becoming more expensive than the entire euro zone. In fact, according to The Economist magazine’s latest edition of the Big Mac index, Brazil’s currency is overvalued, and is third behind mega rich nations like Norway and Switzerland.

Brazil is the most expensive emerging market nation, and the locals are feeling it.

According to the magazine’s Big Mac index, the Brazilian real is overvalued by 5.86% as of July 23, more so than it was in 2009.  The Brazilian real is worth R$2.23. But it used to be a lot stronger. In July of 2008, it hit a strong R$1.55.  Despite a weaker currency, Brazil’s cost of living is on the rise.  For those living there, it’s a cause of frustration.  This is still very much a country where roads flood in the rain in major cities like São Paulo, and World Cup and Olympic quality cities like Rio de Janeiro have a whopping 500,000+ living in squalor in hillside slums.  The views are nice, but the poverty, the crime, the violence and the lackluster government services to those stuck there remain a national embarrassment.

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Brazil Eases Reserve Requirements to Inject $13.5 Billion

July 25, 2014

David Biller and Francisco Marcelino – Bloomberg Businessweek, 7/25/2014

Brazil’s central bank is making available an estimated 30 billion reais ($13.5 billion) with measures including reduced reserve requirements as it looks to boost economic activity.

The bank is allowing as much as 50 percent of time deposit requirements to be used on new loans and the acquisition of loan portfolios, the monetary authority said in a statement on its website today. It also increased the number of banks eligible to sell their portfolios, and those able to use up to 20 percent of reserve requirements to grant loans qualifying under development bank BNDES’s program to sustain investment, known as PSI.

President Dilma Rousseff’s administration is seeking to rein in above-target inflation without strangling growth. Policy makers left rates on hold for the second straight monetary policy meeting ending July 16 following the longest rate-raising cycle in the world, as expectations for 2014 economic growth plummeted. Minutes from the meeting that signaled the bank would leave rates on hold have been “compromised” by today’s measures, according to Andre Perfeito, chief economist at Gradual Investimentos.

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Brazil to boost credit to counter economic slowdown

July 25, 2014

Walter Brandimarte – Reuters, 7/25/2014

Brazil’s central bank on Friday announced measures to boost credit in the country’s ailing economy, one week after keeping its benchmark interest rate at its highest level in over two years to fight inflation.

The bank said in a statement it was freeing up an estimated 30 billion reais ($13.5 billion) in the financial system through changes to banks’ reserve requirements.

The move “aims at improving the distribution of liquidity in the economy” given a recent slowdown in credit and relatively low levels of bad loans, the bank said.

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Dour Outlook For Brazil May Be Exaggerated: A Contrarian Take

July 25, 2014

Jim Cahn – Nasdaq, 7/25/2014

With the World Cup having put it in the spotlight, Brazil is getting a lot of critical attention, including reports that the country is unprepared to host the 2016 Olympics. Between those two events are the pivotal October elections, which will determine if South America’s largest country is going to stick with populist policies and price controls or start doing some very unpopular things to mitigate inflation and revitalize the stagnating economy.

Its domestic growth production is restrained in the 2% range, its foreign imbalances have grown, the currency is being hammered and even the often slow-to-react ratings agencies have cut Brazil from BBB to BBB-.

But frankly, it’s not all that bad. In fact, the outlook for certain sectors is quite good, especially consumer goods, finance and infrastructure.

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No Growth, No Problem For Brazil Investors As Market Beats World

July 24, 2014

Kenneth Rapoza – Forbes, 7/22/2014

Slow growth, protests, and a humiliating defeat against the Germans in the World Cup earlier this month hasn’t soured investor sentiment on Brazilian equities. Over the last four weeks, Brazil’s stock market as measured by the MSCI Brazil index has beat out the MSCI World and the S&P 500.

The same can be told when looked at three months out, with the iShares MSCI Brazil (EWZ) exchange traded fund up 8.9%, beating the MSCI World and the MSCI Emerging Markets Index.

Who cares if GDP is expected to come in under 2% again this year, or that a hotly contested election is just three short months away. Brazil is the cheapest market in Latin America.

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Brazil Trims 2014 Growth Forecast

July 23, 2014

Jeffrey T. Lewis – The Wall Street Journal, 7/22/2014

The Brazilian government cut its economic growth forecast for 2014, reflecting the sluggish expansion already seen so far this year.

The country’s gross domestic product will grow 1.8% in 2014, compared with the 2.5% projected by the government earlier this year, according to a report released Tuesday. The government also raised its forecast for inflation for the year, to 6.2% from 5.6%.

The estimate for the central government’s income excluding transfers to states and municipalities was raised by 714.5 million reais ($332.7 million), to 1.095 trillion reais, after the estimate for transfers was cut.

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Brazil Analysts Cut 2014 GDP Call Below 1% for First Time

July 23, 2014

Matthew Malinowski – Bloomberg, 7/21/2014

Brazil economists cut their 2014 growth forecast for the eighth consecutive week, as low confidence and above-target inflation curb demand in the world’s second-largest emerging market.

Brazil’s economy will expand 0.97 percent this year, compared with the previous week’s forecast of 1.05 percent, according to the July 18 central bank survey of about 100 analysts published today. That was the lowest estimate since the central bank started publishing the data.

President Dilma Rousseff’s administration is trying to combat the fastest inflation in a year without further crimping demand as she campaigns for re-election in October. The central bank last week held the key rate unchanged for the second straight meeting after having lifted the Selic by 375 basis points in the year through April. Economic growth estimates have fallen as industrial sector sentiment in July dropped for the fourth straight month, while consumer confidence hovers near a five-year low.

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Most Brazilian Stocks Advance as Vale Rallies on Commodity Gain

July 22, 2014

Ney Hayashi – Bloomberg, 7/22/2014

Most Brazilian stocks climbed as higher commodity prices buoyed raw-material producers including mining company Vale SA.

The gauge for material stocks on the MSCI Brazil Index gained the most in a week. Trucking company JSL SA rose after saying gross sales increased 20 percent in the second quarter from a year earlier. Petroleo Brasileiro SA, the state-run oil company, fell amid speculation that a nine-session rally may have been excessive.

The Ibovespa was little changed at 57,644.02 at 12:05 p.m. in Sao Paulo, with 46 of its 70 stocks higher. The index rose 3.6 percent in the previous two sessions after a voter poll showed reduced support for President Dilma Rousseff’s bid for re-election amid a stalled economy.

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Emerging-Market Stocks Rise as Brazil Gain Outweighs Russia Drop

July 22, 2014

Julia Leite and Natasha Doff – Bloomberg, 7/21/2014

Emerging-market stocks rose for a second-day as Brazilian state-run companies gained on speculation a new government will boost economic growth, outweighing declines in Russian shares.

Indonesia’s benchmark rose for a second day before the release of presidential election results tomorrow. The Micex Index fell the most since March in Moscow as President Vladimir Putin faced mounting international pressure after the downing of the Malaysian passenger jet in Ukraine. The Shanghai Composite Index declined amid concern new share sales may divert funds from existing shares.

The iShares MSCI Emerging Markets ETF advanced 0.3 percent to $44.31. The Brazilian state-controlled oil producer Petroleo Brasileiro SA led the Ibovespa to a four-month high in Sao Paulo as a voter poll dimmed the prospects for President Dilma Rousseff’s re-election bid.

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