Arminio Fraga offers Brazil an orthodox path

September 19, 2014

Joe Leahy – Financial Times, 9/17/2014

Arminio Fraga’s assessment of what is wrong with Brazil explains why he is the market’s choice to be finance minister after next month’s election.

“There`s a clear feeling the government is lost, it has picked the wrong model,” Mr Fraga says in an interview at his office in Leblon, Rio de Janeiro, almost within hearing distance of the Atlantic waves crashing on to the city’s beaches a block or two away.

Mr Fraga advocates a return to economic orthodoxy. A former managing director with financier George Soros and Brazilian central bank president, who co-founded his own hedge fund Gavea Investimentos before selling it to JPMorgan, Mr Fraga is one of Brazil`s most respected economists. He is seen as the country’s version of Raghuram Rajan, the University of Chicago economist who became India’s central bank governor last year.

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Brazil financial markets sell off on election anxiety

September 12, 2014

Reuters, 9/12/2014

Brazilian financial markets added to losses on Friday after an opinion poll showed President Dilma Rousseff and competing presidential candidate Marina Silva statistically tied in an expected second-round vote in October.

Brazilian stocks and currency have been posting losses over the past few days on fears that Silva, regarded by investors as the strongest option to avoid four more years of a government they strongly dislike, would lose her lead in opinion polls.

On Friday, the Brazilian real weakened to as much as 2.323 per dollar, more than 1 percent weaker on the day, as the Ibope pollster said Silva had 43 percent of voter support in a second-round vote, only one percentage point ahead of Rousseff.

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Brazil’s July Economic Activity Increases More Than Forecast

September 12, 2014

Mario Sergio Lima – Bloomberg, 9/12/2014

Brazil’s economic activity in July rose more than economists forecast, as the central bank signals it will keep interest rates on hold in the world’s second-biggest emerging market.

The seasonally adjusted economic index, a proxy for gross domestic product, rose 1.50 percent in July from the prior month after contracting a revised 1.51 percent in June, the central bank said today in a report posted on its website. The median estimate from 30 economists surveyed by Bloomberg was for a 1 percent expansion.

Brazil’s economy slipped into recession in the second quarter as above-target inflation erodes consumer and business confidence. Moody’s Investors Service cut the nation’s credit rating outlook this week, citing “the absence of any signs of a recovery.” With presidential elections less than a month off, economic management has become central to the campaign.

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Brazil’s Real Falls on Moody’s Outlook as Rousseff Gains Support

September 10, 2014

Paula Sambo – Bloomberg, 9/9/2014

Brazil’s real dropped with bonds as Moody’s Investors Service lowered the nation’s credit rating outlook to negative and a poll showed increased support for President Dilma Rousseff during a recession.

The currency slid 0.8 percent to 2.2847 per dollar at the close of trade in Sao Paulo, the weakest since Aug. 25. Government bonds maturing in 2025 fell 1 cent to 101.84 cents on the dollar in the biggest decrease since March.

The real pared its rally in 2014 to 3.4 percent as Moody’s said in a statement that the nation’s low economic growth probably won’t improve in the short term. The currency dropped earlier today as a CNT/MDA poll showed that Rousseff would be tied in a runoff with Marina Silva, who led previous surveys.

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Dreams on hold, Brazil’s ‘new middle class’ turns on Rousseff

September 9, 2014

Asher Levine – Reuters, 09/08/2014

The streets of Jardim São Luis, a poor and violent neighborhood near the edge of São Paulo, have not been this quiet in years. And that is exactly why Valeria Rocha is so worried.

Arms folded, she scans the racks of baby clothes in her small store before flicking a glance towards the empty sidewalk. “Just a year ago this area used to be packed with shoppers but nowadays it’s all empty, my store included,” she said.

After a decade of economic growth and welfare policies that lifted more than 30 million Brazilians out of poverty, Jardim São Luis and other tough neighborhoods across Brazil had high hopes for the future. But a faltering economy and mounting frustration over poor public services are dimming the outlook for Brazil’s “new middle class.”

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Brazil’s Economic Growth Forecast Reduced Again

September 8, 2014

Rogerio Jelmayer – The Wall Street Journal, 9/8/2014

Economists reduced once again their economic-expansion forecasts for Brazil for this year, after Latin America’s largest economy fell into a technical recession in the first half of the year, according to a weekly central-bank survey published Monday.

The survey’s 100 respondents reduced their estimates for economic growth this year to 0.48% from 0.52%, marking the 15th-consecutive reduction of the growth outlook for 2014. For next year, economists kept their estimates for an expansion of 1.10%.

Brazil’s gross domestic product shrank 0.6% in the second quarter from the previous three months, and first-quarter data was revised to a 0.2% contraction, according to the Brazilian Institute of Geography and Statistics, or IBGE, at the end of August. A conventional definition used by economists is that a recession is two consecutive quarterly declines in economic output.

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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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