Brazil August Retail Sales Rise More Than Analysts Forecast

October 15, 2014

David Biller – Bloomberg, 10/15/2014

Brazil’s retail sales in August rose more than analysts forecast, as the government works to spur growth after the world’s second-biggest emerging market entered recession in the first half of the year.

Sales rose 1.1 percent after a revised 1 percent contraction in July, the national statistics agency said today in Rio de Janeiro. That was the biggest jump since July 2013 and above the median forecast for a 0.8 percent increase from 34 economists surveyed by Bloomberg.

The first sales increase since May comes 11 days before the presidential runoff election between challenger Aecio Neves and incumbent Dilma Rousseff. Shoppers’ purchasing power has become a talking point in the race after above-target inflation eroded consumer confidence and the economy shrank in the first half. In June and July Brazil hosted the monthlong World Cup tournament.

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Brazil economy faces gloomy outlook without reforms- IMF

October 7, 2014

Alonso Soto – Reuters, 10/07/2014

The Brazilian economy will likely have a mild recovery next year as electoral uncertainty fades, but still lag regional peer Mexico that should grow faster after a series of economic reforms, the International Monetary Fund said on Tuesday.

The global lender cut its growth forecast for Latin America’s largest economy by 0.6 percentage point to 1.4 percent in 2015 due to dwindling investment and moderation in employment and credit growth. In its flagship “World Economic Outlook,” the IMF also revised down Brazil’s growth for this year to just 0.3 percent from its July estimate of 1.3 percent.

Four years of lackluster growth in a once-booming Brazil have brought the economy to the center of a political debate between leftist incumbent Dilma Rousseff and pro-market candidate Aecio Neves in what is expected to be a tight second-round of presidential elections on Oct. 26.

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Pre-election spending in Brazil: A final splurge

October 2, 2014

J.P. – The Economist, 10/01/2014

That governments splurge in election years is a hallowed democratic tradition. True to form, Brazil’s left-wing administration, led by President Dilma Rousseff who is seeking a second term in an election on October 5th, has gone on a spending spree. Just how big became apparent on September 30th, when the treasury released its August accounts.

The primary deficit (before interest payments) reached 14.4 billion reais ($5.9 billion) in that month, the fourth in a row in which the government has failed to put aside cash to pay creditors. The consolidated primary surplus in the eight months to August stood at just 0.3% of GDP. Most of that came from the states; the central government managed just 1.5 billion reais, a piffling 0.05% of GDP and the worst result for the period since 1998. The overall budget deficit climbed to 4% of output, the highest level since Ms Rousseff’s predecessor and mentor, Luiz Inácio Lula da Silva, embarked on a huge stimulus package in 2009, as the global financial crisis took hold.

Part of the fiscal deterioration is a good sign, after a fashion. The government has at last decided to stop “pedalling”, as critics mockingly call the dubious procedure of putting off payments to state-owned banks charged with disbursing benefits such as unemployment insurance, or cash handouts for the poor (which Ms Rousseff raised three months ago). In recent months these lenders have had to finance such payments from their own funds. Now the treasury has finally footed the bill.

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Brazil Central Bank Cuts Inflation Forecast on Slow Growth

September 30, 2014

Matthew Malinowski and Mario Sergio Lima – Bloomberg, 09/29/2014

Brazil’s central bank cut its 2014 inflation forecast, saying the world’s second-biggest emerging market will grow at a “disinflationary” pace over the next quarters.

Consumer prices will rise 6.3 percent this year if policy makers keep the benchmark Selic (BZSTSETA) at 11 percent, according to the reference outlook in the quarterly inflation report published today. The inflation forecast compares with a 6.4 percent estimate for 2014 in the June report. Consumer prices will rise 5.8 percent in 2015, compared with a 5.7 percent forecast in June. Policy makers also said the economy will expand 0.7 percent this year, down from the previous estimate of 1.6 percent.

“Taking into account the growth outlook for the next quarters, the committee assesses that the output gap over the next quarters will remain in disinflationary territory,” policy makers said. They reiterated inflation will converge toward its 4.5 percent target in 2016.

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Brazil’s household survey: Slower going

September 22, 2014

J. P. – The Economist, 9/21/2014

Brazil is, famously, one of the world’s most unequal countries. Income of the richest 10% of the population is 38 times that of the poorest tenth. The ratio in Poland, which has similar income per person, is just eight to one. But at least the left-wing Workers’ Party (PT), in power since 2003, has been able to claim that, unlike in most other places, Brazilian inequality has fallen consistently on its watch. On September 18th it seemed this trend had come to an end. Data from the annual household survey, a mini-census of 150,000 families, showed an uptick in Brazil’s Gini coefficient, from 0.499 in 2012 to 0.500 in 2013 (0 signifies everyone has an identical income and 1 means that a single household takes everything).

If this was unwelcome news for President Dilma Rousseff, who is seeking a second term in an election two weeks from now, the next day offered hope of a respite. The national statistics office (IBGE), which compiles the survey, announced that it contained “extremely serious errors”, caused by applying the wrong weights to some of Brazil’s regions. Revised figures show that the Gini in fact edged down to 0.497.

Other tweaks—not to mention the very public cock-up—offered less for Ms Rousseff to cheer about. Brazil’s median inflation-adjusted household income rose by just 2.3% between 2012 and 2013, not 4% as originally thought. Illiteracy dipped from 8.7% to 8.5%, not to 8.3%.


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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