Perennial Nightmare Petrobras Pushes Brazil Stocks Lower

October 17, 2014

Kenneth Rapoza – Forbes, 10/15/2014

Presidential polls are not to blame for this one.  Brazil’s stock market decline is a mix of oil giant Petrobras, and lackluster consumer sales. Though for true followers of the Brazilian stock market, Petrobras is public enemy No. 1.

Brazilian equities were the worst performing of the BRIC markets on Wednesday due to Brazil’s perennial stock market disaster — Petrobras — which fell by 9.06%. The iShares MSCI Brazil (EWZ) exchange traded fund settled 5.11% lower today while the MSCI Emerging Markets settled 1.26% lower.

Petrobras remains a government story, mired in electoral politics and fiscal policies.

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Brazil presidential race heading for October 26 photo finish

October 17, 2014

Anthony Boadle – Reuters, 10/15/2014

Brazil’s most unpredictable presidential election in a generation is heading toward a photo finish on Oct. 26 between leftist incumbent Dilma Rousseff and pro-business challenger Aecio Neves, a new poll showed on Wednesday.

In an increasingly acrimonious campaign, the candidates traded accusations of lies, corruption and nepotism in a bruising television debate on Tuesday night that had no clear winner and saw more attacks than discussion of policy issues.

Neves, the market favorite, has gained ground since his stronger-than-expected showing in the first-round vote on Oct. 5, when he bested environmentalist Marina Silva to place second behind Rousseff.

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Petrobras scandal adds fuel to Brazil’s fiery election campaign

October 16, 2014

Joe Leahy – Financial Times, 10/15/2014

Common wisdom has it that Brazilians have become so desensitised to political scandals – so frequent are they on all sides of the political spectrum – that they make little difference in elections.

But there are signs that what could end up being Brazil’s biggest corruption case – the alleged kickbacks from state-owned oil company Petrobras – could be different. Politicians from the Workers’ party-led ruling coalition are accused of skimming 3 per cent off billions of dollars of contracts signed by Petrobras ahead of the election of incumbent president Dilma Rousseff in 2010.

Not only are Brazilians taking more notice of this scandal – one Facebook user complained last week it meant he was paying 3 cents of every dollar to the Workers’ party, or PT, whenever he fills his car with petrol. “Better to ride a bicycle,” he said.

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Why Brazil needs change: Voters should ditch Dilma Rousseff and elect Aécio Neves

October 16, 2014

The Economist Print Edition, 10/16/2014

In 2010, when Brazilians elected Dilma Rousseff as president, their country seemed at last to be living up to its huge potential. The economy expanded by 7.5% that year, setting the seal on eight years of faster growth and a steep fall in poverty under Luiz Inácio Lula da Silva, Ms Rousseff’s political mentor and the leader of the centre-left Workers’ Party (PT). But four years later that promise has disappeared. Under Ms Rousseff the economy has stalled and social progress has slowed. Sanctions-hit Russia aside, Brazil is by far the weakest performer in the BRIC club of big emerging economies. In June 2013 over a million Brazilians took to the streets to protest against poor public services and political corruption.

Ever since the protests the polls have shown that two-thirds of respondents want the next president to be different. So one might have expected them to turf out Ms Rousseff in the first round of the country’s presidential election on October 5th. In the event she secured 41.6% of the vote and remains the narrow favourite to win the run-off ballot on October 26th. That is mainly because most Brazilians have not yet felt the economic chill in their daily lives—though they soon will. And it is partly because her opponent, Aécio Neves of the centre-right Party of Brazilian Social Democracy (PSDB), who won 33.6%, has struggled to persuade poorer Brazilians that the reforms he espouses—which the country urgently needs—will benefit rather than harm them. If Brazil is to avoid another four years of drift, it is vital that he succeeds in doing so.

Mr Neves’s task has been made harder by a campaign scarred by tragedy and upended by fate, as dramatic as a Brazilian telenovela. Two months ago the third-placed candidate, Eduardo Campos, died in a plane crash on his way to a rally. His former running-mate and replacement, Marina Silva, surged into the lead in the polls. An environmentalist, Ms Silva is the darling of the protesters, the symbol of a “new politics”. But attractive though her lack of a political machine might have seemed, it was a liability. Faced with sometimes underhand attacks from Ms Rousseff, Ms Silva wobbled. It did not help that she is an evangelical Protestant in what is still a largely Catholic country. In the end her 21% share of the vote was scarcely bigger than she managed in 2010. Rather than a “new politics”, the run-off will repeat the battle between the PT and the PSDB that has defined all Brazil’s presidential elections since 1994.

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Neves would return to basics to fix Brazilian economy: adviser

October 16, 2014

Alonso Soto and Jefferson Ribeiro – Reuters, 10/15/2014

Aecio Neves would scrap a “failed” economic model and restore the pillars of Brazil’s economy to overcome slow growth and high inflation if he wins the presidency this month, the candidate’s pick for finance minister told Reuters on Wednesday.

Neves, a centrist who has promised to rescue Brazil from recession, is running neck-and-neck with leftist President Dilma Rousseff ahead of the Oct. 26 run-off vote in the tightest race in two decades.

Sluggish growth and high inflation have been the focus of a combative campaign that pits two candidates with opposing views on how to fix the ills of the world’s seventh largest economy. Arminio Fraga, a former central bank chief, said the senator would restore the so-called “tripod” of economic policies based on fiscal austerity, inflation targeting and a free floating exchange rate that gave Brazil stability two decades ago.

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Gwynne Dyer: The truth about Bolivia’s and Brazil’s economic miracles

October 15, 2014

Gwynne Dyer – The Georgia Straight, 10/14/2014

TO NOBODY’S GREAT surprise, Bolivia’s president, Evo Morales, has won a third five-year term by a landslide majority. It’s no surprise because Bolivia’s gross domestic product (GDP) has tripled since he took office in 2006. The number of people living in poverty has fallen by a quarter, even the poorest now have the right to a pension, and illiteracy has fallen to zero. Of course he won.

What has happened in Bolivia seems as miraculous as what happened in Brazil, where another left-wing president, Luiz Inacio “Lula” da Silva, took office in 2003. The economy started growing at five percent a year, unemployment fell steeply, and some 40 million Brazilians, almost a quarter of the population, were lifted out of poverty. Lula’s former chief of staff and successor as president, Dilma Rousseff, is also likely to win another term in office.

Is there some secret they share? Many other South American economies have been growing fast too, but without the dramatic change in the distribution of income that has happened in Brazil and Bolivia. Even the late Hugo Chavez’s “Bolivarian revolution” in Venezuela, for all its anti-imperialist rhetoric and despite the country’s great oil wealth, has not delivered a comparable transformation in the lives of the poor.

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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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