Brazil’s Campos targets taxes, Petrobras to boost economy

April 17, 2014

Brian Winter & Jeferson Ribeiro – Reuters, 4/17/2014

Eduardo Campos, the centrist former state governor running third in Brazil‘s presidential race, plans to lower the tax burden and set a formula to automatically raise fuel prices at state-run oil company Petrobras if he wins the October election.

In a wide-ranging interview, Campos defended those and other reforms championed by Brazil’s business community, which has largely soured on left-leaning President Dilma Rousseff after three-plus years of slow economic growth.

Recent polls show Rousseff with a clear lead as she seeks a second term. She has around 40 percent support thanks to strong backing from poorer Brazilians who are happy with government welfare programs and unemployment still at record lows.

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Brazil socialist kicks off presidential campaign

April 15, 2014

Paulo Trevisani – The Wall Street Journal, 4/14/2014

Socialist politician Eduardo Campos on Monday kicked off his outsider tilt at becoming Brazil’s next president, the first salvo in a campaign that will likely focus on the economy as a potential weakness for incumbent President Dilma Rousseff.

Mr. Campos, who recently stepped down as governor of Pernambuco state in northeastern Brazil, confirmed he will head the ticket for the Brazilian Socialist Party, or PSB, while former environment minister Marina Silva will be his vice presidential running mate.

“Brazil needs to discuss the economy. We can’t grow at just 1%. We still have too much inequality,” Mr. Campos told a crowd of around 700 supporters at a hotel in the capital of this nation of 200 million people.

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Presidential elections in Brazil: which ADRs to watch

March 4, 2014

Louie Grint – Daily Finance, 3/3/2014

Adding to the uncertainty that most emerging markets are experiencing, a local event is stirring up volatility in Brazilian stocks. Presidential and legislature elections will take place in the country in October, and three candidates have real chances of taking office. The favorite is current President Dilma Rousseff, who is running for re-election, and then we have Aecio Neves and Eduardo Campos.

How does this matter to Brazilian ADRs?
A key point here is the degree of government intervention. Investors sense that if President Dilma Rousseff is re-elected, government intervention will continue, damaging companies’ profitability level. The other two candidates are seen as more market-friendly, and they still have a chance, especially with the current slowdown in the economy. So let’s see how three ADRs are performing.

Low exposure
First, here’s a Brazilian forestry leader and the world’s largest producer of hardwood market pulp, Fibria Celulose . It has an annual production capacity of approximately 5.3 million tons.

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2014 Elections

February 28, 2014

Sergio Fausto, O Estado de S. Paulo, 2/28/2014

Challenges abound for the next presidential term.  There are several symptoms indicating that the “new development model,” the “new paradigm of the political economy,” or all the other pompous names one wishes to assign to the policies of the current government, have not produced the expected results. There is a widespread feeling both here and abroad that we are improvising and kicking the can down the road. For how long will this last?

Given this situation, the following question is raised:  Will the candidates for the Presidency present political platforms that allow the voter to understand their vision with regards to these challenges and learn about the political choices each one intends to make to address them? Or  will we once again watch, as per the norm in recent disputes, a campaign devoid of programmatic content, reduced to propaganda based on real or alleged personal  positive attributes of the candidates and vague proposals of distributing more benefits (fancifully without costs and without sacrificing any other desirable goal)?

It is true that political platforms must be translated into more accessible language to ordinary voters, and that in order for a campaign to be successful, it must mobilize feelings around a simplified driving idea. Or such is the conventional political wisdom in Brazil. This notion, however, not only inhibits voters from being more informed, but also weakens the mandate of the government elected by the voters.

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Brazil’s Rousseff will change course if re-elected: former central bank director

February 20, 2014

Walter Brandimarte – Reuters, 2/18/2014

A former director at Brazil’s central bank said he expects President Dilma Rousseff to make key changes in macroeconomic policy, including cuts in government spending, if she gets re-elected for a second term later this year.

Paulo Vieira da Cunha, who was on the bank’s board from 2006 to 2008, said he also expects that after the election Rousseff will replace Finance Minister Guido Mantega, who has been heavily criticized by investors for overly optimistic economic forecasts and what they see as accounting gimmicks in the country’s budget.

Vieira da Cunha called for a return to the pragmatic style of former President Luiz Inacio Lula da Silva, who was elected as a left-winger but was widely regarded as a pro-growth and pro-business president.

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The richest politicians in Brazil

February 4, 2014

Anderson Antunes – Forbes, 2/3/2014

As in the rest of the world, Brazilians who become politicians are invariably wealthy, or become wealthy, before they serve in public office. But many build their fortunes through questionable means, and, not surprisingly, as a result Brazilians have developed a sentiment of distrust towards politicians.

Half a year after demonstrators climbed onto the roof of Brazil’s Congress in Brasilia, the country’s capital, demanding a clean-up of political deadwood and an end to corruption, the relationship between the Brazilian people and its leaders remains strained. The protests initially began as a public uproar against a hike in bus fares in several major Brazilian cities, and were briefly called a “revolution” by more enthusiastic observers.  Ultimately they were demonstrations against politicians.

Brazilian politicians are among the highest paid and least productive in the world, not to mention some of the most corrupt as well. Political scandals have become so usual in Brazil that many people are satisfied to vote for politicians who notoriously and unashamedly steal from public funds. “Steals but does [something],” goes the saying here in Brazil.

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Brazil’s new anti-corruption law: hard to read

January 31, 2014

The Economist, 01/29/2014

At firstblush, it is just what the doctor ordered. Brazil’s new “Law to Combat Corruption”, which went into effect on January 29th, honours the country’s commitment to curb palm-greasing under the OECD’s anti-bribery convention. By focusing on the corruptors—which could be any firm operating in Brazil, including foreign ones without a permanent presence—it complements the “Administrative Improbity Law” of 1992 that targeted crooked public officials. And it comes at an auspicious time, as the government prepares to dole out more contracts linked to the football World Cup in June and the 2016 Olympic Games in Rio de Janeiro—and against the backdrop of scandals involving alleged backhanders paid by Alstom and Siemens, two European engineering giants, to Brazilian officials.

In many ways the Brazilian statute is harsher than similar remedies elsewhere. Fines slapped on firms can reach 20% of their gross annual revenue or, if turnover is hard to determine, 60m reais ($25m). Unlike America’s Foreign Corrupt Practices Act (FCPA), it requires no proof of bosses’ intent or knowledge: so long as the charged firm benefits from corrupt acts committed by an employee (even one acting through a subsidiary or a subcontractor) it is on the hook. Unlike Britain’s Bribery Act, it does not regard robust internal safeguards as a statutory defence (only as a potential mitigating factor). Unlike either, it allows courts to dissolve a company in particularly egregious cases.

But then graft is a bigger ill in Brazil, which ranks 77th out of 177 countries in the corruption-perceptions index compiled by Transparency International, a Berlin-based lobby. Bribes discourage domestic as well as foreign investment, according to José Ricardo Coelho or FIESP, São Paulo state’s main business lobby, which has embraced the new law with gusto. If accompanying regulations are implementation are clear and consistent, Mr Coelho argues, the law will be a boon for business.

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Dilma needs Davos more than Davos needs Dilma

January 23, 2014


Paulo Sotero – The Financial Times, 1/23/2014

Low expectation is the best thing going for Dilma Rousseff as she prepares for her first appearance as Brazil’s president at the annual conclave of global business leaders in Davos this week. Her absence from the World Economic Forum over the past three years was explained by officials in Brasília as a political decision, indicative of her low regard for the annual assembly of the masters of globalization. Things have changed.

Government sources now say the president never intended to snub the meeting and recognises that she needs to improve the perceptions of participants about Brazil. Indeed, three successive years of economic growth below 2 per cent, disastrous manipulation of fiscal numbers, persistent inflationary pressure and excessive government intervention have soured investors’ attitudes. Without a change in the inward and state-heavy orientation of the Rousseff government’s economic policies, mediocre prospects are projected in the foreseeable future.

Will the Brazilian leader surprise the audience of sceptics awaiting her in the Alps? A PricewaterhouseCoopers survey of 1,344 executives from 68 countries released on the eve of the WEF is an open invitation for Dilma to do so. Despite Brazil’s disappointing performance in recent years, 12 per cent said they were inclined to invest in the country this year – a drop of 5 per cent compared with 2013 but still the fourth largest proportion among those surveyed, behind only China (33 per cent), the US (30 per cent) and Germany (17 per cent).

Paulo Sotero is director of the Brazil Institute at the Woodrow Wilson International Center for Scholars.

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Photo courtesy of Flickr user Cancilleria Ecuador 


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