Brazil $101 Billion Swaps Position Looms Before Election

October 24, 2014

Cristiane Lucchesi, Ye Xie, Josue Leonel – Bloomberg, 10/24/2014

Fourteen months after Brazil began selling billions of dollars-worth of derivative contracts to shore up its currency, the strategy is proving ineffective and raising concern in financial markets.

The real fell to a six-year low yesterday and is the world’s most volatile currency. Some analysts say the swaps, which are equivalent to selling dollars in the futures market and now amount to 27 percent of foreign reserves, are approaching critical levels. The opposition’s presidential candidate has indicated he’d discontinue their use.

“The swaps program has reached its limit and it needs urgent review since it is losing efficiency and credibility,” said Tony Volpon, the managing director and head of emerging markets research at Nomura Holdings Inc., Japan’s largest brokerage.

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Market Forecasting Dilma Win In Brazil On Sunday, Turns To Post-Election Scenarios

October 24, 2014

Kenneth Rapoza – Forbes, 10/23/2014

The market is now forecasting that incumbent Dilma Rousseff will be re-elected president in a squeaker on Sunday. Although rival Aécio Neves could pull off an upset if enough of Marina Silva’s voters choose him or opt-out of voting for anyone, his victory would now be seen as a surprise. Downside risks remain in Brazilian equities.

Neves came from polling in third place behind Marina Silva to clobbering her in the first round on Oct. 5, thus guaranteeing him the No. 2 contender spot against Dilma. Polls have suggested that at least 60% of Marina’s voters would chose Neves on Sunday, but he needs a little more than 65% providing the rest of Marina’s voters choose Dilma. So far, that has not been the case as only around 20% of Marina’s voters said they would vote for Dilma on Sunday, meaning the current crop of undecided voters will call the shots.  Recent polls show a technical tie.

It is worth noting that the market’s forecast is not exactly the market’s preference.  At this stage, investors are broadly looking for change in Brasilia, even more so than the average Brazilian.

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Brazil’s ‘most unpredictable election since return to democracy’

October 23, 2014

Joseph Bamat – France 24, 10/23/2014

An acrimonious and volatile presidential race has entered its final stretch in Brazil, with left-wing incumbent Dilma Rousseff and conservative challenger Aecio Neves running neck and neck.

Over 140 million Brazilians will be voting on Sunday, with Rousseff of the Worker’s Party (PT) fighting to win a second term, and Neves desperate to avoid a fourth consecutive defeat at the ballot box for his centre-right Party of Brazilian Social Democracy (PSDB). Rousseff appears to have regained the momentum just days ahead of the October 26 election, after opinion polls showed she had slipped behind Neves last week. Brazilian polling firm Datafolha revealed on Wednesday that Rousseff was on pace to win 52 percent of the votes that will be cast on Sunday, with Neves set to claim 48 percent support – a margin within the study’s margin of error.

“This election has been marked by unusual political vulnerability,” said Paulo Sotero, the director of the Brazil Institute of the Woodrow Wilson International Center for Scholars. “It’s been the most unpredictable election since the return of democratic elections in 1989 and will remain unpredictable until the end.”

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The cashmere revolution

October 23, 2014

J.P. – The Economist, 10/23/2014

Business barons and financiers are not known for taking to the streets. Yet on October 22nd thousands turned out in the centre of São Paulo in support of Aécio Neves, the centre-right challenger to President Dilma Rousseff, of the left-wing Workers’ Party (PT), in a tight run-off election on October 26th. Together with spouses and children they sauntered down São Paulo’s Avenida Faria Lima, a thoroughfare conveniently located close to many of their offices.

It was a sight to behold—perhaps unprecedented in election history, and not just in Brazil. Besuited types with crisp, initialed shirts toting “Aécio” flags. Snazzily clad socialites, wrapped in pashminas to keep out the unseasonable chill, chanting anti-PT slogans. Everyone snapping selfies with pricey iPhones (most Brazilian rallies are cheaper Samsung affairs). The only thing missing from this “cashmere revolution” was champagne flutes—and Mr Neves himself, campaigning in his home state of Minas Gerais.

“Most of Brazilian GDP is here,” observed one private-equity boss with four Aécio stickers on his checked shirt, shortly after bumping into a pal from a big American technology firm. In that sense, the event played right into PT propaganda, which relentlessly paints Mr Neves as a pawn of the rich elite. On October 21st Luiz Inácio Lula da Silva, Ms Rousseff’s popular predecessor and political patron renowned for his earthiness, went so far as to compare Mr Neves’s Party of Brazilian Social Democracy (PSDB) to the Nazis for its apparent intolerance of the less advantaged. (Mr Neves had previously compared Ms Rousseff’s formidable marketers to Joseph Goebbels.)

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Rousseff Is Brazil’s ‘Most Progressive’ Option

October 23, 2014

teleSUR, 10/22/2014

Supporters of Brazilian president Dilma Rousseff told teleSUR on Wednesday they believe her bid for reelection can maintain steam in the last days of the presidential race.

According to the Brazilian Social Movements’ (MST) coordinator Joaquim Pinero, “The social movements here in Brazil are certain that only with Dilma can we push for what we are asking for here in the streets – for political reform in Brazil.”

“Only through reform, will we be able to have working class representation in congress, which continues to be controlled by the big corporations,” Pinero told teleSUR English’s correspondent in Brazil, Stephanie Kennedy. Another leftist activist in Rio de Janeiro told Kennedy that Rousseff has already “managed to deepen” political reform to empower the poor and strengthen democracy.

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Neves Win in Brazil Would End Alliances Built by Lula

October 23, 2014

Charlie Devereux and Anatoly Kurmanaev – Bloomberg, 10/22/2014

The election of Aecio Neves as Brazil’s president would end a 12-year alliance uniting leaders from Venezuela to Boliviaon regional development and state intervention in the economy.

Neves, who came from behind to make the second-round vote on Oct. 26 against President Dilma Rousseff, has pledged to restore investor confidence in the economy, end “ideological” political alliances and negotiate new trade deals with or without the Mercosur trade bloc Brazil founded with Argentina in 1991. Polls show the two statistically tied.

Former President Luiz Inacio Lula da Silva, once a union leader who lost national elections three times before taking office in 2003, brokered deals and soothed tensions with leaders including Venezuela’s Hugo Chavez, Argentina’s Nestor Kirchner and Bolivia’s Evo Morales. Together, they promoted regional bodies such as Mercosur and the Union of South American Nations, while Mexico, Chile, Peru and Colombia created the Pacific Alliance, a trade bloc designed to boost ties with Asia.

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Brazil race hinges on appeal to lower middle class

October 23, 2014

Associated Press – The Washington Post, 10/23/2014

The debate boiled in Lena’s Salon in Rio’s Cantagalo slum, as patrons argued about who should win Sunday’s presidential election.

In one corner, owner Lucia Helena Silva was loudly arguing for President Dilma Rousseff and her Workers’ Party, waving a hot straightening iron. A customer, primping her carefully coiffed hair, was having none of it, insisting that center-right opposition candidate Aecio Neves would revitalize Brazil’s pallid economy.

“No way! You’ve got to vote for Dilma,” said Silva. “Who has improved the lives of people in this slum? Who has shrunk the distance between us and the rich?”

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