Brazil Stocks Trade Lower Amid Concerns on China Trade

Diana Kinch – Wall Street Journal, 8/10/2012

RIO DE JANEIRO–Brazilian share prices fell in early trading Friday, after disappointing Chinese trade figures renewed concerns over the global economy and depressed markets worldwide.

The benchmark Ibovespa index slipped to 58150 points shortly after opening, 1% below Thursday’s close of 58797 points.

China’s release of weaker-than-expected July trade data highlighted concern over recovery prospects in both the Chinese domestic and global economies, damping markets globally and hitting oil and other commodity prices. The Asia giant is Brazil’s biggest trading partner.

China’s trade surplus fell to $25.2 billion in July from $31.7 billion in June, and was almost $10 billion below expectations for the month. According to Banco Santander (BSBR), the weak export performance reflects lowering demand for Chinese products worldwide, which should take further steam out of Chinese industrial production, while the weaker-than-expected import levels indicate Chinese internal demand is also weakening.

The Chinese trade figures followed data on lower Chinese bank lending rates in July, and Thursday’s weaker industrial production figures from the Asian giant. Economists said the various indicators have created negative sentiment that has dashed market expectations the Chinese economy, which dominates world trade, will recover in the third quarter.

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Brazil looks to China for industrial policy

Joe Leahy – Financial Times, 04/11/2011

When Brazil’s President Dilma Rousseff begins her first visit to China today for a summit of leaders from the Brics club of fast-growing emerging markets, she will be interested in more than just diplomacy.

While she will raise Brazil’s gripes with Beijing, such as China’s allegedly undervalued currency and greater reciprocity for Brazilian manufactured exports, Ms Rousseff will be keen to witness first-hand the Asian economic powerhouse’s successful experiment in statist industrial policy – an approach her government is increasingly moving towards at home.

Concerned about Brazil’s increasing dependence on raw material exports, Ms Rousseff and her predecessor, Luiz Inácio Lula da Silva – both from the leftwing Workers Party – have been pushing for greater development of domestic industry through policies targeting large, state-controlled companies. They have been also aggressively building national champions through the use of state credit.

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Vale to appeal $15 billion Brazil court ruling on taxes

Denise Luna – Reuters Africa, 03/30/2011

Brazilian mining company Vale will appeal a court ruling allowing the government to charge it 25 billion reais ($15 billion) in unpaid taxes on profits from foreign subsidiaries, a company spokesman said on Wednesday.

The ruling comes as the government is pressuring to remove Vale Chief Executive Roger Agnelli and insisting that the company pay close to $2.4 billion in a separate dispute on mining royalties that Vale also disagrees with. 

A Brazilian federal court on Tuesday backed the constitutionality of a provisional decree issued by the Brazilian government in 2001 regarding taxation of foreign subsidiaries.

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Rousseff talks to Obama, Chavez after Brazil election

Carla Simoes and ALexander Cuadros – Bloomberg Businessweek, 11/01/2010

Brazilian President-elect Dilma Rousseff spoke with her U.S. counterpart Barack Obama today to discuss Brazil’s foreign policy and energy cooperation between the two countries, Rousseff’s foreign policy adviser Marco Aurelio Garcia told reporters in Brasilia today.

Brazil’s next leader also spoke with Venezuelan President Hugo Chavez, Mexican President Felipe Calderon and Argentine President Cristina Fernandez de Kirchner, and met with allies including former Finance Minister Antonio Palocci to discuss her transition to power, Garcia said.

Rousseff won 56 percent of the vote yesterday compared with 44 percent for Jose Serra, the former governor of Sao Paulo state.

The yield on the January 2014 interest-futures contract fell 11 basis points, or 0.11 percentage point, to 11.560 percent at 3:56 p.m. New York time, after Rousseff pledged to maintain a lid on spending in her victory speech last night.

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Cherry-pick Brazil’s Gol, Tam as currency soars

Guillermo Parra-Bernal – Reuters UK, 10/14/2010

Airlines TAM and Gol are shaping up as the main beneficiaries of a whopping rally by Brazil’s currency that most companies and government officials see as the source of the country’s next economic headache.

Shares of TAM (TAMM4.SA), Brazil’s biggest carrier, have surged 17 percent since the end of August, when analysts and policymakers began to caution about rapid gains in the currency.

Likewise, smaller rival Gol saw its stock (GOLL4.SA) soar 30 percent. Investors find the appeal of both companies irresistible now as their profit margins widen during times of a weak U.S. dollar — about half TAM’s and Gol’s operating costs are denominated in dollars.

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Complexity behind Brazil’s recovery

Jonathan Wheatley – Financial Times, 08/11/2010

There was a time not long ago when Brazil’s capital markets were driven almost entirely by global macroeconomic conditions – witness the panic sell-offs sparked by the Asian and Russian crises of the late 1990s.

So for many investors the relative ease with which Brazil sailed through the latest global crisis has been cause for relief tinged with incredulity. But Brazil’s shallow recession and rapid recovery do not mean it has decoupled from the outside world, just that things are more complex.

Investors have had to wrestle with conflicting drivers: the power of Brazil’s fast-growing domestic market and, conversely, the extent to which some companies’ fortunes are dictated by external forces. “A lot of people are focused on private companies that are masters of their own destiny,” says Frederick Searby, Latin American equity strategist at Deutsche Bank in New York.

“Vale [the world’s biggest iron ore miner] is like a warrant on China. But companies like Natura [cosmetics] and AmBev [brewing] are domestically orientated and can buck the trend.”

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Foreign investors cooler on Brazil

Josh Noble and Jonathan Wheatley – Financial Times, 08/11/2010

The ardour of foreign equity investors for Brazil has cooled this year as attention has turned to other emerging markets.

Inflows into Russia, India, China, Taiwan and South Korea have all eclipsed fresh investment into the South American country, according to data from EPFR, a research firm that tracks fund flows.

Analysts say a rush of funds to Brazil last year as it emerged almost unscathedfrom the global financial crisis pushed share prices to less attractive levels. Added to that is nervousness over the outcome of Brazil’s presidential election in October.

Overall, equity inflows into Brazil have fallen to $1.8bn in the year to date compared with $13.5bn in 2009, according to EPFR. China, in comparison, has attracted $6.5bn, compared with $14.6bn in 2009.

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Brazil consumer stocks premium won’t deter investors

Bloomberg Businessweek, 07/14/2010

Natura Cosmeticos SA, Brazil’s biggest cosmetics maker, trades at the highest premium to the Bovespa index since 2008. Thornburg Investment Management’s Lewis Kaufman says he’s been buying as economic growth picks up.

“Is there still value in consumer stocks?” said Kaufman, who helps oversee about $55 billion at Thornburg in Santa Fe, New Mexico. “I think there is. The consumer story in Brazil is compelling. Natura is an excellent vehicle for that.”

Companies that stand to benefit most from rising wages and lending in Latin America’s largest economy are climbing this year even as the 65-stock Bovespa falls. Lojas Renner SA of Porto Alegre, the nation’s biggest publicly traded clothing retailer, has rallied 25 percent, the measure’s largest increase. Souza Cruz SA, based in Rio de Janeiro and Brazil’s No. 1 tobacco company, has risen 22 percent while Natura has advanced 12 percent. The Bovespa is down 7.7 percent this year.

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Santander homes in on Latin America

Mark Mulligan – Financial Times, 07/11/2010

Spain’s Santander, the eurozone’s largest bank by assets, is on the lookout for acquisitions across Latin America as the region’s banking system becomes “the best in the world”, according to the head of its Latin American operations.

Francisco Luzón, managing director of the Americas division, said Peru and Colombia were a weak spot in the group’s regional footprint, which also covers Argentina, Brazil, Mexico, Chile and Uruguay. With market shares of between 10 per cent and 20 per cent, the focus in those countries is to consolidate and bring new customers into the banking system, a process known in Spanish as bancarización.

Santander raised €7bn ($8.8bn) last year with the stock market flotation of its Brazilian business in what was the world’s largest initial public offering in 2009.

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Welcome to the Latin American decade

Luis Alberto Moreno – Financial Times, 06/06/2010

While Latin Americans have been fixated on the ups and downs of their football teams in South Africa, financial analysts point to a more impressive set of indicators that should capture the world’s attention.

Economic growth in Latin America and the Caribbean is forecast to average 4.5 per cent this year, twice the estimated US rate and four times faster than the eurozone. Fiscal deficits in Latin America are expected to average 2.3 per cent of gross domestic product in 2010, compared with 6.8 per cent in the euro area and 10.6 per cent in the US. The region’s total public debt is roughly only half the level of Europe and the US.

Brazil is the most visible example: it has emerged as an industrial and agricultural powerhouse while lifting some 30m of its citizens out of poverty, and is on track to grow more than 7 per cent this year. But Brazil’s progress is echoed, to varying degrees, by most of its neighbours.

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