Brazil inflation expected to hit highest rate since August

April 8, 2014

Regerio Jelmayer – The Wall Street Journal, 4/7/2014

Brazil’s inflation problem will be back on the front pages this week as the official consumer price index is expected to move above 6% per year, reaching its highest level since August 2013 and pushing up the chances of more interest rate increases.

A survey by The Wall Street Journal of 12 economists showed 12-month inflation rising to 6.08% for the 12 months ended March, up from 5.68% at the end of February. Some see inflation headed above the 6.5% upper limit of the government’s target range.

Behind the price push? Higher airfares during Carnival is one, temporary problem. More worryingly, however, is a shock from food prices that is proving resilient, amid one of the worst droughts in 40 years. And there may be more further down the line, too.

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Brazil drought jolts commodities’ prices

March 5, 2014

Alexandra Wexler, Jeffrey T. Lewis & Leslie Josephs – The Wall Street Journal, 3/4/2014

Brazil’s worst drought in decades is decimating crops but breathing new life into battered commodity markets.

It hardly has rained in some of the South American country’s top farming regions since the start of the year, a period when precipitation is usually the heaviest. Traders, analysts and government forecasters who were calling for record harvests in coffee, sugar and soybeans as recently as December are cutting production estimates, triggering a spike in futures prices that may translate into higher costs for consumers later in the year.

Futures prices for the arabica coffee variety are up 67% since the start of the year. Raw-sugar prices have risen 8%. Soybeans, which have been affected by drought in some areas and too much rain in others, also are up 8%.

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Brazil carnival, weather push coffee near 2-year high

March 4, 2014

Leslie Josephs – The Wall Street Journal, 3/3/2014

Coffee prices are getting an extra kick from Brazil’s Carnival.

Trading volumes have been lower during the annual festival as many Brazilians take vacation, and many farmers, who usually take the “short” end of a contract when locking in prices, are absent, traders said.

This situation has added fuel to this year’s sharp rally in the $11 billion arabica coffee-futures market. Investors and traders have been snapping up coffee futures on concerns that unusually hot and dry weather in Brazil’s key growing regions will dent coffee-bean output.

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Coffee to Soybean wagers climb on Brazilian drought

February 10, 2014

Luiz Ann Javier – Bloomberg, 2/10/2014

Hedge funds raised bullish commodity bets to a 15-week high after a drought in Brazil threatened crops from coffee to soybeans.

The net-long position across 18 U.S.-traded commodities climbed 15 percent to 900,330 futures and options in the week ended Feb. 4, the biggest gain since August, U.S. Commodity Futures Trading Commission data show. Investors turned bullish on arabica coffee for the first time since July 2012 and soybean wagers rose by the most in almost three months. Brazil is the biggest exporter of both crops.

The Standard & Poor’s GSCI Agriculture Index of eight commodities rose 3.3 percent last week, reaching an eight-week high Feb. 6. In Brazil, also the top sugar grower, the driest January since 1954 drained dams and scorched plants. Extreme global weather also is threatening other crops with too much rain hamperingIndonesia’s cocoa harvest and freezing temperatures damaging U.S. wheat.

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Coffee rises on threat of frost damage in Brazil; sugar advances

July 22, 2013

Marley DelDuchetto Kayden – Bloomberg, 07/22/2013

Coffee futures gained on new forecasts for cold weather that may bring frost damage to crops in Brazil, the world’s largest producer. Sugar and orange juice also advanced, while cotton and cocoa declined.

Temperatures will drop below freezing tomorrow and July 24, posing a significant threat to the southern fringes of Brazil’s coffee-growing areas, Donald Keeney, a meteorologist for MDA Information Systems in Gaithersburg, Maryland, said in a telephone interview. Lows may reach minus 3 degrees Celsius (19.4 degrees Fahrenheit) in southern Parana tomorrow. Damage to Brazil’s coffee tress would help reduce a global glut that helped send prices down 15 percent this year through last week.

“We have some buying on the idea of a frost threat,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview. “It looks like only the minor growing areas are going to experience any real cold, but we will still see speculative buying until tomorrow, when people are more confident the major growing regions are safe.”

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Brazil buying Angolan LNG seen signaling weaker shipping demand

July 11, 2013

Isaac Arnsdorf – Bloomberg, 07/11/2013

Brazil’s purchase of the first cargo of liquefied natural gas exported from Angola may signal weaker-than-expected demand for shipping as voyages shorten, according to SEB Enskilda.

Petroleo Brasileiro SA, the state energy company known as Petrobras, said it bought the first cargo of Angolan LNG last month as the African country’s $10 billion export terminal opened after an 18-month delay. The carrier Sonangol Sambizanga is scheduled to unload near Rio de Janeiro on July 14, according to ship-tracking data compiled by Bloomberg.

The shipment shows how the market has changed since the terminal was planned with exports to the U.S. in mind, said SEB Enskilda analyst Tian Tollefsen in Oslo. While Angola will sell cargoes individually and the destination of the others is unknown, rising South American demand is drawing more deliveries from the largest importers in Asia, curbing shipping distances.

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Does Brazil deserve its ‘B’ for BRICS

June 3, 2013

Anthony Pereira – CNN, 06/03/2013

When former Goldman Sach’s economist Jim O’Neill first went to Brazil after coining the acronym BRIC, someone asked him whether he had included the “B” just to make the name sound good.

Such skepticism is becoming common again, as investors compare the projected rate of growth in Brazil this year — just 3% — to that in China and India, around 8% and 6% respectively.

So does Brazil still deserve to be seen as an economic powerhouse?

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Economics lessons from China and Brazil can teach each other

May 24, 2013

Katy Barnato – CNBC, 05/23/2013

They may both be “BRICs“, but China and Brazil face opposite problems and should take tips from each other, according to a report by Capital Economics published on Thursday.

“Brazil in essence needs to become more like China, with its investment growth, and China needs to learn from Brazil in how to support consumer spending,” said Capital Economics’ chief emerging markets economist, Neil Shearing, in a pan-EM report.

Growth has slowed in both the EM giants, as the impact of euro zone woes and a sluggish U.S. economy is felt in countries with previously robust economies. However, Shearing said that Brazil’s and China’s difficulties were largely rooted in country-specific, but contrasting, problems.

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The view toward closer U.S.-Brazil Relations

May 23, 2013

Julia E. Sweig – Council of Foreign Relations, 05/22/2013

Vice President Joe Biden will visit Brazil, Colombia, and Trinidad and Tobago next week. Don’t assume this American vice president is merely ceremonial: he has a significant domestic portfolio including immigration, guns, and the budget. Nor is his visit one of those bloated good will trips meant to dole out patronage or shore up support for some American foreign venture. Rather, it seems the Obama administration has decided to try and seize a huge, and to date largely missed opportunity related to jobs, energy, and prosperity in Latin America.

Why the sudden awakening? Immigration reform, the President’s top legislative priority this year, and a political must for both parties, has alerted the White House to the potential foreign policy benefit in Latin America, and not just Mexico, of solving a major domestic problem. In fact, the White House and the American public’s disposition to deal with once untouchable domestic politics around immigration, guns, energy, marijuana legalization, and maybe even Cuba, open the door for potential convergence with Latin America. And provide a chance to get beyond the usual ideological battles that too often sap diplomatic energy and patience.

Biden arrives in Brazil five months before President Rousseff’s state visit to the United States and ten years since President Bush and President Lula convened their cabinets for a joint ministerial meeting, their recognition of the strategic potential for the two democracies and their economies. Since then, dozens, if not hundreds, of ministerial and sub-ministerial meetings have followed. And we have stitched together dozens of inter-governmental dialogues, initiatives, defense, business, scientific, and educational exchanges. Yet there is still something missing between the two powers—call it a lack of ambition.

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Fraga says he’s disturbed by Brazil’s focus on consumption

April 23, 2013

Julia Leite, Blake Schmidt – Bloomberg, 04/22/2013

Arminio FragaBrazil’s former central bank president, is concerned by the government’s push to foster growth by encouraging consumers to spend more on credit.

The speed of loan growth in Brazil merits “some monitoring,” Fraga, founder of Gavea Investimentos Ltda., said in remarks at an event organized by the Brazilian-American Chamber of Commerce in New York. Brazil is using state-owned banks aggressively to promote its goals, said Fraga, who was president of Brazil’s central bank from 1999 to 2002.

“The excessive emphasis on consumption disturbs me,” Fraga, 55, said. “You’re borrowing a lot now, but time will come that people will have to pay. You need to do some things on the fiscal and monetary front and also pay attention, with a prudential mindset, keeping an eye on what these loan portfolios look like.”

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