Economics lessons from China and Brazil can teach each other

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

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

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

Arminio Fraga, Brazil’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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Nike’s massive BRIC opportunity: China turning around and Brazil’s World Cup and Olympics could take stock to $80

Agustino Fontevecchia – Forbes, 04/22/2013

The tide may have turned for Nike. The athletic footwear company seems poised to see continued margin expansion and the return of profitability in China over the next year.  Emboldened by recent success, management appears confident in the strength of its brand and its capacity to raise prices.  Nike also has a double whammy of an opportunity inBrazil, with the coming World Cup in 2014 and the Olympics in 2016.  The stock currently trades around $60 a share, but it could top $80 if things go their way, according to UBS ’ equity research team.

Nike has zigzagged over the past year, its stock falling precipitously and surging dramatically on any indication that margins were set to either expand or compress.  After its latest earnings report, where the company revealed margin expansion for the first time in two years, Wall Street has once again gone bullish.

In a thorough note released Monday, UBS’ Michael Binetti made the case for buying the stock, expecting solid returns over the next two years.  After meeting with management, Binetti spoke of a “very optimistic top line outlook from the company over the next few years,” pointing at “a deep innovation pipeline in premium footwear.”

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Gov. Corbett to lead trade mission to Brazil and Chile to promote Pennsylvania business

Jan Murphy – The Patriot-News, 04/03/2013

Six American governors have taken their state’s trade message to Brazil and/or Chile over the past two years, hoping to make some in-roads in those emerging economies. Gov. Tom Corbett will leave Saturday on a 10-day trade mission to Brazil and Chile.File photo/Pennlive 

Soon, that number will grow to seven when Gov. Tom Corbett will lead a 10-day trade mission to both of these South American countries that have attracted recent interest from the likes of Michigan, Iowa, Massachusetts, Delaware, Illinois and Missouri’s governors.

This is the second overseas trip of Corbett’s administration to promote doing business with Pennsylvania companies and establishing a presence here.

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Chinese knockoff sombrero drags Colombian into trade fight

Joshua Goodman – Bloomberg, 01/27/2013

In the Caribbean village of Tuchin, Colombian families who’ve woven straw hats for generations are seeing their livelihoods threatened by competition that shows China’s double-edged impact in Latin America.

Chinese-made imitations of the black-and-white sombrero vueltiao, as the hat is known, sell for half the $20 price of the least expensive originals. In response to plunging sales by artisans who spend up to 15 days cutting, sun-drying and braiding cane leaves to make a single hat, the government is rushing to protect one of the nation’s symbols and ban plastic, machine-made rip-offs.

“The Chinese are stealing our culture like the Spaniards did 500 years ago,” said Eligio Pestana, mayor of Tuchin, where 90 percent of the 34,000 residents, descendants of Zenu Indians, depend on the handicraft trade.

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Republic Airways buys 47 passenger jets from Brazil planemaker Embraer

AP/Fox News, 01/25/2013

Brazilian planemaker Embraer says it has signed a contract with Republic Airways Holdings Inc. for the sale of 47 E-175 passenger jets for an estimated US$2 billion.

Embraer says in a Thursday statement that the agreement includes options for an additional 47 aircraft, which would bring the total value of the deal to approximately US$4 billion.

The statement says deliveries of the 76-seat aircraft are expected to begin in mid-2013.

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EU and Brazil agree on a “speedy conclusion” of the trade pact with Mercosur

MecroPress, 01/25/2013

Brazilian and European leaders called on Thursday for the speedy conclusion of a free trade and cooperation agreement between the European Union and Mercosur. The call for action was made as Brazilian President Dilma Rousseff hosted European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso.

Both the EU and Mercosur “expressed the strong political will to reach an accord,” Van Rompuy told reporters.

Negotiations have so far stumbled over differences on agriculture, especially European farm subsidies, which are seen as hindering Mercosur efficient agriculture.

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Brazil plans a shift in its strategy

John Lyons, Luciana Magalhaes, Matthew Cowley – The Wall Street Journal, 01/04/2013

Brazil is shifting gears in its effort to revive its troubled economy, away from aggressive currency and interest-rate policies to a more hands-off approach, Finance Minister Guido Mantega said in an interview.

“In 2013 we will reap what we have sown,” he said, predicting a return to strong growth after two years in the doldrums. “2013 will be calmer, with fewer measures, because they’ve been done.”

Brazil, the world’s second-largest developing economy after China, is a key bellwether for the economic health of the emerging world and a major source of growth, as Europe, the U.S. and Japan wrestle with debt woes.

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Small businesses can go further by exporting to Brazil

Sarah Shields – The Guardian, 01/22/2013

One international market hat should be considered more by small businesses looking to expand is Brazil. In the past decade, Brazil has become one of the fastest growing emerging markets. It has the largest economy in Latin America and the seventh largest in the world; in 2012, it overtook the UK in the Centre for Economics and Business Research (Cebr) World Economic League Table.

The prime minister, David Cameron, travelled to Brazil in September and came back encouraging UK businesses to boost their exports to the country. According to UKTI, the government agency charged with increasing exports, Brazil is one of the world’s most rapidly developing economies with a GDP per head greater than China.

For small companies, Brazil has lots to offer. It will host two of the world’s largest sporting events in the next four years; the Fifa World Cup in 2014 and the summer Olympics in 2016. The accompanying investment in new infrastructure must lead to new business and partnership opportunities.

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