Brazil financial markets sell off on election anxiety

September 12, 2014

Reuters, 9/12/2014

Brazilian financial markets added to losses on Friday after an opinion poll showed President Dilma Rousseff and competing presidential candidate Marina Silva statistically tied in an expected second-round vote in October.

Brazilian stocks and currency have been posting losses over the past few days on fears that Silva, regarded by investors as the strongest option to avoid four more years of a government they strongly dislike, would lose her lead in opinion polls.

On Friday, the Brazilian real weakened to as much as 2.323 per dollar, more than 1 percent weaker on the day, as the Ibope pollster said Silva had 43 percent of voter support in a second-round vote, only one percentage point ahead of Rousseff.

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Brazil’s Real Tumbles on Concern Rousseff Is Picking Up Support

September 9, 2014

Paula Sambo – Bloomberg, 09/08/2014

Brazil’s real declined the most in emerging markets on speculation voter polls will show increased support for President Dilma Rousseff as she seeks re-election amid a recession and above-target inflation

The real fell 1.1 percent to 2.2675 per U.S. dollar at the close of trade in Sao Paulo, the biggest drop among 24 developing-nation currencies tracked by Bloomberg. Swap rates increased 21 basis points, or 0.21 percentage point, to 11.23 percent on the contract due in January 2020.

The same tracking polls that correctly predicted growing support for opposition candidate Marina Silva are now showing a slight decline in her support, according to a report today by newspaper Folha de Sao Paulo. A new poll by CNT/MDA may be released tomorrow and three others could be released this week. Speculation that Rousseff will lose her bid for re-election amid a faltering economy has helped to push the real up 4.2 percent in 2014, the most inemerging markets.

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Brazil Real Climbs as Polls Seen Showing More Support for Silva

September 3, 2014

Filipe Pacheco – Bloomberg, 09/02/2014

Brazil’s real rose amid speculation polls that may be released tomorrow will show more support for former Environment Minister Marina Silva in a runoff election against President Dilma Rousseff.

The real climbed 0.1 percent to 2.2436 per U.S. dollar. Swap rates on contracts maturing in January 2015 increased two basis points, or 0.02 percentage point, to 10.80 percent.

Speculation that Rousseff will lose her bid for re-election amid a faltering economy has helped to push the real up 5.3 percent in 2014, the most among 31 major currencies tracked by Bloomberg. A Datafolha poll published Aug. 29 showed Silva would have 50 percent of voter support in an October second-round vote against Rousseff, who would have 40 percent backing. The survey polled 2,874 people and had a margin of error of plus or minus two percentage points.

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Real Heads for Weekly Drop as Brazil Refrains From Swap Rollover

August 1, 2014

Filipe Pacheco – Bloomberg, 8/1/2014

Brazil’s real was headed for its biggest weekly decline since January as the central bank refrained from starting a rollover of foreign-exchange swap contracts supporting the currency.

The real declined 1.3 percent to 2.2590 per U.S. dollar this week, the most since Jan. 24, after advancing 0.2 percent today as of 3:42 p.m. in Sao Paulo. Swap rates, a gauge of expectations for interest-rate moves, increased 11 basis points, or 0.11 percentage point, to 11.60 percent on contracts due in January 2017. They have climbed 36 basis points since July 25.

While the central bank sold $198.7 million of currency swaps today to bolster the real and limit import price increases, it allowed the remaining $2.81 billion of contracts maturing at the beginning of the month to expire and hasn’t called an auction to extend the maturity on $10.07 billion in swaps maturing Sept. 1. The sale of swaps has helped push the currency up 4.3 percent this year.

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Economy In Gutter, Brazil More Expensive Than Europe

July 28, 2014

Kenneth Rapoza – Forbes, 7/27/2014

Brazil’s economy might be growing near zero, and it’s currency isn’t as strong as it was in the heyday of the U.S. housing bubble of 2008, but that hasn’t stopped the country from becoming more expensive than the entire euro zone. In fact, according to The Economist magazine’s latest edition of the Big Mac index, Brazil’s currency is overvalued, and is third behind mega rich nations like Norway and Switzerland.

Brazil is the most expensive emerging market nation, and the locals are feeling it.

According to the magazine’s Big Mac index, the Brazilian real is overvalued by 5.86% as of July 23, more so than it was in 2009.  The Brazilian real is worth R$2.23. But it used to be a lot stronger. In July of 2008, it hit a strong R$1.55.  Despite a weaker currency, Brazil’s cost of living is on the rise.  For those living there, it’s a cause of frustration.  This is still very much a country where roads flood in the rain in major cities like São Paulo, and World Cup and Olympic quality cities like Rio de Janeiro have a whopping 500,000+ living in squalor in hillside slums.  The views are nice, but the poverty, the crime, the violence and the lackluster government services to those stuck there remain a national embarrassment.

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Brazil Real Drops Most Among Major Currencies on Growth Outlook

July 7, 2014

Filipe Pacheco – Bloomberg, 7/7/2014

Brazil’s real fell the most among major currencies as economists surveyed by the central bank lowered their 2014 growth outlook for a sixth straight week.

The real declined 0.4 percent to 2.2218 per U.S. dollar at 12:10 p.m. in Sao Paulo, the biggest drop among 16 major currencies tracked by Bloomberg. Swap rates on contracts maturing in January 2017 fell three basis points, or 0.03 percentage point, to 11.40 percent.

Economists reduced their growth forecast for this year to 1.07 percent from 1.10 percent a week earlier, according to the median of about 100 estimates in a central bank survey published today. Moody’s Investors Service said in a research report published today that Brazil’s slower growth and accelerating inflation are credit-negative.

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The challenge today is to create a new round of economic reforms

July 7, 2014

Persio Arida – Exclusive for Folha de S. Paulo, 6/29/2014

Persio Arida

Persio Arida

 

In 1984, ten years before the Real Plan, I participated in a discussion at MIT about the Larida Plan, named after an economic stabilization proposal that André Lara Resende and I had outlined in an academic paper.

The Larida Plan, based on the creation of an indexed currency – the ORTN (readjustable obligations of the National Treasury) pro-rata, which then became rebranded under the Real Plan as URV (Real Value Unit) – was daring. The promise was to make inflation decrease abruptly without resorting to price freezes or artificiality.

During the seminar, one of the commentators, an important American economist, expressed a doubt that seemed unreasonable to me at the time, but that today, many years later, has become factual. Read the rest of this entry »


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