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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Why Brazil’s cars are such big killers

Bruce Kennedy – MSN Money, 05/14/2013

Critics have warned that globalization comes with a price. And it’s not just low-wage workers in far-off places likeBangladesh who often pay that price in human lives. It also appears that auto buyers in South America’s largest economy are paying a deadly toll.

Brazil is one of the BRICs, an acronym for Brazil, Russia, India and China, the international economies that have been booming in recent years while bringing hundreds of millions of their citizens out of poverty.

But The Associated Press released a startling report over the weekend outlining how auto manufacturers in Brazil, including European companies and U.S. makers such as Ford (F +0.93%) and General Motors (GM +1.29%) — at facilities like GM’s Sao Caetano plant (pictured) — are producing vehicles that are apparently unsafe at any speed.

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Another BRIC in the wall: Brazil stakes its claim in Africa

John Campbell – The Christian Science Monitor, 05/01/2013

Brazil is negotiating an agreement with Mozambique to finance the construction of a dam to provide drinking water for the city of Maputo, according to local news sources. It is expected to cost $500 million and the Bank of Brazil has funded an environmental impact study for the project.

With a population approaching two million and growing rapidly, Maputo needs an assured water supply. A successful agreement between Brazil and Mozambique means that construction on the dam could start as early as 2014. 

The dam – known as Moamba Major – highlights Brazil’s expanded engagement in Africa. In November 2012, British think tank Chatham House published a highly useful briefing paper on Brazil’s growing role on the continent. It highlights Brazil’s African economic interests – notably, its trade with Africa has increased from $4.2 billion to $27.6 billion over the past decade. Africa is potentially an important export market for Brazilian manufactured goods.

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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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China and Brazil sign $30bn currency swap deal

RT, 03/27/2013

A $30 billion currency swap deal between Brazil and China is expected to smooth trade between the two countries despite changing global financial conditions and future crises.

The agreement was signed on the sidelines of the BRICS summit in South Africa. Plans for the currency swap were first announced last year at the Rio+20 environmental summit. The idea is that the central banks of the two trading partners are to swap local currency worth up to 190 billion yuan or 60 billion reais ($30 billion) in case turmoil hits the global financial system. 

“If there were shocks to the global financial market, with credit running short, we’d have credit from our biggest international partner, so there would be no interruption of trade,” said Guido Mantega, Brazil’s Economy Minister as quoted by BBC.

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Brazil, Russia, India, China and South Africa: BRICS go over the Wall

Pepe Escobar – Center for Research on Globalization, 03/27/2013

Reports on the premature death of the BRICS (Brazil, Russia, India, China and South Africa) have been greatly exaggerated. Western corporate media is flooded with such nonsense, perpetrated in this particular case by the head of Morgan Stanley Investment Management.

Reality spells otherwise. The BRICS meet in Durban, South Africa, this Tuesday to, among other steps, create their own credit rating agency, sidelining the dictatorship – or at least “biased agendas”, in New Delhi’s diplomatic take – of the Moody’s/Standard & Poor’s variety. They will also further advance  the idea of the BRICS Development Bank, with a seed capital of US$50 billion (only structural details need to be finalized), helping infrastructure and sustainable development projects.

Crucially, the US and the European Union won’t have stakes in this Bank of the South – a concrete alternative, pushed especially by India and Brazil, to the Western-dominated World Bank and the Bretton Woods system.

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Brazil, China to ink deal on trade in national currency

Daily Mirror/AFP, 03/25/2013

Brazil hopes to sign a bilateral accord with China to promote trade in their national currencies at next week’s BRICS summit of the world’s five emerging powers, Trade and Industry Minister Fernando Pimentel said.

The initiative was tentatively agreed last June with the signing of a memorandum of understanding after a meeting of Brazilian President Dilma Rousseff and then Chinese prime minister Wen Jiabao during the UN summit on sustainable development in Rio.

Pimentel said that at the BRICS summit in Durban, South Africa on Monday and Tuesday “we plan to turn this memorandum into a final agreement which is being finalized by central banks of the two countries.”

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Brazil-China local-currency trade deal may be signed next week

Paulo Winterstein – The Wall Street Journal, 03/21/2013

Brazil and China next week could sign an agreement that allows for trade of up to $30 billion to be carried out in local currencies, Trade Minister Fernando Pimentel said Thursday.

The two countries, which are taking part next week in a meeting with fellow BRICS members–an economic bloc consisting of Brazil, Russia, India, China and South Africa–are also in talks to extend the local-currency trade agreement to the entire bloc, Mr. Pimentel said.

Talks with China are the most advanced, he said, as the two countries already signed last year a memorandum of understanding that allowed for the local-currency trade. Next week, they could make permanent the accord, allowing for local-currency trade in the second half of this year, he said.

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Why Brazil’s once-booming economy is losing its shine

Catherine Boyle – CNBC, 01/16/2013

Brazil, long viewed as one of the most promising emerging markets, has seen its crown slip slightly in recent months. The country has been enshrined as Latin America’s economic powerhouse for more than a decade, fuelled by vast resource wealth and investment from China.

Yet its dominance is under threat as other emerging markets compete fiercely on cost.

“The last decade was very good for Brazil,” James Lockhart Smith, head of Latin America, Maplecroft, told CNBC.

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Brazil analysts cut 2013 GDP forecast, raise inflation call

David Biller – Bloomberg Businessweek, 01/07/2013

Analysts covering Brazil lowered their forecast for growth this year and raised it for inflation, as the world’s second-biggest emerging market struggles to rebound from a slowdown that has lasted more than a year.

Brazil’s gross domestic product will expand 3.26 percent this year, according to the median estimate in a central bank survey of about 100 analysts published today, down from 3.3 percent the previous week. Inflation this year will reach 5.49 percent, up from the previous week’s estimate of 5.47 percent. Economists also boosted their 2012 inflation forecast for the fifth straight week to 5.73 percent from the previous estimate of 5.71 percent, the survey showed.

President Dilma Rousseff’s administration has injected a series of stimuli into Brazil’s $2.5 trillion economy, which economists forecast will grow this year the slowest among the BRIC group, which includes Russia, India and China. Meanwhile the central bank has cut the benchmark Selic rate by 525 basis points, the most of any Group of 20 nation, to a record 7.25 percent.

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