Brazil freezes $13.7 billion from budget to meet fiscal goal

May 22, 2013

Maria Luiza Rabello, Matthew Malinowski – Bloomberg, 05/22/2013

Brazil’s government has frozen 28 billion reais ($13.7 billion) in its 2013 budget as it tries to meet its primary surplus target, Finance Minister Guido Mantega said.

Officials did not freeze portions of the budget set aside for investments and hosting the World Cup soccer tournament, Mantega told reporters today in Brasilia. The government may increase abatements against this year’s fiscal surplus goal to 45 billion reais, Mantega said, up from February’s estimate of 25 billion reais.

President Dilma Rousseff’s administration this year is seeking to meet Brazil’s primary surplus goal of 155.9 billion reais without undermining economic growth. Authorities have extended tax cuts and increased spending to spur the economy, even as such measures have helped keep annual inflation near the 6.5 percent upper limit of the central bank’s target range.

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Brazil real stronger in thin volume, with Central Bank absent

February 13, 2013

Tom Murphy – The Wall Street Journal, 13/02/2013

SAO PAULO–The Brazilian real ended active trading Wednesday slightly stronger against the Friday close in thin post-holiday volume.

The real ended active trading at BRL1.9642 to the dollar, stronger from the Friday close of BRL1.9698, according to Tullett Prebon via FactSet. Brazilian markets were closed Monday and Tuesday for the annual Carnival festivities.

Traders said there was little pressure from either side of the market Wednesday, with the real drifting to a stronger position on U.S. dollar inflows from foreign investors, mainly in Brazilian stocks, and from overseas bond issues by Brazilian companies.

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Brazil’s inflation problem

January 16, 2013

Sujata Rao – Reuters, 01/16/2013

When will Brazil’s central bank admit it has an inflation problem? Markets will be watching today’s rate-setting meeting for clues.

There is no doubt about the outcome of today’s meeting at the Banco Central do Brasil (BCB) — no one expects it to do anything but leave interest rates steady at the current 7.25 percent. But the BCB has been focused on growth for 18 months and has cut interest rates by 525 basis points in this time, its actions helping to drive the real 10 percent lower last year versus the dollar. The government meanwhile has unleashed huge doses of fiscal stimulus. The result, rather than a growth recovery, is a steady rise in inflation.

Goldman Sachs’ Latin America economist Alberto Ramos points out that Brazilian inflation came in above the 4.5 percent target for the third straight year in 2012 and the balance of inflation risks has deteriorated. Gasoline prices are to rise from next week and drought is making hydro-power generation more costly. Analysts polled by Reuters expect 2013 price growth at 5.53 percent. Ramos writes:

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Brazil’s monetary jeitinho

January 16, 2013

Samantha Pearson – Financial Times, 01/15/2013

If there’s one Portuguese word you need to learn before coming to Brazil it’s jeitinho. Literally “little way”, it refers to the nationwide habit of circumventing rules or conventions through highly creative, cunning and sometimes downright illegal tactics.

Can’t get tickets to a show or pass your driving test? Don’t worry; you just need to find a jeitinho. It also works for managing the economy, it seems.

With growth still sluggish and prices rising faster than expected, Brazil’s central bank and finance ministry are also becoming pros at the jeitinho – albeit the legal kind.

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Why It Is Time for the Brazil Infrastructure ETF – ETF News And Commentary

August 22, 2012

Eric Dutram – Nasdaq, 8/22/2012

As investors grow increasingly skeptical over the health and near term future of emerging markets, many are taking a closer look at a once favorite destination of Brazil. The country is now growing at a rate of just 2% (or less) a year, a huge decrease from the impressive 7.5% level that the nation saw just two years ago.

This sharp downturn in growth looks likely to put some pressure on the central bank to push rates even lower as a way to spark much needed growth. This could be especially true if inflation levels remain moderate , giving the central bank plenty of policy options in order to accomplish its objectives (see The Comprehensive Guide to Brazil ETFs ).

Beyond monetary stimulus, the country could also see a wave of spending thanks to two important events coming up in the next four years; the World Cup in 2014 and the 2016 Summer Olympics in Rio de Janeiro. Both of these events could greatly add to infrastructure expenditures and demand, creating a boon for the nation’s chronically decrepit road and rail network as well as the main firms that operate in this segment.

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Brazil real drops on Central Bank measures to stem appreciation

July 11, 2011

Matthew Bristow – Bloomberg/San Francisco Chronicle, 07/11/2011

Brazil’s real fell after the central bank stepped up efforts to stem a rally that sent the currency to a 12-year high against the dollar.

The real weakened 1.3 percent to 1.5830 per dollar at 8:40 a.m. in New York after the central bank announced measures late on July 8 to discourage investors from making bets against the dollar in Brazil.

The world’s second-largest emerging market will require banks to make non-interest bearing deposits with the central bank equivalent to 60 percent of short dollar positions that exceed $1 billion dollars or their capital base, whichever is smaller, the bank said in an e-mailed statement. The rule, which banks will have five working days to implement, amends a regulation introduced in January that required banks to pay deposits on short positions above $3 billion. A short position is a bet that the price will fall.

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