Santander stirs Brazil election storm with client note

July 28, 2014

Guillermo Parra-Bernal – Reuters, 7/28/2014

Spain’s Banco Santander SA finds itself in an unwanted spotlight in Brazil after its local subsidiary irked the government by circulating a client note saying that the re-election of President Dilma Rousseff would likely push asset prices lower.

In a monthly column to wealthy clients entitled “You and Your Money,” Banco Santander Brasil SA said a drop in Rousseff’s popularity had helped spark a recent rally in the Brazilian stock market – a common view among economists and investors who believe the government’s heavy-handed policies have contributed to Brazil’s current economic slump.

The note then went on to say that the market rally could fizzle if the president’s popularity stabilizes or rebounds in opinion polls ahead of October’s election, an assertion that angered government officials and members of the ruling Workers’ Party.

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Brazil is set to become the world’s biggest soy producer — and that might be bad news for its forests

July 28, 2014

Gerry Hadden – Public Radio International, 7/28/2014

It’s covered by millions of acres of industrial farms and deep green soy fields. If this year’s harvest — the best in Brazilian history — comes in as expected, Brazil is poised to surpass the US and become the world’s largest soy producer. Soy beans have boosted Brazil’s economy and even brought President Dilma Roussef to Mato Grosso to congratulate farmers in person.

But in a nearby indigenous village, no one is celebrating. The boom in soy production coincided with a spike in deforestation. And Hiparidi Toptiro, an activist from the indigenous Xavante people, says local soy farmers are willing to do anything for a chunk of the forest where the Xavante live.

“Throughout our lands, people show up wielding false deeds to the area,” Toptiro says.  “And they have begun to plant soybeans inside our lands. They pay off one of our villages with a little money, which complicates the relationship between all of us in the reserve. “ He calls it dividing and conquering with trinkets.

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Brazil-Israel ties: it’s not all samba

July 28, 2014

Samuel Feldberg – i24 News, 7/28/2014

Not only civilians have been the victims of violence in the Middle East. This week, diplomatic relations between Brazil and Israel suffered a severe blow when the Brazilian ambassador to Israel was recalled for consultations and the Brazilian foreign ministry condemned the “disproportionality” of Israel’s reaction to Hamas’ hostility.

The cover of the largest Brazilian weekly said: “Blackout in diplomacy” – silence over Russia’s downing of a passenger airline and kind treatment of Cuba’s dictator show the moral bankruptcy of President Dilma’s government.

Is this a new development or, like recurring rounds of violence in Gaza, a repetition of what we already saw in the past? Should we be surprised by the unfriendly positioning of a country that bears significant responsibility for the 1947 UN vote that created the State of Israel?

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Brazil Economists Cut 2014 Growth Call for Ninth Straight Week

July 28, 2014

Matthew Malinowski – Bloomberg, 7/28/2014

Brazil economists reduced their 2014 growth forecast for the ninth consecutive week, as policy makers seek to spur demand without further stoking above-target inflation.

Brazil’s gross domestic product will expand 0.90 percent this year, compared with the previous week’s forecast of 0.97 percent, according to the July 25 central bank survey of about 100 analysts published today. The economists’ growth forecast has dropped by nearly half since their 1.63 percent estimate from May 23.

President Dilma Rousseff is torn between the fastest annual inflation in 13 months and weakening growth as she campaigns for re-election. The central bank said on July 24 its strategy does not contemplate a lower key rate as above-target consumer prices will remain resistant. The next day, policy makers announced they would loosen deposit requirements to free up 45 billion reais ($20.2 billion) in consumer credit.

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Brazil Eases Reserve Requirements to Inject $13.5 Billion

July 25, 2014

David Biller and Francisco Marcelino – Bloomberg Businessweek, 7/25/2014

Brazil’s central bank is making available an estimated 30 billion reais ($13.5 billion) with measures including reduced reserve requirements as it looks to boost economic activity.

The bank is allowing as much as 50 percent of time deposit requirements to be used on new loans and the acquisition of loan portfolios, the monetary authority said in a statement on its website today. It also increased the number of banks eligible to sell their portfolios, and those able to use up to 20 percent of reserve requirements to grant loans qualifying under development bank BNDES’s program to sustain investment, known as PSI.

President Dilma Rousseff’s administration is seeking to rein in above-target inflation without strangling growth. Policy makers left rates on hold for the second straight monetary policy meeting ending July 16 following the longest rate-raising cycle in the world, as expectations for 2014 economic growth plummeted. Minutes from the meeting that signaled the bank would leave rates on hold have been “compromised” by today’s measures, according to Andre Perfeito, chief economist at Gradual Investimentos.

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Japan to help Brazil accelerate drug safety assessment

July 24, 2014

The Japan Times, 7/24/2014

Prime Minister Shinzo Abe is expected to tell Brazilian President Dilma Rousseff in Brazil on Aug. 1 that Japan will provide expertise to speed up its ability to assess the safety of new drugs, a government source said Wednesday.

Japan plans to offer data accumulated by its drug examination agency and send experts on pharmaceutical administration to Brazil, the source said.

It will be the first time Japan has provide such know-how to any other country, and Tokyo hopes shorter screening periods will help it boost sales of pharmaceuticals there.

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Has Brazil Taken the Right Approach to Education Reforms?

July 24, 2014

Emily Gustafsson-Wright – The Brookings Institution, 7/23/2014

In an interview with Inter-American Dialogue, Emily Gustafsson-Wright discusses Brazil’s new National Education Plan, which sets forth 20 goals that the country aims to achieve over the next decade. Read the full interview here

Brazil’s National Education Plan is indeed ambitious. With 20 targets ranging from universalizing access to early childhood education by 2016 to expanding enrollments at the post-graduate level, the federal government has set its sights high in an effort to address the issues of low PISA scores and large inequalities in educational access and quality in terms of geography, race and income. This is not the first time that the Brazilian government has proposed audacious education goals, however.

In 1998, it adopted a radical reform of education financing (FUNDEF and later FUNDEB) to equalize spending per student, and the record shows impressive progress resulted. In 2005, it set the target of raising learning outcomes to OECD levels by 2021 and put in place a highquality national assessment system to monitor and publicize the progress of every state, municipality and school in the country. But this time, a disconcerting factor is the outsized emphasis on spending more rather than spending better. A target to increase public education spending to 10 percent of GDP within a decade is beyond what any developed or developing country has found sustainable: the OECD average of 5.8 percent and Brazil’s current average of 5.7 percent are little more than half that. Where that money will come from, at least in part, was confirmed by President Dilma Rousseff when she signed a law that earmarks 75 percent of oil royalties for education. How it will be distributed and spent effectively is less clear.

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Brazil Analysts Cut 2014 GDP Call Below 1% for First Time

July 23, 2014

Matthew Malinowski – Bloomberg, 7/21/2014

Brazil economists cut their 2014 growth forecast for the eighth consecutive week, as low confidence and above-target inflation curb demand in the world’s second-largest emerging market.

Brazil’s economy will expand 0.97 percent this year, compared with the previous week’s forecast of 1.05 percent, according to the July 18 central bank survey of about 100 analysts published today. That was the lowest estimate since the central bank started publishing the data.

President Dilma Rousseff’s administration is trying to combat the fastest inflation in a year without further crimping demand as she campaigns for re-election in October. The central bank last week held the key rate unchanged for the second straight meeting after having lifted the Selic by 375 basis points in the year through April. Economic growth estimates have fallen as industrial sector sentiment in July dropped for the fourth straight month, while consumer confidence hovers near a five-year low.

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Most Brazilian Stocks Advance as Vale Rallies on Commodity Gain

July 22, 2014

Ney Hayashi – Bloomberg, 7/22/2014

Most Brazilian stocks climbed as higher commodity prices buoyed raw-material producers including mining company Vale SA.

The gauge for material stocks on the MSCI Brazil Index gained the most in a week. Trucking company JSL SA rose after saying gross sales increased 20 percent in the second quarter from a year earlier. Petroleo Brasileiro SA, the state-run oil company, fell amid speculation that a nine-session rally may have been excessive.

The Ibovespa was little changed at 57,644.02 at 12:05 p.m. in Sao Paulo, with 46 of its 70 stocks higher. The index rose 3.6 percent in the previous two sessions after a voter poll showed reduced support for President Dilma Rousseff’s bid for re-election amid a stalled economy.

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Brazil and Africa: the southern link

July 22, 2014

Claudia Valenzuela – Public Finance International, 7/22/2014

Growth, opportunity and potential have ricocheted across Brazil and the African continent in recent years. While other more mature markets are only just beginning to click into gear after the financial crisis, the economies of Brazil and Africa have enjoyed better times as a result of rising popularity with foreign investors, and burgeoning domestic markets driven by an expanding middle class and abundant natural reserves.

Africa, in particular, is picking up the pace. It’s perceived attractiveness relative to other regions has improved dramatically over the past few years, according to EY’s recent Africa attractiveness survey, moving from the third-from-last position in 2011 to become the second most attractive investment destination in the world. Its total share of global FDI projects has also reached the highest level in a decade, with investors increasingly looking across the continent and to new sectors.

An African horizon

While separated by the vast expanse of the southern Atlantic Ocean, the fact that, millions of years ago, Africa and Brazil were joined in a single landmass, and continue to share similarities in soil and climate, serves as a far more apt geographic metaphor. The increasingly close relationship between the two began during the Presidency of Luiz Inácio Lula da Silva, who himself traveled to Africa 12 times in the 1990s, visiting 21 countries in the process. This pattern has continued under his successor, Dilma Rousseff, who, for example, visited Angola, Mozambique and South Africa during her first year in office.

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