August 19, 2014
Paulo Trevisani – The Wall Street Journal, 8/19/2014
True to its habit of offering a steady flow of rosy economic forecasts, the Brazilian government is expecting the second half of 2014 will be better than the first, a top official said Monday.
Brazil’s economy expanded by a meager 0.2% in the first quarter of this year compared with the previous quarter. Second-quarter results aren’t out yet, but analysts expect them to be about as bleak.
That’s disappointing for officials hoping the economy would grow faster this year than the modest 2.5% pace clocked in 2013. In the central bank’s latest weekly survey of about 100 private-sector economists released Monday, the group projected gross domestic product would rise 0.79% this year, down from its prior forecast of 0.81%.
August 18, 2014
Walter Brandimarte – Reuters, 8/18/2014
Brazil’s financial markets closed higher on Monday as an opinion poll showed President Dilma Rousseff, criticized by investors for interventionist policies, is unlikely to win an outright re-election on Oct. 5.
The poll increased uncertainty about who is likely to face Rousseff in a second-round runoff – market favorite Aecio Neves or environmentalist Marina Silva.
Silva was statistically tied with Neves in a Datafolha poll, the first conducted after her running mate Eduardo Campos died in a plane crash last week. Silva’s presidential bid is expected to be formally announced by the Brazilian Socialist Party on Wednesday.
August 18, 2014
Kenneth Rapoza – Forbes, 8/15/2014
Investors may be cheering the likelihood of Brazil’s incumbent Dilma Rousseff being kicked to the curb in the October presidential election, but that will not be enough to push the iShares MSCI Brazil (EWZ) exchange traded fund over $50. That’s because the fundamentals of this economy are not sound.
Brazil may have been a technical trade for a while. Or even a FIFA World Cup trade. But the Dilma trade can’t last for long. Brazil will start getting expensive. And fundamentals will return to the fore. This economy has seen its better days.
The June IBC-Br — a monthly Central Bank proxy for quarterly GDP — came in at a -1.5% month over month, ending the second quarter on a bad note. As a reminder, industrial production during that month decreased 1.4% and broad retail sales dropped 3.6%.
August 18, 2014
Meagan Clark – International Business Times, 8/15/2014
Economic activity in Brazil fell sharply in June, the latest sign indicating Latin America’s largest economy could be slipping into a light recession with a presidential election two months away.
The Brazilian central bank’s index of economic activity fell 1.5 percent in June from May after seasonal adjustments, the bank said Friday, the fifth consecutive monthly decline and the worst since summer 2013.
Brazil’s tourism ministry estimated the World Cup attracted a million foreign tourists for the soccer tournament to Brasilia in June, injected $13.2 billion into the country’s economy (about the same the country invested for preparation) and created 1 million jobs. But Brazil’s labor ministry reported the worst job creation in June since 1998. Labor Minister Manoel Dias has partially blamed the World Cup, saying it caused “a drastic drop in consumption” that led to less working days and less hiring, the Wall Street Journal reported from Brasilia.
August 15, 2014
Filipe Pacheco – Bloomberg, 8/15/2014
Brazil’s swap rates fell after data showed the economy shrank in June by the most in 13 months, adding to speculation policy makers will limit further increases in borrowing costs.
Swap rates on contracts maturing in January 2017, a gauge of expectations for interest rates, dropped six basis points, or 0.06 percentage point, to 11.54 percent at 9:20 a.m. in Sao Paulo, and were down 12 basis points this week. The real climbed 0.2 percent to 2.2622 per dollar, extending the advance this week to 0.9 percent.
Brazil’s seasonally-adjusted economic activity index fell 1.48 percent in June from the previous month, the central bank said in a report posted on its website today, the biggest drop since May 2013. President Dilma Rousseff is struggling to revive Brazil’s faltering economy, which is forecast by analysts to grow at the slowest pace since 2009, two months ahead of presidential elections.
August 12, 2014
Mike Kane – Market Realist, 8/12/2014
The BRICS countries (Brazil (EWZ), Russia, India (EPI), China (FXI), and South Africa) are slowly but surely drifting away from the 20th Century monetary and political structures setup by the U.S. (SPY) and Europe (EZU), as characterized by Russia’s G8 membership being revoked in the wake of the events in Crimea. The G7, as it is now known, is at odds with Russia’s Vladimir Putin, but that rift applies to the entire BRICS coalition — a group that seems to be growing stronger and more focused as leader of the Emerging Markets.
There have been a slew of recent moves within the BRICS network. Russia and China inked a $400 billion, 30-year natural gas partnership, forged a bilateral inter-bank agreement to deal in local currencies, and announced plans to create a new credit rating system to counter the Western agencies. China is diversifying away its U.S. dollar exposure, China and Brazil finalized a local currency swap, and leaders from the group of nations just met for the sixth annual BRICS Summit in Brazil.
According to a government report released in June, China’s (FXI) holdings of U.S. Treasuries (TLT) declined for the third straight month in June 2014. China held 1.26 trillion in U.S. debt as of April 30, 2014, according to the report. This is an $8.9 billion decline from March. This fact is particularly significant given that China (FXI) is the largest foreign holder of U.S. Treasuries (IEF). According to data compiled by Bloomberg, analysts have seen this decline in holdings for three consecutive months.
August 5, 2014
Filipe Pacheco – Bloomberg Businessweek, 8/5/2014
Brazil’s real declined to a two-month low on speculation that evidence of U.S. economic strength will spur the Federal Reserve to begin raising borrowing costs faster than expected.
The real fell 0.7 percent to 2.2746 per dollar at 11:54 a.m. in Sao Paulo, the weakest on a closing basis since June 4. The drop was the biggest among 16 major currencies tracked by Bloomberg after South Africa’s rand. Swap rates, a gauge of expectations for interest-rate moves, increased 17 basis points, or 0.17 percentage point, to 11.76 percent on contracts maturing in January 2017.
“Stronger numbers are coming from the U.S. economy, and any indication that monetary policy may change there before markets expected brings concern to emerging-market investors, and the currency is impacted,” Sidnei Nehme, executive director at NGO Corretora in Sao Paulo, said in a telephone interview. “The real tends to trade closer to 2.30 per dollar for now than toward the 2.25 level.”
August 4, 2014
Angelo Young – International Business Times, 8/4/2014
The first Brazilian-made tactical drone is headed to Africa before the end of the year, says São Paulo-based FT Sistemas S.A., one of the country’s larger producers of unmanned aerial vehicles. The company wouldn’t say which African country is buying its FT-100 Mini-UAV, or for what purposes.
“The Horus FT-100 was designed in conjunction with the Brazilian Army . . . to be used in typical applications of short range performed by platoons, companies or even battalions,” the company said in its announcement (in Portuguese) from July 28. It didn’t mention the value of the deal. Brazil is emerging as a major player in the sale of modern military equipment in emerging and developing markets that can’t afford equipment developed by major players, like Bethesda-based Lockheed Martin Corporation (NYSE:LMT) or Britain’s BAE Systems plc (LON:BA).
“The UAV market remains dominated by the US and Israeli defense contractors, but other nations have been heavily investing in the technology especially for more cost-effective, less technologically advanced solutions,” said IHS Jane’s Defence Industry.