September 8, 2014
Rogerio Jelmayer – The Wall Street Journal, 9/8/2014
Economists reduced once again their economic-expansion forecasts for Brazil for this year, after Latin America’s largest economy fell into a technical recession in the first half of the year, according to a weekly central-bank survey published Monday.
The survey’s 100 respondents reduced their estimates for economic growth this year to 0.48% from 0.52%, marking the 15th-consecutive reduction of the growth outlook for 2014. For next year, economists kept their estimates for an expansion of 1.10%.
Brazil’s gross domestic product shrank 0.6% in the second quarter from the previous three months, and first-quarter data was revised to a 0.2% contraction, according to the Brazilian Institute of Geography and Statistics, or IBGE, at the end of August. A conventional definition used by economists is that a recession is two consecutive quarterly declines in economic output.
September 5, 2014
The Economist (print edition), 9/6/2014
“We are not in a recession,” insisted Guido Mantega, Brazil’s finance minister, on August 29th. According to the most common definition—two consecutive quarters of falling output—he is wrong. Official figures released earlier that day showed that GDP fell by 0.6% between the first and second quarters (an annualised contraction of 2.4%). Output also fell, by 0.2%, in the first three months of the year.
Brazil’s economy has now shrunk in three of the last four quarters. Most analysts think it will not grow at all this year; a year ago they were expecting growth of 3%. In 2015 the economy is likely to expand by only 1%. Not even Mr Mantega can deny that Brazil is going through a rough patch.
The government blames a weak global recovery from the financial crisis of 2008-09 and a surfeit of public holidays during the month-long football World Cup, which concluded in Brazil on July 13th. These were decreed by federal, state and municipal authorities to ease pressure on public transport as hordes of fans descended on host cities. Itaú, a big Brazilian bank, reckons fewer working days account for half the latest fall in GDP. (Critics note that the Copa was meant to be an economic boon, not a curse.) Industrial production picked up in July, with its fewer feriados—but not nearly enough to offset June’s 1.4% decline. Inventories remain uncomfortably high: carmakers’ stocks, for instance, are 50% bigger than usual.
August 25, 2014
Brad Haynes and Silvio Cascione – Chicago Tribune, 8/22/2014
Many of Brazil’s biggest retailers, homebuilders and carmakers are cutting jobs as Latin America’s largest economy teeters on the edge of recession, a fresh blow to President Dilma Rousseff’s re-election bid.
For years, low unemployment was key to Brazil’s emergence as an economic power and important gains in the fight against poverty.
The unemployment rate remains near record lows of around 5 percent and the leftist Rousseff regularly touts it as a success of the ruling Workers’ Party over the last 12 years.
August 22, 2014
Silvio Cascione and Luciana Otoni – Reuters, 8/22/2014
Brazil posted a current account deficit of $6.018 billion in July, central bank data showed on Friday, growing more than expected from the month before.
The country had been expected to post a deficit of $5.8 billion, according to the median forecast of 15 analysts in a Reuters poll. Brazil’s current account deficit in June was $3.345 billion.
Foreign direct investment in Latin America’s largest economy was $5.898 billion in July, above market expectations of $5.4 billion.
August 21, 2014
Kenneth Rapoza – Forbes, 8/20/2014
Brazil’s Central Bank injected another $12 billion into the economy on Wednesday following analyst projections that this year’s GDP will print at just 0.79%.
This is the second time the Central Bank has provided some form of stimulus to lenders. In July, it provided around $21 billion to banks to induce lending.
Brazilian equities have been on a tear lately no matter what the economic fundamentals suggest. The iSharesMSCI Brazil (EWZ) exchange traded fund is up 6.07% in the past five days, clobbering the benchmark MSCI Emerging Markets index by roughly 500 basis points.
August 20, 2014
Matthew Malinowski and Karen Eeuwens – Bloomberg, 8/20/2014
Brazil’s central bank has eased rules on reserve requirement for a second time this quarter in a bid to boost credit in a slowing economy.
The bank published the rules in today’s Official Gazette, altering rules for payments on non-cash deposits. The changes will channel about 10 billion reais ($4.5 billion) into credit, the bank said in a statement published on its website. The move follows the bank’s decision in July to free up 30 billion reais, according to the statement.
President Dilma Rousseff’s administration is struggling to contain above-target inflation without causing growth to deteriorate further. The central bank has kept the benchmark interest-rate at the highest level since 2012, after lifting the key rate by 375 basis points in the year through April. The moves haven’t improved the economic outlook, according to analysts surveyed by the central bank, who forecast growth will slow and inflation will accelerate this year compared to last year.