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.
July 31, 2014
Cihan News Agency, 7/31/2014
Brazilian Minister of Finance Guido Mantega has rebutted a report by the International Monetary Fund (IMF) where it rated Brazil among the emerging economies most vulnerable to external crises. In his remarks on Tuesday (July 29), he said economic indicators for the first half of 2014 show that foreign investors remain interested in the country, in spite of the US Federal Reserve (Fed) tapering its quantitative easing measures. The minister also noted that foreign direct investments – which create jobs in the country – have remained above $60 billion in 12 months for the fourth straight year. Moreover, Mantega said, the Brazilian real appreciated 9.4% in the first semester, and the São Paulo Stock Exchange (BOVESPA) was up 21.25% in the same period.
According to Mantega, the report was prepared by lower echelons of the IMF and repeats the same mistakes of earlier documents disclosed by financial institutions and international organizations that report a “perfect storm” for Brazil’s economy this year and place Brazil among the five weakest emerging countries. “The storm never came, the scenario described by the reports wasn’t fulfilled,” he said.
The minister pointed out that Brazil has the fifth largest international reserves in the world, around $380 billion. The sum exceeds the public and private external debt of $330 billion, enough to see Brazil through for a long time in the event of a shortage in foreign capital.
July 30, 2014
Carlos Eduardo Lins da Silva – Executive editor of Política Externa, Wilson Center Global Fellow
Its initial landing, projected at US$ 3.6 billion a year starting in 2016, will limit the bank’s impact
The sixth summit of the BRICS took place at a time of low economic growth for the group. The BRICS gained prominence after the global financial crisis of 2008, which put the leading capitalist economies on the brink of the abyss and made room for big emerging countries at the decision making table.
The average growth for the five countries in 2014 is expected to be to around 5%, or half of what was recorded eight years ago, with one important difference: unlike 2008, the large economies are now recovering from higher levels of development when compared with the BRICS.
The group made important institutional progress in its sixth summit, held in the Brazilian city of Fortaleza. The event marked the official launching of the New Development Bank. However, it did not elevate the BRICS to an organization capable of substantially influencing global geopolitics and effectively countering the established economic powers or challenging the apparatus they built after World War II to ensure hegemony in the macroeconomic policy decision making. Read the rest of this entry »
October 28, 2013
Merco Press News, 10/28/2013
Rousseff said Brazil had made progress in several fields in the past few months, since the government announced measures in response to spontaneous anti-government protests in June. One of the government’s pledges at the time, she said, was to ensure fiscal responsibilities.
Finance Minister Guido Mantega also criticized the IMF report as incoherent and probably compiled by technical personnel not very familiar with Brazil’s measures. Mantega said IMF chief economist Olivier Blanchard was much more in tune with the measures implemented in Brazil.
“The IMF evaluation of Brazil’s fiscal policies and debt management is mistaken and should be revised”, Finance Minister Guido Mantega said.
October 16, 2013
Patricia Rey Mallén – International Business Times, 10/14/2013
As the United States holds its breath waiting for the resolution on the shutdown, so does Latin America. The fiscal crisis that began two weeks ago with the closing of the U.S. government and could culminate in a U.S. debt default in a few days could have disastrous consequences for the United States’ southern neighbors, hurting the currency exchange rates and weakening the region’s growth.
The U.S., still Latin America’s largest trade partner and investor, must decide whether it will raise the debt ceiling, currently at $16.7 trillion, or suspend payments to bondholders. If that were to happen, possibly as soon as October 17, the world economy would suffer another blow, starting in Latin America and the Caribbean.
“The region is in a very complex situation due to the fiscal crisis and the shutdown,” Colombian financial analyst Juan Alberto Pineda told financial newspaper El Economista América. “The signals that are coming out [of Washington] do not look positive for Latin American exports, or an exchange rate that allows the region to compete in global trade.”
September 23, 2013
Estado de S. Paulo, 09/21/2013
Brazil’s primary budget surplus lost value as an indicator of the situation of the country’s public accounts, assessed economist Teresa Ter-Minassian, who believes the country is in danger of “loosing its fiscal compass” due to the accounting maneuvers used to try to keep the indicator within the official target.
Teresa, former director of fiscal affairs for the IMF, criticized the exclusion of expenses and the use of extraordinary revenues to increase the value of the indicator. “The budget surplus accounts for a universe that is becoming smaller and smaller,” she stated.
Read full article in Portuguese here.
August 30, 2013
“Brazil’s economy is recovering gradually from the slowdown that began in mid-2011,” the IMF Executive Board said in its annual assessment of the Brazilian economy on Wednesday.
It hailed the Brazilian government for beginning this year ”to focus on alleviating supply-side constraints (including infrastructure bottlenecks) and containing inflationary pressures by tightening monetary policy”.
IMF board stressed that “comprehensive efforts to boost productivity, competitiveness, and investment are critical for raising potential growth”.
August 9, 2013
Joe Leahy – Financial Times, 08/08/2013
Brazil has called for the IMF-backed rescue programmes for Greece and other southern eurozone countries to be reviewed to make them more economically sustainable.
The call from finance minister Guido Mantega came as he sought to explain Brazil’s stance on Greece’s rescue programme after its IMF representative, Paulo Nogueira Batista, abstained from a vote to approve the latest tranche of help for Athens.
In an interview with the Financial Times on Thursday, Mr Mantega said Brazil believed the International Monetary Fund-backed eurozone programmes needed to be overhauled to make them more realistic. “I think these programmes of fiscal adjustment created by Europe in general are excessive, they are very stringent,” he said.
August 2, 2013
David Bosco – Foreign Policy, 08/01/2013
Brazil’s representative at the International Monetary Fund, Paulo Nogueira Batista, made waves this week when he loudly criticized the latest round of international funding for Greece. Nogueira Batista reportedly abstained when the fund’s executive board approved the latest installment of the IMF loan package. Now the story gets more complicated. The Financial Times is reporting that Nogueira Batista wasn’t authorized to take the position he did (h/t Oliver Stuenkel):
“Brazil reversed its hardline stance on Greece’s bailout on Thursday, saying it had not authorised its representative to the International Monetary Fund to withhold support for the latest aid to Athens.
Guido Mantega, the country’s finance minister, said it was a “mistake” for Brazil’s representative, Paulo Nogueira Batista, to abstain on the €1.8bn tranche of aid. Mr Mantega said he fully supported the IMF’s efforts to supply financial aid to Greece.
“[Mr Nogueira Batista] did not consult the government, nor was he authorised by us to vote in this manner and the finance minister has ordered him to return to Brazil immediately to explain himself,” Brazil’s finance ministry said on Thursday.”
August 2, 2013
Alonso Soto – Reuters, 08/01/2013
Brazil called back its International Monetary Fund representative on Thursday after he voiced opposition to fresh loans for debt-ridden Greece, a stance that the South American country said was taken without its support.
Brazilian Finance Ministry Guido Mantega on Thursday phoned IMF managing director Christine Lagarde to clarify that its representative, Paulo Nogueira Batista, criticized additional aid for Greece without the authorization of the government.
Batista, who also represents 10 other nations at the Washington-based Fund, on Wednesday publicly criticized the IMF executive board’s recent decision to release 1.7 billion euros of rescue loans to Greece. Brazil abstained from the vote.