Brazil’s Mantega says economy speeding up; disputes critics

June 10, 2013

Reuters, 06/09/2013

Brazil‘s economy is gaining force, industrial output is rising and inflation is falling, showing that concerns about the country’s direction are misplaced, Finance Minister Guido Mantega said in the Estado de S. Paulo newspaper on Sunday.

Mantega also said he’s confident that the economy’s solid foundations, bolstered by efforts to cut taxes and spending, will eventually force the Standard and Poor’s rating agency to reverse its decision Thursday to downgrade the outlook for the country’s foreign debt rating to “negative” from “stable.”

“If it depends on the performance of the Brazilian economy, S&P will have to change their outlook,” he said.

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Record Petrobras oil find brings cost concerns: corporate Brazil

June 6, 2013

Peter Millard – Bloomberg Businessweek, 06/06/2013

Investors in Petroleo Brasileiro SA (PBR), the world’s most indebted oil company, aren’t celebrating Brazil’s biggest-ever crude discovery.

Since regulators doubled estimates for the Libra field to as much as 12 billion barrels on May 23, the state-run company’sshares (PBR) fell 5.3 percent in New York, the worst performance among 15 peers tracked by Bloomberg. The new estimates make the oil prospect Brazil’s largest as the country prepares to bring in partners to start production.

For Petrobras, more oil means more investments and debt for a company that already has the world’s second-biggest spending plan and is stretched for staff and equipment. The Rio de Janeiro-based producer will pay a multi-billion-dollar signing bonus for Libra at a time it sacrifices revenue from fuel sales as part of a government policy to curb inflation. Petrobras has sold imported gasoline and diesel at a loss since late 2010.

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Food shock over, Brazil inflation rate declines

May 8, 2013

Kenneth Rapoza – Forbes, 5/8/2013

Declining food prices helped Brazil’s monthly inflation index fall from 6.59% to 6.49%.  It’s not great, but it’s heading in the right direction.

Food inflation services have been the main culprit behind inflation this  year, but in April it was health and personal care groups that came in stronger than forecast, printing at 0.96% on the month for healthcare and 1.3% for personal care products.  Brazilians love their Nivea and Boticario.  The good news is that daily inflation surveys are suggesting that food inflation is moving down at an even faster pace, which means 6.49% won’t be topped in May.

“We see downside risks to inflation for May,” said Guilherme Loureiro, an analyst at Barclays Capital in São Paulo. He said in a note to clients on Wednesday that a temporary downtrend in domestic inflation plus renewed concerns about the global growth outlook, Barclays is still holding out for a 25 basis point rate hike in Brazil to 8.25%. That’ll happen mid-month if their analysis is right.

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Behind the curve

April 18, 2013

The Economist, 04/20/2013

A CENTRAL bank knows it has lost control of inflation expectations when price rises become the subject of running gags. In Brazil the jokes feature tomatoes, which have suddenly become very pricey following floods, droughts and a big increase in freight costs. Social-media sites buzz with cartoons of bank robbers making off with crates of tomatoes and lottery winners bathing in purée. Even organised crime is diversifying into fruit: customs officers say that Paraguayan smugglers have added Argentine tomatoes to their Brazil-bound trade in drugs, cigarettes and knock-off electronics.

Official figures published on April 10th show that Brazil’s inflation problem goes well beyond salad. Prices rose by 6.6% during the past year, breaching the two-point tolerance band around the Central Bank’s 4.5% target. The price of more than two-thirds of the items used to calculate inflation rose in the past month. Now the mockery seems to have spurred the bank to act. On April 17th it raised the base interest-rate by 0.25 points, to 7.5%. Market watchers expect rates to hit 8.5% by the year’s end.

The belated rise comes just as it has sunk in that Brazil’s economy is failing to regain momentum after stalling last year. Fewer new jobs are being created. Industrial production and an economic-activity index widely seen as a leading indicator of GDP growth both fell in February after rising in January. Core retail sales fell for the first time in almost a decade, a particularly worrying sign given that only domestic consumption kept Brazil out of recession in 2012.

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Brazil inflation: surging tomato prices create political headache

April 17, 2013

Luis Barrucho – BBC News, 04/17/2013

The city of Sao Paulo has a large Italian population and is proud of its Italian restaurants. So it came as a shock when some of them announced that any dish with a tomato base would be dropped from the menu.

This startling change to such a traditional offering came after tomato prices soared over the past 12 months in Brazil, at one point recording an increase of around 150%, according to the IBGE, Brazil’s statistics agency.

And the impact went far beyond restaurant tables as pressure grew on the government to curb rising inflation, an issue that is deeply sensitive in South America’s largest country.

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Trattoria dumps tomatoes to protest Rousseff’s inflation stance

April 9, 2013

Joshua Goodman & Denyse Godoy – Bloomberg, 0/09/2013

One of Sao Paulo’s most traditional Italian restaurants is urging its clients to forgo the tomato to protest what it considers President Dilma Rousseff’s policy of promoting growth at the expense of higher inflation.

Augusto Mello, owner Nello’s Cantina, last month began curtailing his tomato purchases to protest a tripling in prices for the vegetable over the past year to 150 reais ($75) for a 20-kilogram crate. A sign on the entrance of the 38-year-old restaurant urges patrons to become “conscientious consumers” and help fight inflation by ordering dishes without red sauce.

The one-man crusade may be touching a nerve with consumers, whose pockets are being squeezed by surging prices for food and services. A report tomorrow will show that inflation breached the 6.5 percent limit of the government’s target range in March for the first time in 16 months, according to a Bloomberg survey of economists, even as the economy struggles to regain its footing after its second-worst performance in 13 years in 2012.

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Brazil Central Bank sees high inflation for next 2 years

March 28, 2013

Alonso Soto & Asher Levine, 03/28/2013

Brazil’s central bank said on Thursday it expects inflation to remain relatively high in the next two years, raising its forecasts closer to the ceiling of the official target range, but it stopped short of signaling an imminent rate increase.

The bank’s quarterly inflation report confirmed market expectations that inflation is quickening despite slower growth in Latin America’s largest economy, a political liability for President Dilma Rousseff who must campaign for re-election next year.

Inflation hovering well above the center of the official annual target range of 4.5 percent, plus or minus two percentage points, has raises pressure on Brazilian policymakers to curb price pressures soon.

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Brazil Rousseff says won’t fight inflation with low-growth policy

March 27, 2013

Reuters, 03/27/2013

Brazil’s President Dilma Rousseff on Wednesday said she will not support policies that attempt to curb inflation by lowering economic growth.

“I don’t agree to policies to fight inflation that look into reducing economic growth,” Rousseff said in comments to reporters in South Africa, where she is attending a meeting of BRICS countries, broadcast by Brazilian government TV.

“Last year we had low economic growth, but inflation rose because we had a supply shock,” she added, repeating one of the arguments recently used by the central bank to justify keeping Brazil’s base Selic rate at an all-time low of 7.25 percent even as inflation neared the ceiling of a government target.

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Brazil Economists Boost 2013 Selic Forecast Third Straight Week

March 25, 2013

Matthew Malinowski – Bloomberg, 03/25/2013

Analysts covering Brazil’s economy raised their forecast for the benchmark rate at year-end, as policy makers seek to control accelerating annualized inflation in the world’s second-biggest emerging market.

Brazil’s Selic rate will be 8.50 percent at the end of this year, according to the median estimate in a central bank survey of about 100 analysts published today. Analysts had forecast 8.25 percent the previous week. The rate will be 8.50 percent at year-end 2014, the survey showed.

Brazil’s economy has reacted slowly to stimulus aimed at spurring the slowest growth among major emerging markets while cooling inflation. After gross domestic product grew by 0.9 percent last year, measures including tax cuts and record-low interest rates have helped drive recent retail sales and industrial output above forecasts. Brazil may require additional measures to slow inflation levels approaching the upper limit of the central bank’s target range, bank President Alexandre Tombini said on March 22.

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Brazil Miracle architect emerges as ally of Rousseff’s rate cuts

March 15, 2013

Joshua Goodman – Bloomberg, 03/15/2013

Brazil should refrain from raising interest rates if President Dilma Rousseff hopes to win a “tug of war” with banks and spur faster growth, the architect of the country’s economic miracle in the early 1970s said.

Antonio Delfim Netto was finance chief when Brazil’s dictatorship jailed the then-Marxist activist Rousseff in 1970. Now, as a consultant and columnist he’s an often solitary voice praising her government’s cutting of rates to a record and use of capital controls to weaken the real.

Delfim Netto’s views run contrary to that of economists from Itau Unibanco Holdings SA, the nation’s largest bank, and JPMorgan Chase & Co., who say Rousseff’s policies on rates and the currency have been stoking inflation above the 4.5 percent target since 2010. Rousseff is on the right track and should stay the course, defying rate-swap traders who expect the central bank to raise interest rates 150 basis points by year-end, he said.

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