Neves would return to basics to fix Brazilian economy: adviser

October 16, 2014

Alonso Soto and Jefferson Ribeiro – Reuters, 10/15/2014

Aecio Neves would scrap a “failed” economic model and restore the pillars of Brazil’s economy to overcome slow growth and high inflation if he wins the presidency this month, the candidate’s pick for finance minister told Reuters on Wednesday.

Neves, a centrist who has promised to rescue Brazil from recession, is running neck-and-neck with leftist President Dilma Rousseff ahead of the Oct. 26 run-off vote in the tightest race in two decades.

Sluggish growth and high inflation have been the focus of a combative campaign that pits two candidates with opposing views on how to fix the ills of the world’s seventh largest economy. Arminio Fraga, a former central bank chief, said the senator would restore the so-called “tripod” of economic policies based on fiscal austerity, inflation targeting and a free floating exchange rate that gave Brazil stability two decades ago.

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Can Election Put Brazil Back on Path to Fast Growth?

September 30, 2014

Paulo Trevisani – The Wall Street Journal, 09/30/2014

Brazilians face many options in the Oct. 5 vote, but for economists and investors the options are clear: It is reform or die.

Latin America’s largest economy has weakened in the past four years and now growth is near zero, inflation is high and business confidence is depressed. Central-bank interventions keep the currency from a free fall.

But with unemployment low and many voters satisfied with greatly expanded welfare programs, incumbent President Dilma Rousseff may well end up getting a second term.

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Brazil Central Bank Cuts Inflation Forecast on Slow Growth

September 30, 2014

Matthew Malinowski and Mario Sergio Lima – Bloomberg, 09/29/2014

Brazil’s central bank cut its 2014 inflation forecast, saying the world’s second-biggest emerging market will grow at a “disinflationary” pace over the next quarters.

Consumer prices will rise 6.3 percent this year if policy makers keep the benchmark Selic (BZSTSETA) at 11 percent, according to the reference outlook in the quarterly inflation report published today. The inflation forecast compares with a 6.4 percent estimate for 2014 in the June report. Consumer prices will rise 5.8 percent in 2015, compared with a 5.7 percent forecast in June. Policy makers also said the economy will expand 0.7 percent this year, down from the previous estimate of 1.6 percent.

“Taking into account the growth outlook for the next quarters, the committee assesses that the output gap over the next quarters will remain in disinflationary territory,” policy makers said. They reiterated inflation will converge toward its 4.5 percent target in 2016.

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Research briefing: Institutions for Macroeconomic Stability in Brazil

September 4, 2014

Briefing based on IRIBA working paper 7, “Institutions for macro stability: Inflation targets and fiscal responsibility,” by José Afonso and Eliane de Araújo – International Research Initiative on Brazil and Africa, 08/2014

In the 1960s, military governments promoted far reaching structural economic reforms, creating innovative and stable institutions based on standard international theories and best practice at the time.

In this context, the 1960s saw the launch of the Government Economic Action Plan (PAEG), which was intended to promote stabilisation and a return to growth. The fight against inflation took priority because it was impossible for the country to progress while suffering from hyperinflation.

With an initial focus on monetary institutions, financial reform was focused on creating long-term financing mechanisms, avoiding inflationary public sector financing, and re-attracting private sector investment to industry, in order to drive growth.

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Brazil swap rates surge on industrial output gain; Real declines

August 2, 2013

Blake Schmidt & Josue Leonel – Bloomberg, 08/01/2013

Brazil’s swap rates climbed the most in six weeks as higher industrial production spurred speculation that the central bank will sustain the pace of increases in borrowing costs to curb inflation.

Swap rates due in January 2015 rose 25 basis points, or 0.25 percentage point, to 9.84 percent in Sao Paulo, the biggest increase since June 18. The real dropped 1.2 percent to 2.3042 per U.S. dollar, the weakest level since March 2009.

Industrial output rose 1.9 percent in June from a month earlier, exceeding the 1.3 percent median forecast of economists surveyed by Bloomberg. Policy makers raised the target lending rate by a half-percentage point July 10 to 8.50 percent, the third advance this year. The central bank said in minutes of the meeting that it is appropriate to maintain the pace of increases in borrowing costs to curb inflation.

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Brazil sees unfavorable inflation outlook, slower growth in 2013

June 27, 2013

Matthew Malinowski & Raymond Colitt – Bloomberg, 06/27/2013

Brazil’s central bank cut its growth forecast and said the outlook for inflation, already running above target, is unfavorable as the real posts the largest decline against the dollar among major currencies.

Policy makers, in their quarterly inflation report today, said inflation will reach 6 percent this year should the benchmark rate remain unchanged at 8 percent, up from a March forecast of 5.7 percent. They also cut the 2013 growth prediction to 2.7 percent, down from 3.1 percent.

President Dilma Rousseff’s administration is trying to steer Brazil’s $2.5 trillion economy out of its second-worst economic performance in 14 years without further stoking inflation. Government efforts have been complicated by the biggest street protests in more than a decade as 1 million people took to the street to press authorities for less corruption, lower prices and better public services. Rousseff vowed to improve health care, public education and transport, while maintaining fiscal austerity in the world’s second-largest emerging market.

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Protests in Brazil burst bubble: everything is not fine

June 20, 2013

Rasheed Abou-Alsamh – International Business Times, 06/20/2013

The mass street protests that broke out last week in Sao Paulo, and have since spread to other major cities in Brazil, caught many by surprise. Investors and politicians who thought the economic miracle of South America’s biggest country — the headliner of the BRIC group with Russia, India and China — would never end were especially surprised. So were many observers who had bemoaned the passivity of Brazilians in seemingly accepting corruption and overtaxing by their government. The past week’s events have shown that the Brazilian giant, sleeping for so long, has awoken again.

The protests began last week with a demonstration organized by the Passe Livre (Free Pass) movement, a leftist group that wants free public transportation in all of Brazil as its ultimate goal. The announcement that bus fares were being hiked from R$3 (US$1.37) to R$3.20 (US$1.47) was the spark for the march on Avenida Paulista, Sao Paulo’s largest boulevard.

The city’s mayor and the governor of Sao Paulo state, Fernando Haddad and Geraldo Alckmin, both said they would not budge on the price hike and promptly flew off together to Paris to pitch their city as a candidate host of the 2020 World Expo. As the demonstrations grew and continued, they quickly returned home. But it was not until violent clashes between protesters and riot police, using rubber bullets and tear gas on June 13, which left 105 protesters and 12 policemen wounded, that they started to pay attention and soften their stance. On Thursday, Sao Paulo and Rio de Janeiro, the country’s two largest cities, both decided to backtrack and cancel the fare hike.

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