Trattoria dumps tomatoes to protest Rousseff’s inflation stance

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 Miracle architect emerges as ally of Rousseff’s rate cuts

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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Brazil yields to traders pouncing on gains: currencies

Joseph Ciolli & Ye Xie – Bloomberg, 03/14/2013

Efforts by Brazil to tame inflation are providing foreign-exchange traders with the biggest returns in the world by purchasing reais with funds borrowed in dollars.

Investing in real forward contracts funded by the greenback has gained 5.3 percent this year, the most of any of the 44 other currencies tracked by Bloomberg. Wagers that Brazil’s currency will rise outpaced those expecting a decline by an average of $5.6 billion this year, data from the Sao Paulo-based BM&F exchange and compiled by Bloomberg show. As recently as September there were net bets against the real.

Finance Minister Guido Mantega, who popularized the term “currency war” in 2010, told Bloomberg News last month he’s abandoning the strategy that drove the real down 19 percent in two years as the government shifts its focus to containing inflation. The central bank signaled on March 6 that it’s ready to raise interest rates from a record low 7.25 percent after dropping a pledge to hold borrowing costs steady for what it had called “a prolonged period of time.”

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Brazil Central Bank puts inflation at center of concerns

Tom Murphy & Rogerio Jelmayer – Fox Business/Dow Jones Newswires, 02/14/2013

The central bank revealed much of its thinking in minutes released Thursday from its March 6 monetary-policy meeting. At the meeting, the central bank held its Selic base interest rate steady at an all-time low of 7.25%. But a brief statement after the meeting hinted at possible data-based interest rate hikes in the near term.

The minutes of the meeting showed a striking level of concern for continued inflationary pressures.

The minutes stated that Brazil’s inflation problem can no longer be viewed “as a temporary condition.” The minutes said that inflation has proven resilient and may have reached “a new, and higher plateau.”

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Brazil swap rates rise as inflation accelerates; real advances

Bloomberg – Gabrielle Coppolla & Josue Leonel, 03/08/2012

Brazil`s swap rates climbed to a eight-month high as a report showed annual inflation accelerated in February, fueling speculation the central bank will lift borrowing costs this year.

The real rallied to its highest level since May on speculation the central bank will let the currency appreciate to contain inflation. The government’s IPCA index of consumer prices climbed 6.31 percent in February from a year earlier, the highest annual rate in 14 months. The median forecast of economists surveyed by Bloomberg was for a 6.20 percent pace.

“IPCA has been surprising the market, and it shows that there’s a significant inflation risk,” Roberto Padovani, the chief economist at Votorantim CTVM in Sao Paulo, said in an telephone interview. “The increase may prompt the central bank to raise rates in April.”

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Even the Carnival Can’t Save Brazil From a Slump

Holly Ellyat – CNBC, 02/11/2013

As raucous Latin American rhythms, colorful processions and street parties go, Brazil’s Carnival is among the best, but Citigroup’s strategy team is questioning whether the party for Brazil’s economy could be over before it’s really begun.

The five days of celebrations began over the weekend against a backdrop of national pride and optimism. The main carnival in Rio de Janeiro contributes $628 million to the country’s economy and has added around 250,000 temporary jobs. The world-famous samba parade of exotically dressed “carnival queens” and bands generated $42.8 million in ticket sales, advertising and TV rights.

But the celebrations come as economic growth slowed to less than one percent in 2012. At the same time, inflation risks are rising and the currency has strengthened – providing warning signs that all is not well for the “BRIC” economy.

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Brazil’s Real Surges as Central Bank Says Inflation Rate Is High

Blake Schmidt, Marisa Castellani – Bloomberg, 02/07/2013

Brazil’s real rallied the most among emerging-market currencies as the central bank said high inflation requires attention, spurring speculation that policy makers will let the currency strengthen to contain prices.

Swap rates climbed after the government reported that consumer prices increased in January at the fastest pace in almost eight years, adding to bets on a boost in borrowing costs. The exchange rate and tax cuts will help slow inflation, a central bank board member said in a phone interview, asking not to be identified because of internal policy.

“Higher inflation shoots the real up,” Joao Paulo de Gracia Correa, currency manager at Correparti Corretora, said in a phone interview from Curitiba, Brazil.

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Brazil Central Bank says inflation high as bond bids spurned

Matthew Malinowski, David Biller -  Bloomberg, 02/07/2013

Brazil’s inflation is at a high level that requires attention, the central bank said in response to a report showing that consumer prices rose in January at the fastest pace in almost eight years. The real posted the biggest gain among major currencies.

The 12-month inflation rate, which reached 6.15 percent in January, will hover around 6 percent until June before slowing, the central bank said. The exchange rate, smaller wage increases, a drop in rental prices and slower credit growth will ease consumer price increases in 2013 from 2012, according to the bank. Brazil targets inflation of 4.5 percent.

Central bank President Alexandre Tombini is trying to convince investors that inflation, running above target for 29 months, will remain under control after he cut the benchmark interest rate to a record. The real today gained as much as 1.5 percent against the U.S. dollar on speculation policymakers will allow the exchange rate to appreciate to help tame inflation instead of increasing interest rates.

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Why Brazil’s once-booming economy is losing its shine

Catherine Boyle – CNBC, 01/16/2013

Brazil, long viewed as one of the most promising emerging markets, has seen its crown slip slightly in recent months. The country has been enshrined as Latin America’s economic powerhouse for more than a decade, fuelled by vast resource wealth and investment from China.

Yet its dominance is under threat as other emerging markets compete fiercely on cost.

“The last decade was very good for Brazil,” James Lockhart Smith, head of Latin America, Maplecroft, told CNBC.

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Brazil’s monetary jeitinho

Samantha Pearson – Financial Times, 01/15/2013

If there’s one Portuguese word you need to learn before coming to Brazil it’s jeitinho. Literally “little way”, it refers to the nationwide habit of circumventing rules or conventions through highly creative, cunning and sometimes downright illegal tactics.

Can’t get tickets to a show or pass your driving test? Don’t worry; you just need to find a jeitinho. It also works for managing the economy, it seems.

With growth still sluggish and prices rising faster than expected, Brazil’s central bank and finance ministry are also becoming pros at the jeitinho – albeit the legal kind.

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