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.
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.
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.
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.
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.
March 14, 2013
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.”
March 14, 2013
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.”
March 8, 2013
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.”
February 11, 2013
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.
February 7, 2013
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.