Vale sees China slowdown blunted by Brazil Real depreciation

Juan Pablo Spinetto & Laurie Hays- Bloomberg, 06/17/2013

Vale SA (VALE5), Brazil’s largest exporter, said further local currency depreciation could counter cost rises and a slowdown in Chinese iron-ore demand as it seeks to regain market share from Rio Tinto Group and BHP Billiton Ltd. (BHP)

The real, the worst-performing emerging-market currency in the past three months, probably will weaken to about 2.40 from 2.15 per U.S. dollar, bolstering Brazil’s competitiveness, said Jose Carlos Martins, Vale’s executive director for ferrous and strategy. China’s iron-ore and steel demand growth is set to slow to about 5 percent from 10 percent in the first five months of the year, he said.

“The Brazilian currency will devalue further,” Martins, 63, said in a June 14 interview at the company’s Rio de Janeiro headquarters. “The slowdown in China is negative, devaluation is positive because not only our costs in dollars will be reduced but also investments will be lower.”

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Redeemers of a macho society

The Economist, 06/15/2013

RIO DE JANEIRO is proof that even nature’s most lavish blessings cannot guarantee success. Rio lost its position as Brazil’s political capital to Brasília in 1960 and its status as the country’s business capital to São Paulo over the following decades. Gang wars and poor infrastructure have battered its tourist industry. The 2016 Olympic games represent the city’s best chance of reversing decades of decline. But is it capable of seizing the chance? That question towers over Rio like the rhetorical equivalent of the statue of Christ the Redeemer.

The person who will do more than anybody else to answer it is the head of the Municipal Olympic Company, Maria Sílvia Bastos Marques. She has the perfect background to lead an organisation that straddles the public and private sectors: a former boss of a steel company and director of Brazil’s two biggest companies, Petrobras and Vale, she has also held numerous positions in local government and served as the first female director on the board of Brazil’s huge development bank, BNDES. And she has a ready answer to any question.

What about logistics? She points to a map that shows the dedicated bus lanes and metro lines that will bring the scattered population to the games. What about Rio’s Byzantine government (power is divided between federal, state and municipal government, and the armed forces own huge chunks of land in the city)? She seems to know everyone who matters. What about crime? She notes that this is not her responsibility but quotes figures to show that the new “pacification” police are doing a good job. Ms Bastos Marques says she wants the games to transform her native city, speeding up projects that have been on the books for years—such as a 30-year-old scheme to upgrade the port district—to lay the foundations for long-term growth.

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Brazil: eager to explore new frontiers in Africa

Ruth Costas – BBC Brasil, 06/11/2013

The government and some large Brazilian companies are betting on the opening of new frontiers in the African market.

In recent years, Brazil has increased its economic presence both in Lusophone Africa – mainly Angola and Mozambique – as in South Africa (considered to be one of the more “mature markets” in the region along with North African countries.)

Now, explained Ambassador Paulo Cordeiro, secretary-general of the Ministry of Foreign Affairs for Africa and the Middle East, one of the greatest challenges for Brazilian diplomacy is to create the right conditions so that a growing number of companies explore new investment opportunities in emerging African markets, such as Ethiopia, Nigeria, Sudan, Kenya, Guinea, Tanzania, Senegal and Ghana.

“These efforts are a big part of my work. We are committed to creating the right environment for this expansion to take place, and to convince Brazilian society that the African continent has many interesting opportunities to offer- and not only in Portuguese speaking countries,” said Lamb.

Official initiatives range from programs for military and technical cooperation to projects for expanding the financing of investments in the continent as well as efforts for political rapprochement.

These initiatives work alongside some large Brazilian companies that have been actively seeking out business opportunities in countries that until recently were synonymous with conflict and extreme poverty, interested primarily in opportunities in the infrastructure and natural resources sectors.

According to Cordeiro, the decision announced by President Dilma Rousseff to forgive $900 million dollars of African debt took place amidst these expansion plans.

Financing

In total, 12 countries will benefit from President Rousseff’s decision: Congo, Tanzania, Zambia, Senegal, Ivory Coast, Democratic Republic of Congo, Gabon, Guinea, Mauritania, Sudan, Sao Tome and Principe and Guinea-Bissau –of which only the last two classify as Lusophone nations.

Until recently, Brazilian state-owned banks could not finance investments and trade flows to these countries because of their unsettled debts with Brazil.

This measure will allow the Brazilian Development Bank (BNDES) and Banco do Brasil to finance Brazilian exports as well as investments and infrastructure projects carried out by Brazilian companies (today, almost all BNDES loans for projects in Africa go to Mozambique and Angola.)

“The demand for investment and cooperation called for by African countries is immense,” said Cordeiro. “Tanzania wants Brazilian companies to help in the hydroelectric sector, for example, and Gabon seeks investments in oil. We also have many Brazilian companies interested in participating in this market – but we are still lacking the means to finance such projects.”

According to the Ambassador, in order to solve this problem, proposals were made to BNDES to create a board responsible solely for loans to Africa and Latin America.

“We need to think of appropriate financial instruments for these projects in Africa and understand what their guarantees could be,” stated Cordeiro.

Cooperation

Cordeiro points out that in the field of technical cooperation, the Brazilian Agricultural Research Corporation (Embrapa) already has projects in several African Countries – among them Senegal, Mali and Ghana. In addition, in terms of military exchange, there has been significant Brazilian participation in the training of Namibia’s Navy.

In the past three months, Dilma made three trips to Africa. Besides her trip to Ethiopia where she participated in the celebration of the African Union’s anniversary, she also went to Guinea Bissau in February to attend the third South America-Africa Summit and to Nigeria to meet with President Goodluck Jonathan.

In March, she attended the 5^th BRICs summit in South Africa, taking the opportunity to also meet with leaders of other African countries.

Moreover, according to the Foreign Ministry (Itamaraty,) in recent years efforts have been made to expand the infrastructure of various Brazilian embassies in Africa, which more than doubled over the last decade, allowing Brazil to rank fourth, along with Russia, in terms of countries with the largest representation in the Continent (behind the United States, China and France.)

Translated from Portuguese

Original article here

Will fertilizer companies lose Brazil’s business forever?

Sara Murphy – Daily Finance, 06/11/2013

Around two years ago, Brazil declared its intention to wean itself off of fertilizer imports by 2020. While acknowledging that it could not fully meet domestic potassium demand, Brazil’s stated aim was to become self-sufficient in nitrogen and phosphates, and to reduce its dependence on foreign potash (water-soluble potassium) significantly. Considering that Brazil is one of the world’s largest potash consumers, importing 90% of its requirements, might this be shaping up to be a major blow to international producers?
Over the last 30 years, Brazil has transformed itself into a breadbasket, and it’s done so in large measure by dramatically increasing farm inputs. The government is seeking to close that loop, putting pressure on the industry to triple spending on domestic fertilizer capacity over the course of the next five years.

Why might the country want to become less reliant on imports? Beyond the usual national security arguments, there’s the matter of competitiveness. Transportation of nutrients to inland farms from ports can be very expensive and time consuming. As a result, Brazil’s farmers are losing out to countries like the U.S.

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Brazil turns away from capital controls

Ryan Olson – The Foundry, 06/11/2013

Last week, Brazil announced that it is finally eliminating its most prominent tax on foreign portfolio investment. This reversal is the most recent reminder of the negative effects of capital controls.

Capital controls are measures, sometimes in the form of taxes or fees, that limit the movement of capital into and out of an economy. Championed in Brazil by Finance Minister Guido Mantega, these barriers to foreign investment were supposed to stem the tide of “hot money” flooding into Brazil, and the subsequent appreciation of the Brazilian real. In reality, they limited capital mobility and may have contributed to economic distortions including high inflation, which is currently 6.5 percent.

Mantega’s reversal on capital controls will hopefully mean a more realistic assessment of Brazilian economic policy. The most likely explanation of the run-up of the real was the country’s obsession with commodity exports. The discovery of oil off the southeastern coast in 2006 has contributed to a dramatic expansion of oil exports, which have increased 45 percent since 2002. In addition, the partially state-owned mining giant Vale has become a world leader in mineral extraction and made up 16 percent of Brazilian exports in 2011.

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Argentines hope Lula will pull of miracle on Vale potash mine

Samantha Pearson – Financial Times, 06/02/2013

It was an unnerving sight for Vale’s investors. Dressed in a traditional Andean poncho, Brazil’s former president Luiz Inácio Lula da Silva was pictured in Argentina in May discussing the future of the miner’s suspended potash project.

“We are trying to make the venture viable and he seemed open to the idea,” Francisco Pérez, the governor of Argentina’s Mendoza province where the mine is based, said after their meeting.

The visit came less than a month after President Dilma Rousseff also flew to Argentina to discuss the matter, raising concerns that Vale, the world’s second-biggest miner by volumes, is facing growing political pressure to maintain the cash-draining project.

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Brazil’s Vale won’t be ‘active’ player in CSA sale process

Rogerio Jelmayer – Fox Business/Dow Jones Newswires, 05/03/2013

Brazilian mining giant Vale SA (VALE, VALE5.BR) won’t play an “active” role in the change of ownership at Companhia Siderurgica do Atlantico, a loss-making steel mill in Rio de Janeiro state, and is only interested in maintaining its existing supply contracts with the mill.

“Vale just wants to maintain the rights that are assured by the contracts. We don’t envisage being active players in the process,” the company said in an emailed statement.

Vale owns a 26.87% stake in Companhia Siderurgica do Atlantico, a EUR5.2 billion joint venture with German steelmaker ThyssenKrupp AG (TYEKY, TKA.XE), which put its stake in the steelmaker up for sale after losing billions of dollars on the projects in recent years.

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Brazil’s Vale hopes for ‘peaceful’ exit Of Argentina

Paul Kiernan – Fox Business/Dow Jones Newswires, 04/25/2013

Brazilian mining giant Vale SA (VALE) is preparing to pull out of Argentina after costs at its Rio Colorado potash project spiralled out of control and negotiations with local authorities failed to bear fruit.

Following months of general reticence since Vale abruptly stopped work on the project in late December, company executives took advantage of a series of conference calls Thursday to clarify that they do not expect to lift the suspension announced last month.

“We hope, with the discussions going on this week, that Vale may leave Argentina in the most serene and peaceful way and that the Rio Colorado may be implemented, but by other partners,” Vale Chief Executive Murilo Ferreira told reporters on a call.

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Brazil’s Vale Still Sees ‘Long March’ for Ships to Enter China

Paul Kiernan – Fox Business/Dow Jones Newswires, 04/25/2013

Brazilian mining company Vale SA (VALE) still sees a “long march” ahead in the effort to obtain authorization from China to berth its supersize iron-ore freighters in the country, executives said Thursday.

The company docked a vessel in China earlier this month that was partially loaded and had a lower draft in order to accommodate local regulations, said Jose Carlos Martins, Vale’s head of ferrous and strategy, in a conference call.

“It’s not a fully loaded Valemax, but it was another important step,” he said, referring to the company’s nickname for the vessels. “I think that to berth a Valemax in China will be a long march for us.”

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Mozambique protesters at Brazil-owned Vale coal mine

BBC News – 04/17/2013

Hundreds of protesters have blocked the entrance to a coal mine in Mozambique in a row over a compensation deal agreed after they were displaced.

The demonstrators demanded further compensation for being uprooted five years ago to make way for the colliery.

The Brazilian corporation Vale insisted it had already done enough, paying out about $2,000 (£1,300) per person.

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