Amid Crisis, Rousseff Seeks Closer Ties with the U.S.

April 20, 2015

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Paulo Sotero – The Huffington Post, 4/17/2015

Confronted by calls for her impeachment in street protests fueled by a deteriorating economy and a deepening investigation on massive corruption at state oil giant Petrobras, a weakened President Dilma Rousseff sees improving relations with the United States as part of the solution to Brazil’s and her own mounting challenges.

Following a Saturday April 11 meeting with president Barack Obama at the Summit of the Americas, in Panama, Rousseff said concerns caused by the 2013 revelations of the National Security Agency surveillance activities in Brazil were resolved and confirmed she will visit Washington this year. The announcement of the June 30th gathering at the White House put the Brazil-U.S. dialogue back on track following a period of estrangement that cost the U.S. the loss of a major defense contract and frustrated plans to elevate Brazil-U.S. relations to a new level of engagement.

Praised by Rousseff for his decision to normalize U.S. relations with Cuba, the American leader has scored points by enhancing U.S. ties with its largest regional neighbor at a time when Brazil is experiencing its most severe political and economic crisis in two decades. Rousseff’s official visit to the U.S. will not have the frills of the state visit planned for October 2013, which was derailed by the NSA revelations, but was welcomed by the business communities and economic officials in both countries, who hope it will send a positive reassuring message to markets and help to restore investors’ confidence in Brazil.

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Paulo Sotero is the Director of the Brazil Institute at the Woodrow Wilson International Center for Scholars.


Brazil’s Most Trusted Official Says Petrobras Has ‘Turned Page’

April 21, 2015

Kenneth Rapoza – Forbes, 4/19/2015

Brazil’s most trusted official, Finance Minister Joaquim Levy, says beleaguered oil giant Petrobras has turned the page. And the upcoming release of Petrobras earnings will prove it.

“Petrobras has given us signs of reorienting itself to some degree, in certain segments of its business, in a way that is strategically forward looking. They changed management. They renewed the board of directors,” he said in an interview with Brazilian journalists this weekend.

What he said is nothing new. The market knows about new management, and of Petrobras asset sales. But what investors may read here in the tea leaves is that Levy is confident that Petrobras will produce its much-anticipated earnings report. Supposedly the board of directors will agree on a publishing date on Wednesday, April 22.

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Brazil’s reality show

April 21, 2015

Ilan Goldfajn – Financial Times, 4/21/2015

I have just returned from abroad. It felt like déjà vu from a distant past. Explaining Brazil has become complex again. “I read about corruption accusations, popular protests, deficits and crises; what is happening in Brazil?” I was asked by an important investor. The answer inevitably tends to be long and full of Buts and Ifs.

Nevertheless, I will make an effort to summarize it here in a straightforward way. Brazil did not invest enough during the favorable commodity cycle. Policymakers did not recognize the end of the cycle in time. When they did, they tried to go back to a past that no longer existed. Now, Brazil must adjust everything at once to avoid a worse crisis. But markets are dynamic: with the recent depreciation of the real, there are already investors looking for opportunities. That is the reason Brazilian assets rebounded lately.

All Latin American economies – from Argentina and Venezuela to Chile and Peru – are experiencing declining growth. This is a sign of a common factor: the end of the favourable global cycle of commodity boom and growth in China and abundant capital flows to emerging markets. Corruption accusations and investigations are surfacing in many Latam countries such as Brazil and Mexico, but also in Chile, which signals that even the tolerance to such deviations is cyclical.

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Brazil’s ‘bullets, beef and bible’ caucus wants to imprison 16-year-olds

April 17, 2015

Bruce Douglas – The Guardian, 4/17/2015

Among Brazil’s weak and demoralised leftwing members of Congress, they are known as the “Bancada BBB”: Bullets, Beef and Bible Caucus.

These conservative hardliners – from Brazil’s security forces, agricultural sector and evangelical churches – triumphed in last October’s legislative elections, while President Dilma Rousseff, of the leftwing Workers’ Party (PT), only narrowly won re-election.

Over the past few months, the president’s authority has been undermined by a massive corruption scandal, major street protests and the open revolt of many of her former political allies.

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Brazil Scandal Sends Multinationals Running to Attorneys

April 17, 2015

Joel Schectman – The Wall Street Journal, 4/16

Multinationals with operations in Brazil are making frightened calls to their lawyers, as the country’s spreading corruption scandal reaches more companies.

The bribery investigation known as “Operation Carwash,” which has already sent Brazil’s state-run Petroleo Brasileiro SAPBR +1.15% into a tailspin, is spreading across the country’s largest construction companies and its third largest bank. Brazilian prosecutors say shipbuilding arm of South Korean conglomerate Samsung paid bribes to a former executive at Petrobras. Brazilian prosecutors have also accused Swedish builder Skanska ABSKA-B.SK -2.11% of taking part in the corruption at Petrobras. Skanska didn’t respond to requests for comment. Samsung couldn’t be immediately reached for comment.

Brazilian investigators have said they are investigating large international firms that they believe have paid bribes, Reuters reported.

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Investors tiptoe back into Brazil markets as inflation peaks

April 17, 2015

Walter Brandimarte – Reuters, 4/17/2015

Some investors are carefully betting that the recent selloff in Brazilian financial markets was overdone, pointing to signs that inflation is slowing and the government is getting its finances in order.

Many expect inflation will come down from its current 11-year high of 8.13 percent, thanks to the central bank’s interest rate hike cycle of 1.75 percentage points since October, as well as the economic slump’s effect on demand.

Meanwhile, state-run oil company Petrobras is expected to this month post financial statements that have been delayed by a huge corruption scandal, greatly reducing the risk of a major debt crisis that could have cost Brazil its investment grade credit rating.

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Protests in Brazil: Tropical tea party

April 17, 2015

The Economist (print edition), 4/18/2015

BY NEARLY any standard, the protests to denounce the president, Dilma Rousseff, and to rail against corruption in Brazil were huge. Some 660,000 people turned out on April 12th, in 152 cities. Yet that is compared with roughly 2m Brazilians who rallied a month ago. The drop in numbers is sobering for a movement that dreams of toppling the president with massive shows of street support. It means the organisers will have to change tactics and refine their muddled message.

The anger has not ebbed, and the movement is not going away. According to Datafolha, a pollster, three-quarters of Brazilians support the protests. Two-thirds want Ms Rousseff to be impeached over a multi-billion-dollar bribery scandal surrounding Petrobras, the state oil company. Members of her Workers’ Party (PT) and others in the governing coalition are under investigation, although the president herself has not been implicated. Her popularity has sunk from 40% at the start of her second term in January to 13%. Even in the PT’s heartland in the poor north-east, a majority thinks she is doing a poor job.

The movement against her resembles insurgencies in Europe and the United States, but with big differences. Unlike Syriza in Greece or Podemos in Spain, the organisers of Brazil’s protests are not left-wing and do not constitute a political party. Some compare the protesters to America’s Tea Party, which agitates for small government within the Republican Party. That is closer to the mark. The protesters lean towards Brazil’s opposition parties and hope to influence them. Renan Hass of the Free Brazil Movement (MBL), a main organiser of the protests, wants the Party of Brazilian Social Democracy to be “more macho”. But the movement is too young, and too fragmented, to have infiltrated Congress, unlike the American Tea Party. Dozens of grassroots organisations called protesters onto the streets.

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