Brazil turns a page – What to expect of a Temer government

Thomas Kamm – Brunswick Group, 05/12/2016

After a wrenching battle and a last-ditch attempt to derail the whole process, Brazil has removed President Dilma Rousseff and is set to install Michel Temer in her place. Now comes the hard part: getting the country back on track. Mr. Temer is facing a wave of conflicting pressures that amount to a triple challenge to him and his government.

Brunswick Partner Thomas Kamm looks at these challenges faced by a Temer government and the likely steps to expect from him and Finance Minister-designate Henrique Meirelles.

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Businesses Signal Approval of Brazil Leadership Change

Rogerio Jelmayer – The Wall Street Journal, 05/12/2016

Businesses and investors are cheering the new leadership in Brazil following the suspension of President Dilma Rousseff, who many blame for a deep recession and crumbling finances in Latin America’s largest economy.

Vice President Michel Temer, who officially will replace Ms. Rousseff later Thursday as she steps down to face an impeachment trial, is expected to quickly propose measures to cut spending and rein in entitlements.

Mr. Temer could reduce the number of government ministries — more than 30 exist now — and the potential leader of his economic team is looking to tame budget deficits. These measures aim to shrink a massive budget deficit and restore investor confidence.

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Flame Lands in Troubled Brazil for 94-Day Relay to Games

Reuters/The New York Times, 05/03/2016

President Dilma Rousseff lit the Olympic torch in Brazil’s capital on Tuesday and pledged that political turmoil engulfing her nation would not harm the first Games to be held in South America.

The Olympic flame was flown into Brasilia on Tuesday to start a three-month relay through more than 300 towns and cities that will end with the opening of the 2016 Games in Rio de Janeiro’s Maracaná stadium on Aug. 5.

A smiling Rousseff waved to crowds as she lit a green cauldron with the Olympic flame on the ramp of Brasilia’s modernistic Planalto presidential palace.

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Is Brazil giving up on growth?

Kenneth Rapoza – Forbes, 04/25/2016

Inflation is down nearly 100 basis points from a few months ago, but the Central Bank of Brazil has no intention of lowering interest rates. Investors should take this coming Wednesday’s meeting as a cue whether or not there is a growth strategy anywhere in Brasilia.

Nomura Securities said that they are forecasting the Bank to keep rates at 14.25% even though inflation is coming down. Brazil’s rolling 12-month inflation was as high as 10.7% in January. It’s currently 9.4%. Nomura has close ties to Brazil’s central bank and is good gauge of which way the wind is blowing on the monetary policy committee.

Brazil’s economy, expected to contract by around 3.5% again this year, is facing a massive political crisis. It would be good if the central bank could be more independent and cut rates to boost growth. On the other hand, sentiment among Brazil’s business class is so burned out with the twin crises of politics and economics that it is going to take more than a rate hike to improve things.

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Brazil’s Corruption Culture ‘can be beaten’

Paul Moss – BBC, 04/26/2016

Even a visitor who detests shopping can admire the building’s quirkiness, a semi-arch that seems almost to fall on to the pavement, embodying the modernist curves which define architecture in Brazil’s capital.

This is a city that was constructed virtually from scratch in the 1950s and which is supposed to proclaim the new, progressive side of the country.

Yet the man I had come to meet at the mall had a story as old as his country’s creation: “When you bid for a government contract in Brazil, they usually say ‘what can you do for us? What can you do to make this contract a win-win for all of us?’ They want a percentage of the contract…which means bribes.”

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Five reasons why the world needs Brazil to pull through its political crisis

Nick Miroff – The Washington Post, 04/22/2016

If you caught a glimpse of last weekend’s impeachment proceedings against President Dilma Rousseff, you may have noticed that Brazil is going bonkers right now. There was spitting, shoving and confetti-shooting on the floor of parliament, which at times looked more like a Roman coliseum than a legislative chamber.

Rousseff lost the vote badly, setting up what is likely to be a protracted, bitter political battle to unseat her. She will be forced to step down temporarily if Brazil’s senate votes as soon as mid-May to go forward with the impeachment process, with hearings that could drag on for six months.

The country of 200 million people, by far the largest in Latin America, is increasingly polarized and entirely consumed with its political crisis. By no means is Brazil on the verge of collapse, but here are some reasons why the turmoil isn’t so good for the rest of us.

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