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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Road to Rio: Brazil’s troubled path to summer Olympics

Carter Dougherty   – Newsweek, 04/17/16

Pinning business woes on a feckless government can sometimes stretch the bounds of logic, but Robert Mangels can make a pretty persuasive case from where he’s sitting in São Paulo.

The CEO of Mangels Industrial, a metalworking company, Mangels steered his family business into “judicial recuperation”—Brazil’s version of the U.S. Bankruptcy Code’s Chapter 11—in late 2013. He then squeaked through 2015 by paying the firm’s creditors on time and paying careful attention to the bottom line.

Mangels, whose business activities include making aluminum wheels for Toyota vehicles and refurbishing steel propane tanks, watched the Brazilian economy begin to crater in 2014 as prosecutors crept ever closer toward implicating President Dilma Rousseff in an unimaginably wide-ranging corruption scandal that has ensnared dozens of Brazil’s senior politicians. To him, cause and effect appear pretty obvious.

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Brazil Real advances as House plans preliminary impeachment vote

Paula Sambo – Bloomberg, 04/11/2016

Brazil’s real advanced on growing speculation the ouster of President Dilma Rousseff is drawing closer as Congress prepared for key votes on the process this week.

Brazil’s currency, the most volatile in emerging markets as traders try to gauge the outlook for a complicated impeachment effort, gained 0.5 percent to 3.5742 per dollar at 9:21 a.m. in Sao Paulo. The real was the world’s best performing currency in the first quarter on wagers that bringing in a new government will help pull Brazil out of its worst recession in a century and shore up a record fiscal deficit.

Newspaper O Estado de S.Paulo reported more lawmakers are in favor of removing Rousseff as a special committee in the lower house was scheduled to vote Monday on whether to move forward with the impeachment request. The full house could vote as early as April 17, either squelching impeachment or setting the stage for Rousseff’s ouster in the Senate. The real tumbled last year as Brazil lost its coveted investment-grade status and a sweeping corruption scandal hit businesses and the government.

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Law firm at center of Panama Papers leak was implicated in Brazil corruption scandal in January

Keren Blankfeld – Forbes, 04/06/2016

Two months before one of the world’s largest data leaks, dubbed the Panama Papers, was made public on Sunday, Brazilian prosecutors accused the Panama law firm Mossack Fonseca at the center of the leak, of corruption. (The firm, whose leaked records span 40 years and make up the Panama Papers, according to the International Consortium of Investigative Journalists (ICIJ), issued a statement to the ICIJ denying any unlawful activities. In addition, it stated that ties to offshore companies is not an implication of wrongdoing.)

On January 27 Brazil’s Federal Police, as part of Brazil’s far-reaching corruption probe known as Operation Car Wash (“Operação Lava Jato”), accused the firm of helping clients create offshore entities to hide corrupt money. Prosecutors alleged that the firm was using real estate company OAS Empreendimentos Imobiliários S/A to help cover up money made in the criminal scheme involving state-owned oil giant Petrobras . Six temporary arrests were made and 16 search warrants were issued. Lawyers representing those arrested denied any wrongdoing or irregularities. FORBES has been unable to reach the firm for comment. Aside from its office in Brazil, the firm also has branches in 40 other cities.

According to the ICIJ, which on Sunday began sharing information on the Panama Papers, Mossack Fonseca’s cofounder Ramón Fonseca, an adviser to Panama’s president, “took a leave of absence as presidential adviser in March after his firm was implicated in the Brazil scandal and ICIJ and its partners began to ask questions about the law firm’s practices.”

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Brazil politicians linked to offshore companies in Panama leaks: paper

Silvio Cascione and W Simon – Reuters, 04/04/2016

Politicians from seven parties in Brazil were named as clients of a Panama-based firm at the center of a massive data leak over possible tax evasion, O Estado de S.Paulo said on Monday.

The newspaper was one of more than 100 other news organizations around the globe to publish this weekend details of more than 11.5 million documents from the files of law firm Mossack Fonseca, based in the tax haven of Panama.

O Estado said names in the leaked files included politicians from Brazil’s largest party, the PMDB, which broke away from President Dilma Rousseff’s coalition last week. Political figures from the PSDB, the most prominent opposition party in the country, was also mentioned in the leaks, as well as others from the PDT, PP, PSB, PSD and the PTB parties.

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