Brazil’s Biggest Banks Caught In Petrobras Dragnet

March 23, 2015

Kenneth Rapoza – Forbes, 3/22/2015

Fifteen banks will join Petrobras next week, April 3, in a New York court to explain how they did nothing wrong when selling $98 billion worth of the Brazilian state oil company’s bonds to American investors.

Of the 15, lawyers representing the investment banking divisions of Itau and Bradesco will appear before New York judge Jed Rakoff in hopes to escape the scandal.

Petrobras is currently in the middle of its worst, and most embarrassing moment in its history. A massive corruption scandal involving its construction partners and ruling party politicians is threatening to take down members of congress. Last weekend, hundreds of thousands of Brazilians took to the streets in protest against Petrobras and the Workers’ Party. Some called for the impeachment of president Dilma Rousseff.

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Brazil’s slumping economy and bribery scandal eat away at Rousseff’s popularity

March 23, 2015

Simon Romero – The New York Times, 03/20/2015

President Dilma Rousseff ran for office declaring that she would harness an oil bonanza in Brazil to supercharge the economy while avoiding the corruption and mismanagement that have plagued other oil-rich countries in the developing world.

But less than three months into her second term as president, Ms. Rousseff is fighting for her political survival as Petrobras, the national oil company she oversaw and has championed, reels from a colossal bribery scandal.

Compounding her problems is the prospect that the economy could shrink in 2015 for the second consecutive year, the first such contraction here since the onset of the Great Depression in 1929 and 1930.

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Brazil’s Slumping Economy and Bribery Scandal Eat Away at Dilma Rousseff’s Popularity

March 20, 2015

Simon Romero – The New York Times, 3/20/2015

President Dilma Rousseff ran for office declaring that she would harness an oil bonanza in Brazil to supercharge the economy while avoiding the corruption and mismanagement that have plagued other oil-rich countries in the developing world.

But less than three months into her second term as president, Ms. Rousseff is fighting for her political survival as Petrobras, the national oil company she oversaw and has championed, reels from a colossal bribery scandal.

Compounding her problems is the prospect that the economy could shrink in 2015 for the second consecutive year, the first such contraction here since the onset of the Great Depression in 1929 and 1930.

Read more…


Protests in Brazil: The wisdom of crowds

March 20, 2015

The Economist (print edition), 3/21/2015

DILMA ROUSSEFF, Brazil’s president, expected the anti-government protests on March 15th to be big. She convened a meeting of a crisis group at her official residence to monitor them. But nobody, including the organisers, imagined they would be as massive as they turned out to be. Police in São Paulo put the size of the crowd on Avenida Paulista, the preferred venue for such gatherings, at more than 1m; Datafolha, a pollster, counted 210,000. Either way, it was the biggest political demonstration in the country’s biggest city since the diretas já (“elections now”) movement that helped end military rule in 1985. Overall, police estimated that 2.2m people turned out in dozens of cities across all 27 states. That dwarfs the number who took to the streets on any single day in June 2013, the most recent occasion when Brazilians vented their anger at politicians en masse.

Trade unions, which had organised (much smaller) pro-Dilma demonstrations two days earlier, dismissed the protesters as privileged white people. Many were not. “I am black, poor and want Dilma out,” declared a demonstrator from one of the nine mobile stages along Avenida Paulista. Many wore the national football team’s yellow-and-green jerseys. Opposition politicians wisely stayed away. They realised that their presence would obscure the bottom-up message and reinforce the government’s claim that behind the protests were sore losers of last October’s elections, won by Ms Rousseff and her left-wing Workers’ Party (PT).

The grievances of 2013 were diffuse. Today’s are directed squarely at Ms Rousseff and the PT. Some protesters—about a quarter on Avenida Paulista, according to one poll—want her to be impeached over a multi-billion-dollar bribery scandal at Petrobras, the state-controlled oil giant. Most others simply want to show that they are fed up with sleaze and economic mismanagement, which has pushed up inflation and is likely to trigger a recession this year. A vocal fringe called for military intervention—but was shouted down.

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Brazil’s Eike Batista Fined 1.4 Million Reais by Market Regulator

March 19, 2015

Luciana Magalhaes – The Wall Street Journal, 3/18/2015

Former billionaire Eike Batista was fined 1.4 million Brazilian reais ($429,000) Wednesday by Brazil’s market regulator for failing to provide shareholders with timely information while his industrial empire was collapsing in 2013.

Mr. Batista plans to appeal the fines, one of his attorneys said.

Once Brazil’s richest person, Mr. Batista over the last two years has sold assets and dismantled his group of companies to pay debt. He also is on trial on market-manipulation and insider-trading charges related to his oil company, charges he has denied.

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Brazil’s economic difficulties are cyclical argues President Rousseff

March 13, 2015

Mercopress, 3/13/2015

“We’re going through a time of cyclical difficulties but we’re a country with a solid foundation,” the head of state said at the inauguration of a project to expand and modernize the Port of Rio de Janeiro.

Rousseff, who again refused to characterize Brazil’s current situation as a crisis, defended her austerity program in the face of criticism from the opposition and some government allies.

Brazil’s economy is stagnant and may contract 0.7% this year, according to the latest forecasts, while the country’s federal, state and local governments ended 2014 with a cumulative primary budget deficit (before interest payments) equivalent to 12.51 billion, putting public finances in the red for the first time since the current reporting methodology was adopted in 2001.

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Putting Brazil’s political risk in perspective

March 13, 2015

Kenneth Rapoza – Forbes, 3/13/2015

The case for Brazil is not hard to make: diverse economy, rising incomes, cheap assets, high investment grade yield, and despite scandal a relatively stable government. But the noise is so deafening, and the recent data so awful, that it’s hard to make the case that Brazil has hit bottom. The bottom is coming, only not until next year.

For the contrarian investor, maybe you get ‘em while they’re hot?

Think about this for instance: the Brazilian real is trading near historic lows at R$3.20 on Friday’s opening in São Paulo. It is projected to stay there for another year, hovering between R$3.00 and R$3.15, according to Barclays Capital’s estimates. If you bought a local currency Brazilian bond, and held it for three years, you’d be getting 12.75% interest at least, and most likely a gain from the currency when the real strengthens again in a year or two.

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