Rating-cut angst lurks as Brazil stocks, real decline on budget

Denyse Godoy, Paula Sambo and Filipe Pacheco – Bloomberg Business, 7/22/215

Traders now have one more reason to expect a downgrade of Brazil’s credit rating.

Speculation that President Dilma Rousseff would cut the primary budget surplus goal, which excludes interest payments, spurred the biggest slide in the world for the real and sank the Ibovespa. After the close of trading, a government report confirmed that the administration is proposing a reduction of its target for this year.

The move is seen hurting Brazil’s credibility and worsening the outlook for an economy set for the worst recession in 25 years.
“That could certainly jeopardize the nation’s credit rating,” Jason Vieira, the chief economist at Infinity Asset Management, said by phone from Sao Paulo. “It would be terrible news for the economy and for investors alike.”

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The Hijacked State

Murillo de Aragão – O Estado de S. Paulo, 6/20/2015  

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Image courtesy of Arko Advice

For a long time now, the Brazilian state has been hijacked. Formerly, by the military regime. Today, after re-democratization, citizens lost control of the state to politicians, bureaucracy, and to the rigging of public posts through patronage by politicians and syndicates. Each of these hijackers operates in accordance with their own logic. While many politicians use the state to get reelected and perpetuate themselves in control, others use it for business. Some use it for both.

Evidence of this abuse lies in the succession of scandals that involve politicians, political parties, state institutions, and public work. Bureaucracy hijacked the state to get access to economic gains in forms of salaries and other benefits. Those who rigger the state are there to create business transactions and political power that favors those they sponsor.

In midst of a puddle of mud and billionaire financial losses, Petrobras gives us proof of the prevalence of minor interests. It will not pay dividends to its shareholders, but will instead, pay over R$ 1 billion to its employees per performance, although there has been no profit.

Continue reading “The Hijacked State”

A setback in Brazil

The Editorial Board – The Washington Post, 6/27/2015

Just a couple of years ago, it was widely concluded that Brazil had finally overcome the decades-old gibe about the world’s fifth-largest country: that it would always be “the country of the future.” Exports, particularly to Asia, were booming; a middle class was filling in the once-polarizing gap between the very rich and very poor; and huge offshore oil discoveries appeared to ensure yet another economic acceleration. In seeming confirmation of its new status, Brazil was chosen to host both soccer’s World Cup last year and the 2016 Olympics.

The Rio de Janeiro games are still a year away, but already Brazil’s bubble appears to have burst. The economy is mired in a deepening recession, thanks to the drop in oil and other commodity prices. The state oil company, Petrobras, has triggered the biggest corruption scandal in the country’s history, with dozens of businesspeople and more than 50 members of Congress implicated in some $2 billion in kickbacks. Investments in the vaunted new oil fields have been cut back, even as Brazilians fume over the billions spent on new stadiums.

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Small expectations between two big countries during Brazil’s official trip

Michael D. Mosettig – PBS, 6/26/2015

As official visits go, it has been an inauspicious scene-setting for next week’s trip of Brazilian President Dilma Rousseff to the United States and a Tuesday meeting with President Barack Obama.

First off, the trip is a re-do. Rousseff was supposed to be in Washington two years ago for a full-fledged, bells and whistles state visit. She abruptly cancelled after revelations that the National Security Agency had been tapping her phone. (The scandal was even more painful for the Boeing Company, which had been on the verge of winning a $4 billion contract to re-equip the Brazilian air force. The contract went to a Swedish company.)

In her country of 202 million people, Rousseff’s problems keep mounting. The national joke in Brazil is that her poll ratings (barely 10 percent) are one point ahead of the country’s inflation rate (8.4 percent). Brazil’s signature, state-dominated company, Petrobras, is engulfed in allegations that billions disappeared in kick backs to Rousseff’s Workers Party. Just last week, two of the country’s major industrialists were arrested. Neither Rousseff nor her highly popular predecessor and mentor Luiz Inacio Lula da Silva have been implicated so far, but the country is on edge against the possibility of the scandal spreading.

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The mythology of racial democracy in Brazil

Ana Lucia Araujo – Open Democracy, 6/22/2015

Brazil’s government has taken important steps to combat racial inequalities over the past two decades. Afro-Brazilian populations nevertheless remain socially and economically excluded, continuing patterns that began with legal slavery.

Brazil has been in the news a great deal of late, especially in association with the 2014 FIFA World Cup. The most popular images involve football, carnival, samba, sunny beaches, and tanned women in bikinis. Less well known is the history of slavery and racism, which continues to have a profound impact upon Brazilian society.

Brazil has the dubious distinction of having imported the largest number of enslaved Africans—more than five million—of all countries of the Americas. The slave trade from Africa to Brazil was outlawed in 1831, but an illegal trade continued until 1851 before being outlawed for a second time. In contrast, legal slavery persisted until 1888, making Brazil the last country to abolish slavery in the western hemisphere. Today, 53 percent of the Brazilian population self-identify as black or pardo (brown, or mixed race). These terms as established by the Census refer to colour and not ancestry.

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Brazil President’s approval rating hits record low

Rogerio Jelmayer – The Wall Street Journal, 6/21/2015

Brazilian President Dilma Rousseff’s approval rating dropped to a record low, poll results showed Sunday, amid the country’s sluggish economic performance and corruption allegations involving the state-run energy company.

According to a survey by the Datafolha polling institute, 10% of respondents said the Rousseff administration was “excellent or good,” compared with 13% in a poll published in April.

Meanwhile, around 65% of respondents said Ms. Rousseff’s administration was “bad or terrible,” up from 60% in the previous survey. That was the highest level since 1992, when President Fernando Collor de Mello received a 68% rating shortly before he was impeached.

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Why did Brazil’s president change her tune on spying?

Vincent Bevins – Foreign Policy, 6/16/2015

When Brazilian President Dilma Rousseff emerged from a meeting with President Barack Obama on the sidelines of the Summit of the Americas in Panama City in April, she was in surprisingly good spirits. She looked healthier and more energetic than she had in months as she stepped up to the microphone for a press conference. She was all smiles as she described an upcoming trip to Washington, planned for June 30.

Rousseff, who was re-elected in October with only 51.6 percent of the vote, faces a spiraling corruption scandal at home and the lowest approval rating since her party took power in 2003. And her government has been clashing with Washington off-and-on for two years. So her cheery demeanor after meeting Obama was not what the room full of journalists was expecting when she stepped out for the press conference.

“Does this planned visit mean that the NSA spying episode is entirely overcome?” Brazilian journalist Patricia Campos Mello asked Rousseff.

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