Carlyle’s Rubenstein: Brazil best, despite problems

Lawrence Delevigne – CNBC, 5/12/2015

Once an investor darling, Brazil is hardly a consensus target for international cash today.

High inflation, a sluggish economy and a massive corruption scandal at state energy company Petrobras have caused many investors to flee. But others are sticking with the beleaguered South American country.

One example is $193 billion private equity giant Carlyle Group. Co-CEO David Rubenstein thinks Brazil is actually the most appealing market for investment after the U.S., Europe and China, according to remarks made Tuesday at the Global Private Equity Conference in Washington, D.C.

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Carlyle’s Rubenstein: Brazil best, despite problems

Brazil must face consequences of an unravelling political system

Paulo Sotero – Financial Times, 5/12/2015

The severity of the crisis that has engulfed Brazil in the early part of President Dilma Rousseff’s second term has generated an unusual degree of candour among officials and politicians.

“State capitalism does not work well in a democracy,” said finance minister Joaquim Levy after the gigantic March 15 street protests that revealed the extent of popular anger caused by the nation’s reversal of fortunes, and turned Ms Rousseff into a highly unpopular and isolated leader less than six months after her re-election.

Mr Levy was referring to the part of the crisis he is in charge of fixing: the debilitating effects of large-scale state intervention in the economy during Ms Rousseff’s first term. It turned fiscal surpluses into deficits, brought inflation back, compromised investors’ confidence and threw the nation into a recession expected to last for a while. Mr Levy’s task is probably the easier one.

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Brazil must face consequences of an unravelling political system

The New White Elephants of Brazil

Shannon Sims – OZY, 5/11/2015

It isn’t easy for the residents of the Irmã Dulce housing development to get home these days. Their neighborhood, a collection of new low-rise condos that gleam against the sky, is located on the outskirts of João Pessoa, a city set on a dirt road miles from any bank or supermarket. There are no bus lines, and it’s not like most residents will be driving — seeing as they live below the poverty line. Indeed, most folks travel on foot. Which is why you might raise an eyebrow at a key Irmã Dulce amenity: a parking space for each unit.

There’s a housing boom going on in Brazil — only this one is for the poor and backed by the government. Fly into any city in the poorest regions of Brazil, and you’ll spot them: rectangular scars on deep green fields, surrounded by nothing, except maybe a slowly decaying white elephant World Cup stadium. They’re the new housing developments borne out of the government’s 6-year-old “My House, My Life” program. Look closer at the white and clay-colored rectangles and you’ll notice they’re in fact box after box after box, appearing more like warehouses than homes, both reminiscent of Escher-esque illusions and symbolic of suburban dystopias. It’s in these communities that today millions of Brazilians live, with more moving in every day; President Dilma Rousseff has promised nearly 3 million of these homes will be delivered by 2018 — homes for 25 million, or 1 in every 8 Brazilians.

Although on the one hand the developments are a well-intentioned attempt to put a safe roof over the heads of Brazil’s neediest families, the communities’ brutal aesthetic and far-away placement, combined with misfired amenities, have caused architects and social scientists to sound the alarm. Those parking spaces, for one, are aimed at folks who can’t afford diapers without government assistance — proof, critics say, of the disconnect between smart design and the reality of Brazil’s housing constructions.

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The New White Elephants of Brazil

Sixty Years Later: What Have We Learned?

Rafael R. Ioris – Brazil Wire, 5/6/2015

Successive demonstrations in its most important cities, brawls between militants of opposing ideological sides who see the other as an enemy rather than a political adversary, growing numbers of strikes, verbal and written attacks in the media, rising polarization in Congress. A good description of what has been taken place in the country of the future in the last several weeks, this narrative would be similarly accurate in describing events leading to as well as immediately after the military coup of 1964. Indeed, in the first years of the decade and even towards its end, when the authoritarian regime tightened its grip and curtailed most forms of political life, Brazil was immersed in intense activism reflecting, at the same time, the vibrancy of its flourishing democratic institutions, rising civil society, and protracted but continuous path of socio-economic and political inclusion, as well as a reasserted resistance against substantive social transformations from different sectors of its entrenched, and mostly conservative ruling elites.

Though history doesn’t seem to repeat itself in the same ways, it is clear that deep-seated structural factors tend to encroach upon one’s reality unless they have been sufficiently weakened. In fact, the recent, rapid though not necessarily sustained, rise of traditionally excluded groups to the economic and political lives of the country notwithstanding, Brazil’ political landscape since last year’s presidential election resembles more that of a country mired in Cold War rhetoric rather than that of a nation in the path of consolidating its transition from autocratic rule to fully democratic life. In what has been called by some the ‘third round’ of the recent electoral proceedings, the fact is that many who supported the opposition candidate, senator Aécio Neves, in his unsuccessful bid to the presidential seat last October, have refused to accept the outcome of the election and have since then taken to the streets to demand Dilma Rousseff’s, the narrowly reelected president, ousting from power – if needed by means of a military coup. Further complicating the prospects of dialogue between the opposing sides, the current composition of Brazil’s parliament is one that reflects its ideologically most conservative alignment in over 60 years, and, to her supporters greatest dismay, the recently appointed new finance minister of Rousseff’s second term in office is pushing for a sharp cut in public investment and social expenditures in order to bring down the country’s rising inflation, thus appeasing domestic and international investor as well as global financial rating agencies.

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Sixty Years Later: What Have We Learned?

Brazil is suffering from recession and scandal

Financial Times, 5/4/2015

In a world of near-zero interest rates, how about this? Last week, Brazil’s central bank increased its main interest rate to 13.25 per cent. The 50 basis-point rise is part of Brazil’s efforts to put its house in order. The economy is expected to shrink by 1 per cent this year, the deepest recession in 25 years; unemployment is rising; while inflation is running at over 8 per cent — almost twice the official target, hence the rate rise. After years of fast growth and easy credit, Brazil is on its back.

Latin America’s biggest economy is also reeling from a corruption scandal at Petrobras, believed to be the largest in national history. Release of the state-controlled energy company’s long-delayed results last month estimated losses, due to corruption, of more than $2bn — much of them due to political kickbacks. Combined with the recession, this has savaged President Dilma Rousseff’s standing. Even in a region of weak leaders, her dismal approval rating stands out. At 13 per cent, it is lower even than that of Nicolás Maduro, the president of Venezuela.

There are three main reasons for Brazil’s gloom. China’s slowing economy has punctured the commodity price boom forcing Brazil, and other commodity countries in the region, to tighten their belts. The prospect of higher US interest rates threatens to suck international liquidity out of the country. Most of all, it is paying the cost of Ms Rousseff’s mistaken faith during her first term in so-called “developmentalism”.

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Brazil is suffering from recession and scandal

Brazil minister supports regulatory relief for Petrobras

Sabrina Valle & Anna Edgerton – Bloomberg, 5/3/2015

Brazil is considering lifting a requirement for its national oil company to operate all new projects in a deepwater region where exploration costs are some of the highest in the industry.

Any changes to regulations for the so-called pre-salt area will have to go through Congress with lawmakers “open to alternatives,” Energy Minister Eduardo Braga said Sunday in an interview in Houston before the Offshore Technology Conference. The government is also giving Petroleo Brasileiro SA freedom to set fuel prices, he said. The state-run company known as Petrobras lost billions subsidizing gasoline and diesel imports in President Dilma Rousseff’s first term.

Efforts to develop discoveries it already made has contributed to Petrobras becoming the world’s most indebted oil producer. Chief Executive Officer Aldemir Bendine said last week that under current rules any new pre-salt ventures would increase leverage. More participation from foreign operators is welcome, Braga said.

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Brazil minister supports regulatory relief for Petrobras

Prosecutors in Brazil investigate Lula for alleged influence peddling

Samantha Pearson – The Financial Times, 5/4/2015

Brazil’s federal prosecutors have opened a preliminary investigation into the country’s wildly popular former leader Luiz Inácio Lula da Silva for illicit influence peddling in Cuba, among other countries, putting further pressure on his embattled protégée President Dilma Rousseff.

The prosecutors’ office in Brazil’s capital Brasília confirmed late on Sunday reports by a local magazine that Mr Lula da Silva is being questioned by their anti-corruption unit over claims he helped construction conglomerate Odebrecht win contracts overseas between 2011 and 2014.

Weekly magazine Época alleged on Friday that Mr Lula da Silva improperly used his influence to obtain loans from Brazil’s state development bank BNDES for Odebrecht’s dealings in Cuba and the Dominican Republic, often travelling to meet the countries’ leaders at the company’s expense. The magazine also accused Mr Lula da Silva, one of the founders of the ruling Workers’ Party (PT), of similar influence peddling in Ghana and Angola.

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Prosecutors in Brazil investigate Lula for alleged influence peddling