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

Ex-president’s relationship with Odebrecht scrutinized in Brazil

Blake Schmidt – Bloomberg, 5/2/2015

Brazil’s federal prosecutors have initiated a preliminary inquiry as to whether former president Luiz Inacio Lula da Silva used his influence to persuade the state development bank to help finance projects of one of Brazil’s biggest industrial conglomerates, according to media reports.

The weekly Epoca magazine was the first to report an inquiry into alleged influence-peddling involving the politician’s speaking engagements abroad. The magazine reported on Friday that Brazil’s development bank, BNDES, had financed Odebrecht SA construction projects in countries whose leaders Lula had met with.

Lula, Odebrecht and BNDES have each denied any wrongdoing.

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Ex-president’s relationship with Odebrecht scrutinized in Brazil

As Petrobras cuts back, Brazil turns to U.S. for Atlantic drilling help

Kenneth Rapoza – Forbes Magazine, 5/3/2015

Call it the shock doctrine, but if it walks like a duck and quacks like a duck…well, you get the picture.

Wracked by the biggest corporate scandal in Brazilian history, oil major Petrobras is reducing costs. While it says it is not reducing costs on exploration and production, the state-owned Petrobras is turning to Texas this week to meet with companies that want to help it drill in one of the most lucrative oil finds in the world — Brazil’s deep water, pre-salt oil fields off the coasts of Rio and Sao Paulo states.

As some would have it, this is all part of the plan. Petrobras is in dire straights. Petrobras has too much control over the mega oil fields under rock and sand. And foreign firms want a piece of it without having to give up so much to Petrobras.

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As Petrobras cuts back, Brazil turns to U.S. for Atlantic drilling help

Brazil’s biggest problem isn’t Petrobras

Matt Phillips – Quartz, 4/28/2015

It’s not the scandal, stupid.

Last week the Brazilian oil giant Petrobras wrote down the value of its assets by some $17 billion, including $2.1 billion reflecting the impact of bribes and graft. The scandal—in which company executives allegedly received kickbacks in exchange for awarding contracts at inflated values—has prompted worries that it could creep closer to President Dilma Rousseff, who served as the chairwoman of Petrobras, during the years when much of the alleged bribery took place. So far, she hasn’t been implicated.

But as the nation’s attention continues to be riveted by the scandal, Brazil’s economy is decelerating rapidly. Numbers out this morning show that unemployment rose to 6.2% in March, up from 5.9% in February and the highest since March 2012.

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Brazil’s biggest problem isn’t Petrobras

Why Brazilians are really going to miss supermodel Gisele

Dom Phillips – The Washington Post, 4/27/2015

At first glance, the glittering career of Brazilian supermodel Gisele Bündchen is not very Brazilian. The supermodel, who retired from the catwalks at age 34 on April 15 in a blizzard of publicity, has pursued her profession with a Teutonic single-mindedness and efficiency, as befits her family’s German roots.

Friends, industry professionals and colleagues used terms such as “punctual,” “secure investment” and “well educated” to describe her — terms rarely associated with models, fashion or, indeed, tropical, impulsive Brazil, where she is often described as an über-model, rather than a supermodel.

Nonetheless, Brazilians can claim her as their own. “Gisele is what most represents Brazil abroad. It is Pelé, carnival and Gisele,” said Fernanda Tavares, a New York-based Brazilian model who has been her friend since they started their careers together 20 years ago, at age 14. Tavares was among those who suggested that Bündchen will still do select catwalk shows, as well as her advertising contracts.

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Why Brazilians are really going to miss supermodel Gisele