Economists see Brazil economy extending contraction into 2016

Guillermo Parra-Bernal – Reuters, 08/17/2015

The Brazilian economy is expected to shrink next year, on top of a sharp contraction forecast for this year, according to a weekly central bank survey of economists published on Monday.

The median forecast of about 100 financial institutions projected a contraction of 0.15 percent in Brazil’s gross domestic product in 2016, down from stability in the prior week’s survey. Economists in the same survey expect the economy to shrink 2.01 percent this year, steeper than 1.97 percent the prior week.

The survey also showed a slight increase in inflation forecasts for 2016, to 5.44 percent, from 5.43 percent previously. Estimates for gains in consumer prices this year remained unchanged at 9.32 percent.

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Brazil defaults rise fastest in three years, Serasa says

Guillermo Parra-Bernal – Reuters, 8/17/2015

The number of unpaid utility bills, defaulted loans and bounced checks among Brazilian consumers jumped in the first seven months of 2015 at its fastest pace in three years due to rising borrowing costs and inflation, credit research company Serasa Experian said on Monday.

The Serasa Experian Consumer Default Index rose 16.8 percent from a year earlier, the biggest jump since 17.8 percent three years ago. On a monthly basis, corporate delinquencies surged 19.4 percent in July from a year earlier, Serasa said.

Bank defaults and unpaid bills led the increase in the index in the seven-month period, Serasa said.

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Brazil austerity plan is ‘stupid,’ prominent senator tells paper

Guillermo Parra-Bernal – Reuters, 8/17/2015

The Brazilian government’s attempts to reduce the country’s rapidly expanding debt by raising taxes and to stem a decline in the currency by using futures contracts are “stupid” and will only do the opposite, opposition Senator José Serra told Valor Econômico newspaper in an interview published on Monday.

Serra, the runner-up in the 2002 and 2010 presidential elections, said the deficit-reduction targets and an active monetary policy had caused a slump in economic activity across the board, Valor said. A “power vacuum” in the presidency is creating market turmoil, he added.

His remarks come as opposition to President Dilma Rousseff’s austerity program mounts, partly because she promised in her 2014 re-election campaign not to implement any budget cuts or interest-rate increases. Her austerity efforts, meant to keep Brazil’s sovereign investment-grade credit rating, have turned off even some supporters and are meeting resistance from lawmakers.

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Brazil analysts forecast back-to-back recession for first time

Mario Sergio Lima and Matthew Malinowski – Bloomberg Business, 8/17/2015

Brazil analysts forecast that Brazil’s economy faces two straight years of recession for the first time since the Great Depression.

Brazil’s economy will shrink by 2.01 percent in 2015 and by 0.15 percent in 2016, according to the Aug. 14 central bank survey of about 100 analysts. That marks their first forecast for recession next year and compares with the previous week’s predictions of a decline of 1.97 percent in 2015 and flat growth in 2016. The last time the economy shrank for two straight years was in 1930-31.

President Dilma Rousseff is struggling to balance policies aimed at taming the fastest inflation in over a decade while reviving economic growth amid a massive corruption scandal that has complicated relations with Congress. Moody’s Investors Service this month became the second ratings company to cut the country’s sovereign credit rating to the cusp of junk. Protests on Sunday that drew half a million people into the streets will maintain the pressure on a government with record-low popularity ratings.

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Brazil will be ready in time

Eric Farnsworth – The Miami Herald, 8/13/2015

Paraphrasing Ronald Reagan, there they go again. As Brazil readies to host the 2016 Olympic Summer Games one year from now, international observers have begun the countdown clocks and a familiar litany of complaints that are aired out before virtually every major worldwide sporting event.

Venues that will not be ready to host events. Infrastructure that can never be completed on time if at all. Community redevelopment projects that will remain on the drawing board. Security concerns and police over reaction. Cost overruns, debt accumulation, and corruption. Environmental clean-up and pollution control measures that are failing, endangering the health of athletes and spectators alike.

Hosting the Olympic Summer Games is not for the faint-hearted. It is a massive, risky, hugely expensive undertaking with increasingly questioned benefits. For approximately two weeks, cities and the nations they represent draw the eyes of the world, bringing the attention and anticipated revenue they might otherwise not have other opportunities to attract.

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Brazil’s stocks lead world losses as real approaches 12-year low

Andressa Lelli, Filipe Pacheco, Paula Sambo – Bloomberg Business – 8/13/2015

Brazilian banks sent the Ibovespa to the biggest slide in the world after Banco do Brasil SA joined Itau Unibanco Holding SA in allocating more money for soured loans. The real approached the lowest level in 12 years.

Financial shares in the MSCI Brazil Index sank to a six-year low on speculation other lenders will be forced to bolster so-called provisions. The stock benchmark dropped for a third day, while the real extended this year’s plunge to 24 percent. Swap rates, a gauge of expectations for borrowing costs, rose.

Lenders have suffered from a slowdown in consumer purchases as financing gets more expensive with interest rates at a nine-year high. The selloff in banks has intensified since May on concern that President Dilma Rousseff’s decision to boost taxes on the industry’s profits will erode earnings.

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India first, Brazil worst in emerging stocks after Fed increase

Maria Levitov – Bloomberg Business, 8/14/2015

Bet on India’s growth stories and shun Brazilian behemoths when the Federal Reserve raises interest rates, emerging-market stock-pickers say.

India will probably do best among the 10 largest emerging equity markets after the Fed boosts rates for the first time in nine years, and Brazil the worst, according to a Bloomberg survey of 10 stock fund managers in the U.S., Europe and Asia.

A Fed increase, which may come next month, would herald the end to an era of record-low U.S. interest rates that supported demand for riskier assets. Higher U.S. borrowing costs threaten to lure money out of developing nations, making it costlier to finance budget and current-account deficits.

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