Brazil’s bottomless pit finds a few daredevils

Kenneth Rapoza – Forbes, 11/6/2015

It’s a fire sale! So says famed Brazilian entrepreneur and board chairman at Brasil Foods, Abilio Diniz, during a meeting with investors in New York this week.

“We don’t have an economic crisis in Brazil. It’s just a political crisis, which has destroyed confidence…no one is investing,” he said. “Brazil is not growing, it’s contracting. But once we pass through this moment of uncertainty, once we resolve this political crisis, the economy will turn very, very fast.”

Investors are still waiting. Back in April, Gradual Investments CEO Fernanda de Lima said she felt the end was near in Brazil, meaning the bottom was in sight. It only got worse. Calling a bottom has been fool’s gold at this point. The only safe bet on the Brazilian economy has been the currency. Negative sentiment drives it. The Brazilian real is unlikely to hold court in the 4s for long even as China and the U.S. slow.

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Brazil’s Dilma Rousseff stares down budget black hole

Joe Leahy – Financial Times, 11/6/2015

Every week that passes in recession-hit Brazil seems to bring a new, bigger estimate for the size of the hole in the government’s finances.

The latest came on Wednesday from Hugo Leal, a lawmaker from congress’s fiscal commission who is overseeing a bill covering the government’s 2015 budget. He said he would amend the bill to allow for a 2015 primary fiscal deficit — the budget balance before interest rates — of R$119.9bn (US$32bn), more than double that of the government’s most recent official estimate.

The blowout, which mainly accounted for government off-budget liabilities with state banks, highlights the central problem facing Latin America’s biggest economy. Politicians are struggling to agree on and implement an austerity programme to plug the widening gap in government finances, creating uncertainty over the sustainability of public debt and undermining investor confidence.

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Brazil credit risk drops to lowest in seven weeks as real gains

Filipe Pacheco – Bloomberg Business, 11/4/2015

Brazil’s sovereign risk declined to the lowest level since September amid signs investor sentiment is slowly improving and as the government moves closer to a vote in Congress that will help it boost revenue. The real advanced.

The cost of insuring Brazilian bonds for five years in the credit-default swaps market declined for the fourth straight day to 389 basis points, the lowest level since Sept. 17. The real advanced 0.4 percent to 3.7548 per dollar as of 11:22 a.m. in Sao Paulo, after falling as much as 0.3 percent earlier. It was still the worst performer among 31 major currencies tracked by Bloomberg, with a 30 percent decline.

Brazilian President Dilma Rousseff and Finance Minister Joaquim Levy are trying to push measures to strengthen government finances through Congress to avert further credit rating cuts after Standard & Poor’s downgraded Brazil’s debt to junk in September. At the same time an increase in mergers and acquisitions in Latin America biggest economy showed some buyers see value in the country’s assets.

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Oil workers union strike hurt production, Brazil’s Petrobras says

Will Connors – The Wall Street Journal, 11/3/2015

Turmoil at Brazil’s state-run oil company Petroleo Brasileiro SA deepened late Tuesday, as the company said a strike by Brazil’s biggest oil workers union stopped a significant amount of oil and gas production, and that the company’s alternate board chairman was stepping down just two months after his appointment.

Petrobras said that the strike affected 13% of the company’s daily oil production and 14% of the company’s daily natural gas production on Monday. The strike affected 273,000 barrels of oil production and 7.3 million cubic meters of natural gas production, the company said.

The Oil Workers Federation, or FUP, began the strike on Sunday to protest a series of asset sales by Petrobras after the union held more than three months of negotiations with the company. The FUP represents platform and refinery workers, among others.

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‘Carwash’ probe recovers $622 million in Brazil, O Globo reports

Filipe Pacheco – Bloomberg Business, 11/1/2015

Individual and companies involved in the investigations of Carwash, an alleged pay-to-play scheme, agreed to give back to Brazil’s government close to 2.4 billion reais ($622 million), O Globo newspapers said.

The money is part of 31 lawsuits within Brazil’s judiciary system in which companies and individuals accused of bribery agreed to return funds, according to a report published Sunday. Carwash is under investigation by Brazilian prosecutors and police in connection with alleged kickbacks, bribes and inflated construction contracts involving state-controlled oil producer Petroleo Brasileiro SA.

The money will be initially held by Brazil’s prosecutors, o Globo said. Petrobras alone has already received 296 million reais transferred by local judges, the report said.

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Brazil: How could so much go so wrong?

Mimi Whitefield – Miami Herald, 11/1/2015

It would be bad enough if Brazil’s embattled president, Dilma Rousseff, just had a recession and a plummeting currency to deal with. But in a perfect storm, she also has two corruption investigations, a fractious Congress and impeachment threats on her plate.

Inflation is running at nearly 10 percent, there is a soaring budget deficit and the value of the real has fallen by 32 percent. Average wages are declining and unemployment in Brazil’s six major metropolitan regions was 7.6 percent in September after years of almost full employment. And the bad news keeps on coming: In the first nine months of this year, 657,761 jobs were lost, and 1.5 million jobs are expected to disappear from Brazil’s formal economy in 2015.

Standard & Poor’s has downgraded Brazil’s credit rating to junk status, and Fitch Ratings downgraded Brazil to BBB-, which places it at just a notch above junk. Corruption investigations into both Petrobras, the state-run oil company, and the construction industry already have damaged investor confidence. Dozens of members of Congress are under investigation and important corporate leaders have been jailed.

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Brazil’s most costly soccer stadium may not host Olympic games

Anthony Boadle – Reuters, 10/27/2015

In the midst of Brazil’s deepening economic crisis, its cash-strapped capital may not have the money to fulfill a promise to host Olympic soccer games next year, leaving unused the most expensive stadium built for the 2014 World Cup.

The Rio 2016 organizing committee has given Brasilia until mid-November to sign a contract or be stripped of the seven games set to be held there next year, a spokesperson said.

Tickets for matches in Brasilia have already been on sale for months and it remains unclear how fans, many of whom may have bought flights and booked hotels, would be reimbursed.

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