UPDATE 1-Brazil 2015 budget gap hits record as austerity fails

Alonso Soto – Reuters, 01/29/2016

Jan 29 Brazil’s overall budget deficit soared to a record 613 billion reais ($150.99 billion) in 2015, central bank data showed on Friday, nearly doubling from last year as efforts to rebalance fiscal accounts failed and interest rates shot up.

The budget deficit equaled 10.34 percent of the gross domestic product, nearly five times its shortfall in the 12 months to mid-2011. The deficit mushroomed under President Dilma Rousseff, who took office at the start of 2011.

In comparison, at the height of its debt crisis in 2009 Greece had a deficit of 15.2 percent of GDP.

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Partying on a precipice

The Economist, 01/30/2016

JANUARY is a languid month in Brazil. Beyond the hullabaloo at samba schools—practising for their bawdy annual face-off during Carnival, which starts on February 5th—business pauses while Brazilians go on holiday in the scorching southern summer. Fewer cars clog streets; more bodies throng the beaches.

Politicians customarily switch off along with everyone else. Congressmen return from their Christmas break on February 2nd, but will probably do little until after Mardi Gras a week later. Neither they nor the president, Dilma Rousseff, will be able to relax, though. A frightening mosquito-borne disease has put the health authorities on high alert (see page 42). Meanwhile, Brazil’s political and economic crises are deepening. When politicians return to work they may regret the time they took off from attempting to solve them.

Brazil Announces R$83 Billion Plan to Jumpstart Economy

Lise Alves – The Rio Times, 01/29/2016

The Brazilian government announced on Thursday measures to boost production and recover the country’s growth, including a credit injection of R$83 billion (US$20.4 billion) into the economy. Among the measures announced are investments in infrastructure and more available credit from state-run banks to small and medium sized companies and for important economic sectors such as agriculture and construction.

According to Finance Minister, Nelson Barbosa, the measures will not incur extra costs for the government. “The greater part of the initiatives is administrative. There will be no additional cost for Brazilian taxpayers. We want to make better use of the available resources,” said Barbosa during a press conference to announce the measures.

In addition to freeing up credit for industry and agriculture, the government will also ask Congress to approve a measure that would allow laid off workers to use their FGTS (workers’ pension fund) as a guarantee to obtain loans. According to Brazil’s Central Bank the total volume of credit offered by banks last year increased by only 6.6 percent, to R$3.21 trillion, the lowest annual growth ever registered.

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Brazil a Bright Spot for Debt Restructuring Advisors as Recession Bites Hard

Tatiana Bautzer, GuillermoParra-Bernal – Reuters, 01/28/2016

Debt restructuring firms are poised to pull in record amounts of business in Brazil this year as the country’s worst recession in decades and a corruption probe that has cast a shadow over dozens of companies leads to a surge in defaults.

While a slump in prices is squeezing commodities producers – from sugar mills to oil producers and miners – the “Operation Car Wash” investigation into political kickbacks at state oil firm Petroleo Brasileiro SA is also hitting many of its suppliers.

Soaring consumer delinquencies as Brazil’s interest rates hit their highest levels for nearly a decade are also putting some major retailers and homebuilders in line for painful reorganizations. Scenting an opportunity, U.S. restructuring shops including FTI Consulting Inc, Houlihan Lokey Inc, and Moelis & Co have set up shop in Brazil over the past three years to vie for mandates with local banks and independent advisors.

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Majority of Petrobras oil fields in Brazil won’t turn a profit

Kenneth Rapoza – Forbes, 01/25/2016

Unless oil prices suddenly hit $40 again, some 80% of the oil fields owned by Brazil’s Petrobras are money losing operations. Smaller fields, both on and off shore, that produce less than 100,000 barrels a day might be returned to the National Petroleum Agency, the outfit that regulates the sale of Brazilian oil fields, or offer them to competitors. Offering them to the market seems to be the wisest decision. Other than sitting on them and leaving them idle, Petrobras stands to lose over one billion reals if it returns the fields to the Agency, Estado de Sao Paulo newspaper reported on Monday in a long feature on the beleaguered oil giant.

Petrobras is Brazil’s biggest oil producer. It is majority owned by the government and so that means whenever the Agency auctions off concession rights to oil companies, Petrobras automatically gets a cut of the deal. This is the most relevant oil company south of the Rio Grande. Nothing compares to it. Not PDVSA. Not PeMex.

But for Petrobras to make real money off its prize possessions sitting deep under the Atlantic Ocean floor, oil needs to be between $35 and $40 at least. It’s currently a little over $31.

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Brazil Economy Shed 1.5 Million Payroll Jobs in 2015

AP, 01/21/2016

Brazil lost 1.5 million payroll jobs in 2015 amid a contracting economy that has led to high inflation and layoffs in the manufacturing and service sectors, the labor ministry said Thursday.

The ministry said that 39.7 million workers were formally employed at the end of last year, compared to 41.2 million at the end of 2014 and 40.8 million in 2013.

Labor Minister Miguel Rossetto said last year’s job creation figures are the worst since they started being compiled in 1992.

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Barclays Retreats from Asia, Brazil and Russia

Martin Arnold, Don Weinland – The Financial Times, 01/21/2016

Barclays has told staff it aims to remain a “bulge-bracket investment bank” while outlining plans to cut up to 1,200 staff by closing many operations in Asia, Brazil and Russia and exiting precious metals trading.

Tom King, head of Barclays’ investment bank, said in a memo seen by the Financial Times: “By focusing our business on areas where we have sustainable competitive advantage, we are putting ourselves in a position where we cannot just survive but thrive in a dynamic, complex operating environment.”
The retrenchment comes as many of the world’s biggest investment banks are cutting staff and pulling out of non-core countries in response to growing pressure from regulators and declines in fixed income trading.

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