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.
Raymond Colitt and Arnaldo Galvao – Bloomberg Business, 5/11/2015
Brazil’s Finance Minister Joaquim Levy is up against a ticking clock to convince reluctant legislators to push austerity measures through Congress.
Two decrees that cut social-security spending by as much as 14.5 billion reais ($4.74 billion) lapse June 1 if they don’t pass Congress. A separate bill to raise 12.8 billion reais in corporate-payroll taxes this year has stalled, meaning the government is being denied the projected revenue.
A standoff last week over unemployment benefits reflects the reluctance inside President Dilma Rousseff’s coalition to pay the political price for shoring up Brazil’s public coffers. That, and a Senate chief critical of the proposals, will put Levy’s savvy to its biggest test yet, said Brasilia-based political analyst Andre Cesar.
Samantha Pearson – Financial Times, 5/12/2015
Ten years ago, Brazilian musician Max Gonzaga shot to fame with “Middle Class”, a hit song about the millions of Brazilians who were emerging from poverty to join the middle class, often referred to in Brazil as “C Class”.
“I hate buses. I have a car that I bought in installments . . . I’m always at the limit of my overdraft,” say the lyrics, capturing some of the cynicism many wealthier Brazilians felt about the consumerism that had gripped the country.
Since Brazil’s ruling Workers’ Party (PT) took power in 2003, more than 40m Brazilians have joined the middle class, thanks to government benefit schemes such as Bolsa Família and an economic boom that boosted wages and brought more stable employment.
Luke McLeod-Roberts – Financial Times, 5/12/2015
Brazil’s abundant natural resources are a blessing or a curse, depending on whom you ask.
The share of raw materials in Brazil’s total exports increased from 29 per cent when the ruling Workers’ Party (PT) assumed office in 2003, to 49 per cent last year, according to the country’s ministry of development. The proceeds of the world’s increasing demand for Brazilian agricultural produce, minerals and oil were invested in social programmes and fuelled a consumer boom.
The view that Brazil has become too dependent on commodities, however, is gaining prominence, as Chinese demand softens and a slower-than-expected European recovery depresses key commodity prices. Over the past year, soya beans have fallen more than a third, Brent crude oil more than 40 per cent and iron ore by almost half.
Matthew Futterman – The Wall Street Journal, 5/10/2015
Organizers of the 2016 Rio Olympics have declined to adjust a previously agreed-upon exchange rate on international tickets sales even though the value of Brazil’s currency has fallen roughly 30% during the past nine months.
Rio2016, the organizing committee for next year’s Summer Olympics, said it needs the windfall to help cover the cost of hosting the Games.
The organizing committee has set aside 2.25 million tickets for sale internationally, about 30% of the total 7.5 million tickets. In September, the group struck agreements with nearly all of its authorized ticket resellers who do business outside of Brazil with an exchange rate of 2.35 reais to the dollar, or one real costing about 43 cents.
Michael Smith, Sabrina Valle, Blake Schmidt – BloombergBusiness, 05/08/2015
In mid-2013, Brazilian federal police investigator Erika Mialik Marena noticed something strange.
Alberto Youssef, suspected of running an illicit black-market bank for the rich, had paid 250,000 reais (about $125,000 at the time) for a Land Rover. The black Evoque SUV ended up as a gift for Paulo Roberto Costa, formerly a division manager at Brazil’s national oil company, Petrobras. “We were investigating a money-laundering case, and Petrobras wasn’t our target at all,” says Marena. “Paulo was just another client of his. So we started to ask, ‘Why is he getting an expensive car from a money launderer? Who is that guy?’”
Marena had spent the previous decade building cases against money launderers, and Youssef had been a perennial target. He’d been arrested at least nine times for using private jets, armored cars, clandestine pickups by bagmen, and a web of front companies to move illicit cash. But Youssef had been spared serious jail time by testifying repeatedly against other doleiros, Brazilian slang for specialists in laundering unreported cash.
Paulo Trevisani and Djania Savoldi – The Wall Street Journal, 5/6/2015
BRASÍLIA—Brazil’s lower house of Congress on Wednesday approved the first of two controversial austerity measures aimed at cutting government spending on worker benefits.
While the measure must still be approved by the Senate, Wednesday’s result was seen as a significant victory for embattled President Dilma Rousseff, who has been advocating fiscal reforms to avoid a potential downgrade of Brazil’s sovereign debt.
The Chamber of Deputies voted 252-to-227 to, among other changes, make it tougher for workers to qualify for unemployment benefits, doubling the minimum time worked to 12 months. The vote comes after weeks of intense negotiations, as lawmakers from Ms. Rousseff’s own labor-backed governing Workers’ Party, or PT, had threatened to kill the bill on fears the measure would alienate their core constituents.