Brazil’s reality show

April 21, 2015

Ilan Goldfajn – Financial Times, 4/21/2015

I have just returned from abroad. It felt like déjà vu from a distant past. Explaining Brazil has become complex again. “I read about corruption accusations, popular protests, deficits and crises; what is happening in Brazil?” I was asked by an important investor. The answer inevitably tends to be long and full of Buts and Ifs.

Nevertheless, I will make an effort to summarize it here in a straightforward way. Brazil did not invest enough during the favorable commodity cycle. Policymakers did not recognize the end of the cycle in time. When they did, they tried to go back to a past that no longer existed. Now, Brazil must adjust everything at once to avoid a worse crisis. But markets are dynamic: with the recent depreciation of the real, there are already investors looking for opportunities. That is the reason Brazilian assets rebounded lately.

All Latin American economies – from Argentina and Venezuela to Chile and Peru – are experiencing declining growth. This is a sign of a common factor: the end of the favourable global cycle of commodity boom and growth in China and abundant capital flows to emerging markets. Corruption accusations and investigations are surfacing in many Latam countries such as Brazil and Mexico, but also in Chile, which signals that even the tolerance to such deviations is cyclical.

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Amid Crisis, Rousseff Seeks Closer Ties with the U.S.

April 20, 2015

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Paulo Sotero – The Huffington Post, 4/17/2015

Confronted by calls for her impeachment in street protests fueled by a deteriorating economy and a deepening investigation on massive corruption at state oil giant Petrobras, a weakened President Dilma Rousseff sees improving relations with the United States as part of the solution to Brazil’s and her own mounting challenges.

Following a Saturday April 11 meeting with president Barack Obama at the Summit of the Americas, in Panama, Rousseff said concerns caused by the 2013 revelations of the National Security Agency surveillance activities in Brazil were resolved and confirmed she will visit Washington this year. The announcement of the June 30th gathering at the White House put the Brazil-U.S. dialogue back on track following a period of estrangement that cost the U.S. the loss of a major defense contract and frustrated plans to elevate Brazil-U.S. relations to a new level of engagement.

Praised by Rousseff for his decision to normalize U.S. relations with Cuba, the American leader has scored points by enhancing U.S. ties with its largest regional neighbor at a time when Brazil is experiencing its most severe political and economic crisis in two decades. Rousseff’s official visit to the U.S. will not have the frills of the state visit planned for October 2013, which was derailed by the NSA revelations, but was welcomed by the business communities and economic officials in both countries, who hope it will send a positive reassuring message to markets and help to restore investors’ confidence in Brazil.

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Paulo Sotero is the Director of the Brazil Institute at the Woodrow Wilson International Center for Scholars.


Mark Zuckerberg meets with Brazil’s president at the 7th Summit of the America’s, in Panama

April 14, 2015

Anderson Antunes – Forbes, 04/11/2015

Brazil’s president Dilma Rousseff met Facebook founder Mark Zuckerberg on Friday during the 7th Summit of the Americas, which is being held in Panama City. A picture of the meeting was released by Brazil’s Presidency press office. The image shows the politician side by side with Zuckerberg, wearing a jersey that contains Facebook’s logo and Brazil’s flag, given to Rousseff by the billionaire.

The meeting took place just a few days after the launch of a new program by Brazil’s government aiming to tackle cyber security and human rights violations on the Internet in cooperation with a private initiative. Facebook is among companies teaming up with the South American nation on the program through its Internet.org non-profit organization, set to launch at the summit. Internet.org aims to bring connectivity to everybody, particularly to low-income communities that have traditionally been deprived of the technology.

 

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Three Former Brazil Lawmakers Arrested in Petrobras Probe

April 10, 2015

Rogerio Jelmayer – The Wall Street Journal, 4/10/2015

Brazil’s federal police arrested three former lawmakers Friday as part of an investigation of alleged corruption involving contracts between state-run oil firm Petroleo Brasileiro SA, construction firms and politicians. Petrobras officials took a cut of the cash from inflated contracts, funneling the rest to lawmakers and political parties, according to investigators.

Police arrested Andre Vargas, a former lawmaker of the ruling Worker’s Party; Luiz Argolo, a former lawmaker of political party Solidariedade; and Pedro Correa, of the Progressive Party (PP) related to corruption allegations, said federal police spokesman Paulo Roberto da Silva. He said more details of the operation would be disclosed later Friday at a news conference.

Mr. Vargas and Mr. Argolo are accused of involvement with currency dealer Alberto Youssef, previously arrested by the federal police as part of “Operation Car Wash.” Messrs. Vargas and Argolo have previously denied involvement in the alleged corruption scheme. It is not clear what the accusations are against Mr. Correa.

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More austere, accommodating Rousseff paying off for Brazil

April 10, 2015

Brian Winter and Anthony Boadle – Reuters, 4/10/2015

The “new Dilma” is starting to produce results.

By embracing power-sharing deals and budget cuts that she shunned during her first term in office, President Dilma Rousseff has begun to ease the economic and political crisis plaguing Brazil, congressional leaders and economists say.

Rousseff’s decision this week to hand formal responsibility for negotiating with Congress to Vice President Michel Temer, a leader of the Brazilian Democratic Movement Party (PMDB), was a milestone that should help ease tensions with the biggest party in her coalition and dissuade it from sabotaging her economic agenda as it did earlier this year, legislators said.

Brazil’s stock and currency markets rallied as investors hoped the more stable political climate, and new signs that Rousseff is shifting toward more market-friendly policies, will eventually help Latin America’s largest economy recover from what is expected to be a moderate recession this year.

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Greece Brightens, Brazil Darkens

April 7, 2015

Matthew Winkler – Bloomberg View, 4/7/2015

Greece and Brazil are both synonyms for economic dysfunction. So why do investors think Greece is becoming a respectable bet while Brazil remains a lousy one? Here’s a partial answer: the euro. Greece, a member of the European Monetary Union, works with a solid (if imperfect) currency. Brazil, on its own, doesn’t.

For bondholders, that’s a big deal. Greek government bonds returned 336 percent since May 2012 as Brazilian government bonds gained 24 percent, when measured in local currencies, according to the Bank of America Merrill Lynch index. Brazil’s real has depreciated 14 percent this year against the dollar, making it the worst performer among the 31 most traded currencies.

Investor skepticism also made the real the world’s least predictable currency. Its implied volatility, a measure of traders’ bets on how much its value will change day to day, jumped more than any other currency this year.

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Brazil’s Rousseff navigates troubles at home as she ponders a U.S. visit

April 6, 2015

Vinod Sreeharsha – McClatchyDC, 04/01/2015

Brazilian President Dilma Rousseff is expected to meet President Barack Obama next week when the Western Hemisphere’s leaders gather for the Summit of the Americas in Panama, in what will be Rousseff’s highest-profile encounter with Obama since revelations last year that the National Security Agency had spied on her.

Made public in the documents leaked by fugitive former NSA contractor Edward Snowden, the spying revelation led to the cancellation of a planned Rousseff visit to Washington, and she’s expected to respond next week to an invitation from the White House to reschedule the trip.

Yet tense relations with the Obama administration are nothing compared with what Rousseff faces at home: two years of virtually no economic growth, a currency that’s plunged 18 percent against the dollar just since Jan. 2, a major corruption scandal and loud calls for her resignation or impeachment. In just the third month of her second four-year term, her approval rating is 13 percent, according to the Brazilian pollster Datafolha, after she won 52 percent of the vote last fall.

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