Brazil’s real: how low can it go?

Joe Leahy, John Paul Rathbone – Financial Times, 02/08/2016

When Dilma Rousseff attended the 2016 opening session of Brazil’s congress this week, she appealed to lawmakers to approve tax increases to tackle a widening gap in the country’s public finances.

Most critically, the president called for the reintroduction of a tax on financial transactions, known as the CPMF, that was abandoned in 2007 after objections from business. Opposition congressmen booed her.

But with Brazil reporting a budget deficit last year that was the biggest among emerging economies except for Saudi Arabia at over 10 per cent, unpopular measures are needed to save the country from a deepening fiscal hole, analysts say

Brazil’s Congress reconvenes, mired in pessimism

Silvio Cascione -Reuters, 02/02/16

Brazilian lawmakers return from their annual recess today with an overwhelming list of work to do as the country sinks into a broadening political, economic and health crisis.

And yet expectations about their actual capacity to make 2016 a better year than 2015 could hardly be smaller.

While there is little consensus on the measures needed to fix Brazil’s budget, deputies and senators are set to spend much of their political energy this year arguing about if and how President Dilma Rousseff should be impeached – and a whole new program of economic reforms could be started from scratch.

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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 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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How Brazil can raise the value of its chemical industry

Forbes, 01/27/2016

Brazil’s chemical industry has grown significantly over the past 15 years, but an increasing portion of growth is due to imports—an alarming trend for chemical companies and the businesses that depend on them.

Prior to 2007, the industry’s trade deficit ranged from $6 billion to $9 billion, but by 2014, it had risen to $31.2 billion. Two main factors contributed to the deficit. First, domestic consumption grew faster than production, as rising income spurred chemicals consumption, which outstripped corresponding investments in local production capacity. And second, the import of high-value chemicals grew faster than exports, in part because Brazilian companies are better positioned to produce lower-value commodity chemicals.

Left unchecked, this trend could threaten the sustainability of Brazil’s chemical industry. Rising imports of finished products often correlate with lower domestic production of the chemicals used in those products—for example, in tires, textiles and toys.

 

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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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