Investors tiptoe back into Brazil markets as inflation peaks

April 17, 2015

Walter Brandimarte – Reuters, 4/17/2015

Some investors are carefully betting that the recent selloff in Brazilian financial markets was overdone, pointing to signs that inflation is slowing and the government is getting its finances in order.

Many expect inflation will come down from its current 11-year high of 8.13 percent, thanks to the central bank’s interest rate hike cycle of 1.75 percentage points since October, as well as the economic slump’s effect on demand.

Meanwhile, state-run oil company Petrobras is expected to this month post financial statements that have been delayed by a huge corruption scandal, greatly reducing the risk of a major debt crisis that could have cost Brazil its investment grade credit rating.

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Brazil’s economic activity grows unexpectedly in February

April 15, 2015

Silvio Cascione – Reuters, 04/15/2015

Brazilian economic activity grew unexpectedly in February from the previous month, central bank data showed on Wednesday, but economists said the increase was too small to dispel forecasts for a recession this year in Latin America’s largest economy.

The Brazilian central bank’s IBC-Br economic activity index BRIBC=ECI, a gauge of farming, industry and services activity, rose a seasonally adjusted 0.36 percent from January, topping market expectations for a drop of 0.2 percent.

The index is seen as a leading indicator for gross domestic product data, which is released quarterly. Economists have forecast Brazil’s economy to shrink about 1 percent in 2015, which would be the country’s deepest recession in 25 years.

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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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Brazil’s Annual Inflation Hits Highest Level In Nearly 10 Years

March 6, 2015

Rogerio Jelmayer – The Wall Street Journal, 5/6/2015

Consumer prices in Brazil rose more than expected in February, putting the 12-month rate at the highest level in nearly 10 years and underlining one of the main challenges facing Latin America’s largest economy in the year ahead.

Brazil’s consumer-price index, the IPCA, was up 1.22%, compared with a rise of 1.24% in January, the Brazilian Institute of Geography and Statistics, or IBGE, said Friday.

The rolling 12-month IPCA increased 7.70% through February, up from 7.14% in January, remaining well above the 6.5% ceiling of the central bank’s target range. The 12-month figure marked the highest level since May 2005, when it reached 8.05%.

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The noise from Brazil? An economy on the brink

March 6, 2015

Alberto Nardelli – The Guardian, 3/6/2015

The more you look at Brazil’s fundamentals, the more shaky the country looks. And we are not talking about the defensive prowess of David Luiz here. It is the country’s economic backline that risks tumbling down like a set of dominoes.

When a Latin American economy is in trouble a good place to start is its inflation rate. Brazil’s is today running at 7.5%. While this is nowhere near the 2,000-3,000% of the early 1990s, when the price of everything went up several times a week, it is far higher than the central bank’s mid-point target of 4.5%.

On Wednesday, in an effort to bring inflation down, Brazil’s central bank raised interest rates to 12.75%, a six-year high.

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Brazil’s shock therapy against inflation

March 3, 2015

Silvio Cascione – Reuters, 3/3/2015

Brazil’s central bank’s two-day policy meeting kicks off later on Tuesday with all bets placed on a fourth straight interest rate increase, despite growing consensus that the country is headed for its worst economic recession in 25 years.

The benchmark interest rate, currently at an already-high 12.25 percent, is expected by the wide majority of 48 economists polled by Reuters to reach the highest in six years at 12.75 percent. Other increases are in the pipeline, and some say the Selic rate could climb to as much as 13.75 percent this year.

Monetary tightening is just one side of Brazil’s all-out war on price rises. Finance Minister Joaquim Levy, tasked by President Dilma Rousseff to plug a growing budget deficit, has already frozen dozens of billions of dollars in government spending, removing one of the major pressures over consumer prices in recent years.

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Brazil Mid-Month Inflation Quickens More Than Forecast

February 24, 2015

David Biller – Bloomberg Business, 2/24/2015

Brazil’s inflation in the month through mid-February quickened more than economists estimated, as the central bank continues to raise rates in the world’s second-biggest emerging market.

Inflation as measured by the benchmark IPCA-15 index accelerated to 1.33 percent from 0.89 percent a month earlier, the national statistics agency said on its website today. That was the fastest rate since February 2003 and above the median 1.30 percent forecast from 41 analysts surveyed by Bloomberg. Annual inflation sped up to 7.36 percent from 6.69 percent.

Policy makers in Brazil are caught between the fastest annual inflation in nearly 10 years and gross domestic product that analysts estimate will contract in 2015. The latter limits the scope for Finance Minister Joaquim Levy and central bank directors to tighten fiscal and monetary policy to slow above-target inflation, which is damping consumer confidence.

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