Brazil Real advances after Rousseff backs spending cut measures

Filipe Pacheco – Bloomberg Business, 06/08/2015

Brazil’s real appreciated the most among Latin American currencies after President Dilma Rousseff said measures to shore up the budget need to be strong enough to boost growth.

Criticism of Finance Minister Joaquim Levy for pursuing tax increases and spending cuts is unfair, Rousseff said in an interview published by O Estado de S.Paulo newspaper Monday. Levy has vowed to improve Brazil’s fiscal accounts after the worst budget deficit on record. He has increased taxes and frozen 69.9 billion reais ($22.2 billion) of this year’s budget.

“It is important for the market to see Rousseff defending him,” Jefferson Rugik, a currency trader at Correparti Corretora de Cambio in Curitiba, Brazil, said in telephone interview. “She’s being vocal in her attempts to seek confidence in her administration.”

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A year later, Brazil’s FIFA World Cup infrastructure still not built

Kenneth Rapoza – Forbes, 06/07/2015

The FIFA World Cup. It promises developing nations status, stadiums with wi-fi and cup holders, roads, bridges and new airport terminals. And let’s not forget, sponsorship parties! But I digress…

Last year’s FIFA World Cup left Brazilians crying in disbelief as their national team took looked like the Muppets on the field with the Germans. The consolation prize at least was all this new development that was promised when FIFA awarded the country with the soccer championship back in October 2007. Shiny trains. More efficient airports. Less traffic in Sao Paulo. FIFA might be worth it after all.

But an investigative report Sunday by Folha de Sao Paulonewspaper shows that R$11 billion ($3.5 billion) worth of 35 projects budgeted  in 2010 are not complete and a handful of simply been abandoned. A year after the World Cup, Brazil’s FIFA projects for public transportation and airport terminal extensions at places like Guarulhos International (GRU) in Sao Paulo and Afonso Pena International (CWB) in Curitiba are incomplete.

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Brazil treads fine line between inflation and contraction

Joe Leahy – Financial Times, 06/08/2015

South America’s largest economy faces a difficult balancing act to avoid a potentially disastrous spiral of economic contraction as it seeks to control inflation.

Brazil’s planning minister Nelson Barbosa warned that he expected only a very gradual recovery from this year’s recession, in contrast with previous downturns during the past decade when the country immediately bounced back with rapid growth.

However, Mr Barbosa added that growth should still be enough for Brazil to avoid slipping into a situation in which interest rate increases to control inflation combined with an austerity programme to reduce the budget deficit only deepened the recession.

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Brazil analysts boost interest-rate forecast to nine-year high

David Biller – Bloomberg Business, 06/01/2015

Economists raised their forecast for Brazil’s key interest rate to the highest since 2006 as they expect policy makers to continue boosting borrowing costs after this week’s meeting.

Analysts changed their forecast for the year-end benchmark rate to 14 percent from 13.75 percent, according to the May 29 central bank survey of about 100 analysts published Monday. They also increased their outlook for 2015 consumer-price increases to 8.39 percent from 8.37 percent the prior week.

Above-target inflation is forcing Brazil’s central bank to raise interest rates even as the economy heads toward recession. Analysts in Monday’s survey forecast gross domestic product will shrink 1.27 percent this year, which would be the worst performance since 1990.

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If you think Brazil’s first quarter was bad, wait for the second

David Biller – Bloomberg Business, 05/27/2015

Brazil’s economy probably shrank in the first three months of 2015, and the second quarter may be worse as the nation enters its first recession in six years.

Gross domestic product contracted 0.6 percent in the first quarter, according to the median estimate of 36 economists surveyed by Bloomberg. When surveyed last month, analysts forecast that would be the year’s weakest quarter. Now they foresee the second quarter being even worse, according to a May 22-27 survey.

As steward of Brazil’s economic policy, Finance Minister Joaquim Levy has cut spending while raising taxes and the prices of regulated items to avert a sovereign downgrade. At the same time, the central bank is boosting borrowing costs to slow inflation. This two-pronged tightening has already taken a toll on industry and investment, and the slump will spill over into consumption and services in the second quarter, according to Roberto Padovani, chief economist at Banco Votorantim.

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Soiled by oil scandal, Brazil’s model is primed for makeover

Juan Pablo Spinetto, Anna Edgerton, Sabrina Valle – Bloomberg Business, 05/27/2015

Oil was to be the elixir of Brazil’s dreams to build a formidable economy, promote industrial development and fund a more generous welfare state even as it attracted billions in private global investment.

Instead, crisis and disappointment in the oil sector are beckoning Brazil’s leadership to move — if grudgingly — toward more deregulated industries and to temper the government’s hand in using state-run companies to forge broader economic policy.

Which helps explain why, as her second term takes shape, some of President Dilma Rousseff’s ministers have jettisoned the statist language of her first four years in office and those of her popular predecessor, Luiz Inacio Lula da Silva. Instead, they are floating some liberal notions more in keeping with the pre-Lula years.

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Brazil president says to maintain oil rules, national content

Reuters, 05/14/2015

May 14 Brazilian President Dilma Rousseff said on Thursday that her government will maintain rules that mandate production-sharing contracts for the country’s most promising areas and high national content requirements for the oil industry.

“The local content policy is not something that can be set aside, it is central to my policy of reviving our country’s investment capacity,” Rousseff said at the christening of an oil tanker at the Atlântico Sul Shipyard near Recife, Brazil.

“We are going through a period of macroeconomic difficulty, but today things are different because we have these shipyards.”

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