Brazil’s inflation to pierce target ceiling in mid-September

Silvio Cascione and W Simon – Reuters, 09/16/2014

Brazil’s annual inflation rate probably pierced the government’s target ceiling in mid-September as airfares rose and food prices slowed their decline, according to analysts surveyed in a Reuters poll published on Tuesday.

Consumer prices BRIPCY=ECI are seen up 6.57 percent in the 12 months to mid-September, slightly above the 6.5 percent ceiling of the official target range, according to the median of 23 forecasts in the survey.

In the month to mid-September, consumer prices BRIPCA=ECI probably rose 0.35 percent, up from a 0.14 percent gain in the month to mid-August, according to the median of 28 forecasts. The inflation data is due to release on Friday at 9 a.m. (8 a.m. EDT.)

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Brazil: a role model for development?

Armando Barrientos & Ed Amann – The Guardian, 4/17/2014

Brazil isn’t getting the best press at the moment, with ongoing problems with the construction of the World Cup stadiums and protests about public services. Recently economic growth in the country has slowed, with some commentators arguing the recent government response sounds “the death knell for Brazil’s economic strategy“.

It’s remarkable how far and fast Brazil has fallen from grace. Only a couple of years ago, the IMF and others were lauding the country for its resilience to the global financial crisis and its sound economic management.

We need to get this into perspective, because behind the hyperbole, there’s much for other developing countries to learn from Brazil’s recent experiences. Countries such as Zambia, which has seen positive growth rates that haven’t translated into poverty reduction, or Nigeria, which has seen inequality dramatically widen over the past 20 years.

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In Brazil, usual Olympics worry with unusual validity

Christopher Clarey – The New York Times, 4/11/2014

The smash-hit London Olympics were nearing a close in August 2012, and I found myself in an elevator at the main news media center with a small delegation of observers from the next Summer Games, in Rio de Janeiro.

They looked and sounded worried. One of them said, “I really hope that everyone does not expect Rio to be better than this.”

In truth, almost everyone does not. Neither Brazil nor any of its neighbors have staged an Olympics, and it was clear that Rio, despite its high profile and abundant charms, was going to face organizational challenges of a higher magnitude. The trade-off, however, seemed worth it to bring the Games to new territory.

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Investors snap up $1.5 billion in bonds from Brazil’s BNDES

Rogerio Jelmayer – Wall Street Journal, 4/8/2014

Investors continued their Brazilian buying spree this week, snapping up $1.5 billion in bonds sold by the government-run National Bank for Economic and Social Development, or BNDES, and more deals are expected.

The total demand reached $5.5 billion, said a banker involved in the transaction, who declined to be named for this article.

Investors bought $1 billion in five-year bonds at a yield of 4.054%, and a further $500 million in new bonds from an existing issue due 2023 at a yield of 5.32%, the person said. BB Securities, Citigroup, HSBC and Mitsubishi UFJ Securities coordinated the operation.

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Brazil’s Real falls to one-week low after trade deficit report

Filipe Pacheco – Bloomberg, 3/7/2014

The real declined to a one-week low a day after Brazil posted a trade deficit and foreign-exchange outflows, reducing the currency’s allure.

The currency depreciated 0.2 percent to 2.3302 per U.S. dollar at 9:48 a.m. in Sao Paulo, the biggest decline among major currencies tracked by Bloomberg after the South African rand. The real pared its weekly advance to 0.7 percent. Swap rates on contracts due in January 2017 rose four basis points, or 0.04 percentage point, to 12.41 percent, extending their increase since Feb. 28 to 15 basis points.

“The market didn’t like the trade deficit and the outflow numbers from yesterday,” Jose Carlos Amado, a foreign-exchange trader at Renascenca DTVM in Sao Paulo, said in a phone interview. “That should weaken the currency. It should get back to a lower level, around 2.34 per dollar.”

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Brazil swap rates rise after Central Bank minutes as Real gains

Filipe Pacheco – Bloomberg, 3/6/2014

Brazil’s swap rates climbed after the central bank said that it would be appropriate to keep adjustinginterest rates given persistent inflation.

Contracts due in January 2017 rose five basis points, or 0.05 percentage point, to 12.33 percent at 11:34 a.m. in Sao Paulo. The real advanced 0.5 percent to 2.3080 per dollar today, the strongest level on a closing basis since Dec. 10.

The central bank, which slowed the pace of interest-rate increases to 25 basis points last month after six straight half-point adjustments, said in minutes of the meeting published today that it considers “the continuation of the adjustment of monetary conditions under way” to be appropriate. Policy makers have raised borrowing costs 350 basis points since April to 10.75 percent. Consumer prices jumped 5.65 percent in the year through mid-February, above the bank’s 4.5 percent target.

“The minutes show there will be a change of 0.25 percentage point in the next meeting,” Solange Srour, the chief economist at ARX Investimentos in Rio de Janeiro, said in a phone interview. “It showed that there still are concerns regarding inflation.”

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Brazil swap rates fall before Central Bank decision: Real slips

Blake Schmidt & Josue Leonel – Bloomberg, 2/25/2014

Brazil’s swap rates dropped for a fourth straight day on speculation that policy makers convening for a two-day meeting will limit increases in borrowing costs to a quarter-percentage point.

Swap rates on contracts due in January 2019 sank 12 basis points, or 0.12 percentage point, to 12.44 percent at 4:32 p.m. in Sao Paulo, the lowest since Nov. 22. The real depreciated less than 0.1 percent to 2.3431 per U.S. dollar.

Policy makers will raise the target lending rate by 25 basis points tomorrow to 10.75 percent, according to the median estimate of 59 economists surveyed by Bloomberg, after six straight increases of a half-percentage point. Brazil’s construction costs index rose 8 percent in February from a year earlier, the slowest pace since September, the Getulio Vargas Foundation reported.

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What’s holding back Brazil?

Otaviano Canuto – Project Syndicate, 2/21/2014

One often hears that Brazil’s economy is stuck in the “middle-income trap.” Since the debt crisis of the 1980’s, Brazil has failed to revive the structural transformation and per capita income growth that had characterized the previous three decades. But, with the right mix of policies, it could finally change its fortunes.

The prevailing explanation for Brazil’s failure to achieve high-income status lumps the country together with other middle-income economies, all of which transferred unskilled workers from labor-intensive occupations to more modern manufacturing or service industries. While these new jobs did not require significant upgrading of skills, they employed higher levels of embedded technology, imported from wealthier countries and adapted to local conditions. Together with urbanization, this boosted total factor productivity (TFP), leading to GDP growth far beyond what could be explained by the expansion of labor, capital, and other physical factors of production, thereby lifting the economy to the middle-income bracket.

Progressing to the next stage of economic development is more difficult, reflected in the fact that only 13 of 101 middle-income economies in 1960 reached high-income status by 2008. According to the dominant view, success hinges on an economy’s ability to continue raising TFP by moving up the manufacturing, service, or agriculture value chain toward higher-value-added activities that require more sophisticated technologies, higher-quality human capital, and intangible assets like design and organizational capabilities.

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