No rate cuts seen in Brazil despite recession, analysts say

David Biller – Bloomberg, 12/7/2015

Brazil won’t have room to cut interest rates next year as inflation remains above the upper limit of the target in spite of a deepening back-to-back recession, according to a central bank survey.

Policy makers will keep the benchmark interest rate on hold at 14.25 percent next year, compared to a forecast of 14.13 percent a week earlier, the median estimate of about 100 economists in a Dec. 4 central bank survey shows. The survey followed indications by policy makers last week that the central bank is ready to boost borrowing costs next year.

“This is the reflection of the minutes that were released last week, which were much more hawkish than the previous minutes,” Edward Glossop, emerging market economist at Capital Economics in London, said by phone. “Policy makers are saying they’ll do what they need to do to get inflation as close to target next year as possible.”

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Petrobras to help pull Brazil into recession

Kenneth Rapoza – Forbes Magazine, 2/9/2015

A few months ago, I asked here whether Petrobras could possibly disappoint investors more? That answer is now a resounding yes, it can!

Last week, two of Brazil’s largest banks revised their 2015 forecast for the country’s GDP. Thanks to Petrobras, it’s now negative. Only Russia and Argentina’s economy is expected to do worse than Brazil’s within the emerging market universe. As they say in Portuguese, “parabens”.

Or…congratulations, Petrobras, for a job terribly done.

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Brazil Raises Taxes by $7.5 Billion in Quest for Confidence

Mario Sergio Lima and Rachel Gamarski – Bloomberg, 1/20/2014

Brazil’s government will raise taxes on fuel, imports, credit and cosmetics as part of efforts to restore confidence in its fiscal discipline, Finance Minister Joaquim Levy said.

The measures will increase revenue by more than 20 billion reais ($7.5 billion), he told reporters Monday in Brasilia after markets closed. As part of the new policy, Brazil will resume collection of the so-called Cide tax on fuel and raise taxes on loans to individuals and imports. President Dilma Rousseff also vetoed Tuesday a tax break on income tax approved by Congress that would cost the government about 7 billion reais.

“This is a series of actions being taken to re-balance the economy, particularly from a fiscal perspective with the aim of improving confidence,” Levy said. Brazil is “making changes step by step so it can reach, with as little sacrifice as possible, what’s needed to resume the path to growth.”

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Brazil July inflation slows more than economists forecast

David Biller – Bloomberg, 8/8/2014

Brazil’s consumer price increases slowed more than expected in July, as transport and food costs fell in the world’s second-biggest emerging market.

Inflation (BZPIIPCM) as measured by the benchmark IPCA index decelerated to 0.01 percent, the slowest in four years, from 0.40 percent in June, the national statistics agency said today in Rio de Janeiro. That was below all estimates from 46 economists surveyed by Bloomberg, whose median forecast was 0.10 percent.Annual (BZPIIPCY) inflation slowed to 6.50 percent, versus a median estimate of 6.60 percent.

While consumer price increases slowed more than expected, inflation at the top of the target range is hurting consumers’ purchasing power less than two months before presidential elections. President Dilma Rousseff has worked to contain inflation by capping government-regulated prices, while the central bank undertook the longest rate-raising cycle in the world of its benchmark Selic rate.

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Brazil economic activity has first drop in March since December

Matthew Malinowski – Bloomberg, 5/16/2014

Brazil’s economic activity contracted in March for the first time this year as above target inflation curbs demand.

The seasonally-adjusted economic activity index, a proxy for gross domestic product, fell 0.11 percent from the prior month, after growing a revised 0.02 percent in February, the central bank said today in a report posted on its website. The median estimate of 27 economists surveyed by Bloomberg was for a 0.1 percent contraction.

President Dilma Rousseff’s administration has struggled to boost economic growth in the world’s second-largest emerging market. Quickening inflation has curbed purchasing power and prompted the central bank to lift the key rate in nine straight meetings.

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Brazil’s Mantega sees economy growing 2.3 percent in 2014

Reuters, 4/28/2014

Brazil’s economy will post steady growth in 2014,Finance Minister Guido Mantega said on Monday, as the country takes advantage of an improving global economic outlook.

Brazil’s economy should grow 2.3 percent this year, Mantega said at an event in Sao Paulo, the same growth rate it posted in 2013.

The number is more optimistic than the median 1.65 growth estimate in a central bank poll of economists released Monday. In February Brazil’s government said it was working with a growth estimate of 2.5 percent for the year.

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Brazil economists see faster inflation and slower growth in 2014

Matthew Malinowski – Bloomberg, 4/7/2014

Brazil economists raised their 2014 inflation forecast for the fifth straight week and cut their growth estimates as a food price shock curbs purchasing power in the world’s second-largest emerging market.

Brazil’s inflation this year will accelerate to 6.35 percent, compared with the previous week’s forecast of 6.30 percent, according to the April 4 central bank survey of about 100 analysts published today. Analysts also cut their 2014 growth estimates to 1.63 percent from 1.69 percent a week ago.

President Dilma Rousseff’s administration is struggling to spur growth amid above-target inflation. Brazil’s central bank last week lifted the key rate for the ninth straight time after a drought drove up food prices. Policy makers in an accompanying statement signaled they will observe economic progress before deciding on the future path of monetary policy.

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Brazil’s economy faces trouble after World Cup, election

Brian Winter & Silvio Cascione – Reuters, 3/12/2014

With the World Cup in June and July and a presidential election in October, many Brazilians aren’t thinking beyond 2014. But next year is likely to be memorable for all the wrong reasons in Latin America’s biggest economy.

President Dilma Rousseff, or whoever wins the election, will have to make deep budget cuts, raise taxes and take other painful steps to address Brazil’s growing financial imbalances.

The fallout will likely be more damaging than many investors anticipate, resulting in a fourth straight year of disappointing growth – a big fall back to earth for a country that last decade was one of the world’s most dynamic emerging markets.

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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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