Brazil’s real closes at weakest level in 12 years

Jeffrey T. Lewis – The Wall Street Journal, 7/24/2015

The Brazilian real closed at its weakest level in 12 years against the dollar on Friday, extending a slide that began on Wednesday, as concern about the government’s inability to get its budget and debt problems under control continues.

The real lost more than 1.7% Friday and exited active trading at 3.3488 to the dollar, according to Tullett Prebon via FactSet, after closing at 3.2904 on Thursday. The Brazilian currency hit 3.3570 during Friday’s session, and has weakened from 3.1699 at the close on Tuesday.

Brazilian Finance Minister Joaquim Levy announced Wednesday that the government is cutting key fiscal targets for this year, next year and 2017. The government’s target for its primary budget surplus, a measure of its ability to save, was slashed to 0.15% of gross domestic product for 2015, from 1.1%, and the targets for the next two years were also reduced.

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Questions over budget surplus dim Brazil’s prospects

Joe Leahy – The Financial Times, 7/26/2015

Brazil’s economy may be in freefall but until recently its hard-pressed citizens could at least count on the unwavering commitment of their famously hawkish finance minister to limit the damage.

Rushed to hospital last month with what local media speculated was a pulmonary embolism, a dangerous condition involving bloodclotting in the lungs, Joaquim Levy nevertheless embarked a few hours later on a flight to New York to tout Brazil to potential investors.

So when Mr Levy announced last week he was backpedalling on one of his key promises — to quickly restore Brazil’s sinking public finances to good health — markets reacted with surprise.

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Brazil struggles with inflation, and expectations

Paulo Travisani – The Wall Street Journal, 7/26/2015

Brazil’s version of the Federal Reserve will almost certainly raise its benchmark Selic interest rate next week for the 16th time in just over two years in a bid to fight escalating inflation.

Trouble is, prices aren’t cooperating. Brazil’s annual inflation rate recently hit 9.25%. That is more than double the official 4.5% target and up substantially from 6.5% in April 2013, when the bank started raising rates.

That double-whammy of high rates and inflation are weighing on Latin America’s largest economy, which is contracting this year.

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Brazil starts exporting soy from new Northeast terminal

Gustavo Bonato – Reuters, 7/25/2015

Two soybean cargoes have recently departed from a new terminal in northeast Brazil operated by VLI and local trader Multigrain, the latest option in the region as exporters look for alternatives to Brazil’s overcrowded southern ports.

A third ship carrying 27,800 tonnes of soy contracted by Multigrain is anchored in the Barra dos Coqueiros terminal in Sergipe state, according to shipping agencies and Thomson Reuters data.

The first known soy terminal in Sergipe will export just 150,000 tonnes of soy per year, but it is part of a broader trend to increase capacity and cut costs for exporters in Brazil by developing new shipping routes closer to the Panama Canal.

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Cut to Brazil budget target hits markets

Joe Leahy – Financial Times, 7/22/2015

Brazil has slashed its estimates for balancing its budget this year, sending markets lower amid fears the move could place its prized investment grade rating at risk.

The country’s economic team announced on Wednesday night that it was reducing its 2015 target for the primary fiscal surplus, the budget balance before interest payments, from 1.2 per cent of gross domestic product to just 0.15 per cent.

“Tax revenue is lower than what was expected,” said Nelson Barbosa, planning minister, blaming the country’s deepening recession.

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Credit-downgrade threat sinks Brazil stocks as Petrobras slumps

Rita Nazareth and Denyse Godoy – Bloomberg Business, 7/20/2015

The Ibovespa fell to an almost four-month low after Finance Minister Joaquim Levy said that a credit-rating downgrade by Moody’s Investors Service is more likely if Brazil doesn’t make economic adjustments.

Traders also pushed down the value of shares after newspaper Folha de S.Paulo reported Saturday that lower house President Eduardo Cunha would rebel against the administration by blocking a package of measures designed to shrink the budget deficit. His announcement heightened a political crisis that had already driven President Dilma Rousseff’s popularity to a record low and revived talks of impeachment.

“A credit downgrade is a big possibility as the government faces many hurdles in approving adjustment measures,” Hersz Ferman, an economist at brokerage Elite Corretora, said in a telephone interview from Rio de Janeiro. “Investors are already avoiding Brazilian assets because of that risk.”

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Brazil analysts boost 2016 benchmark rate call for second week

David Biller – Bloomberg Business, 7/13/2015

Brazil analysts raised their 2016 forecast for the benchmark Selic rate as the central bank vows to slow inflation to target by the end of next year.

Analysts increased their forecast for the Selic rate at end-2016 to 12.25 percent from 12.06 percent the prior week, according to the July 10 central bank survey of about 100 analysts published Monday. That’s the second straight increase of analysts’ median forecast. They also reduced their 2016 inflation prediction for the second time, to 5.44 percent from 5.45 percent.

Brazil’s inflation is running at almost double the target as the government raises regulated prices and a weaker currency fuels the price of imports. The central bank, which raised the key rate in the past six meetings, will continue to lift borrowing costs even as the economy heads to its deepest recession in 25 years.

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