Brazil economy plunges in second quarter

Paul Kiernan – The Wall Street Journal, 8/28/2015

Brazil has entered its deepest economic downturn since the global financial meltdown of 2008-09, official data confirmed Friday.

But unlike the previous crisis, economists say the current problems were caused by errant economic policy at home and that the road to recovery will be a long one.

Brazil’s gross domestic product shrank 1.9% between April and June from the previous three months in seasonally adjusted terms, the Brazilian Institute of Geography and Statistics said on Friday. It was the second consecutive quarter of decline after the economy shrank a revised 0.7% in January-March, meeting the criteria for what most economists consider a recession.

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Brazil’s economy is being blasted back in time

Linette Lopez – Business Insider, 8/5/2015

Economic indicators are flashing danger in Brazil. Activity in the country’s service sector is at its lowest level since the depths of the financial crisis, according to data from Markit Economics.

Meanwhile, economic activity is falling at almost 5% a year, according to research firm Reorient.

Couple that with a scandal-ridden president with a 7% approval rating and a major commodities slump, and what you’ve got are the ingredients for economic disaster.

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Brazil Farmers Group Occupies Finance Ministry

Paulo Trevisani, Wall Street Journal, 8/4/2015

Protesters from a far-left organization that calls for the distribution of farmland to the poor occupied Brazil’s Finance Ministry, forcing the suspension of official business in the building.

Brazil’s Finance Minister Joaquim Levy. Photographer: Michael Nagle/Bloomberg

Brazil’s Finance Minister Joaquim Levy. Photographer: Michael Nagle/Bloomberg

The Landless Farmers Movement, also known as MST, was protesting cuts in funding for land distribution to 1.8 billion Brazilian reais ($520 million) from 3.5 billion reais, a spokeswoman for the group said at the site.

A spokesman for the Agrarian Development Ministry, the body in charge of Brazil’s land-distribution program, said that figure referred to the full size of cuts across the ministry, although a good part of it was related to land distribution.

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This country’s battered stocks could make a great buy

Stephanie Yang – CNBC, 7/30/2015

Brazil’s economy is facing a bleak outlook, plagued with increasing inflation, a plunging currency and contracting GDP. The Dow Jones Brazil Index has fallen almost 45 percent in the past year. But one trader says that all those negative factors are actually creating the perfect environment for a significant bounce.

“I think we’re going to get another 10, possibly 20 percent bear market rally, of which since 2012 we’ve had four,” Larry McDonald, head of U.S. strategy at Societe Generale, said Wednesday on CNBC’s “Trading Nation.”

According to McDonald, economic challenges will force Brazil’s central bank to ease its monetary policy, which will prompt a relief rally for Brazilian stocks.

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Brazil: engine trouble

Joe Leahy – Financial Times, 8/2/2015 

The boardroom of heavy vehicle maker MAN in São Paulo is decorated with a Boys’ Own collection of model trucks, soccer balls and the jerseys of local football teams.

But the toys do little to lift the mood here. Once a champion of the Brazilian corporate world with double-digit growth rates, the truck industry, like the national football team which was thrashed by Germany in last year’s World Cup, has fallen on hard times.

In the first six months of this year, truck and bus production fell 45 per cent compared with a year earlier. It is a disaster that is expected to be repeated across Latin America’s biggest economy this year.

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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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