Brazil budget not conducive to reality, finance minister says

Kenneth Rapoza – Forbes Magazine, 5/25/2015

Brazil’s federal budget needed some slicing and dicing in the financial editing rooms in the capital city last month because it was “nowhere close”  to reality, Finance Minister Joaquim Levy said on Monday.

The Brazilian economy is going through a serious economic correction. With the commodity super cycle over, Brazil got hammered by keeping rates artificially low for too long in the first term of president Dilma Rousseff.  At the time, the government was fighting a “currency war” against a weak U.S. dollar that led to hot money flowing into Brazil’s currency and debt markets. A stronger currency didn’t match the fundamentals of a weakening economy, cutting Brazil out of some competition in foreign markets, and leading to an increase in imports as local manufacturers could not compete with similar product makers abroad. Inflation rose. The economy slowed even more. Now there’s hell to pay. And Brazil’s FinMin is taking a battle ax to the government’s planned budget, released last month.

Levy said the latest round of budget cutbacks is due to a shortfall in revenues.

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Brazil budget not conducive to reality, finance minister says

Brazil’s Most Trusted Official Says Petrobras Has ‘Turned Page’

Kenneth Rapoza – Forbes, 4/19/2015

Brazil’s most trusted official, Finance Minister Joaquim Levy, says beleaguered oil giant Petrobras has turned the page. And the upcoming release of Petrobras earnings will prove it.

“Petrobras has given us signs of reorienting itself to some degree, in certain segments of its business, in a way that is strategically forward looking. They changed management. They renewed the board of directors,” he said in an interview with Brazilian journalists this weekend.

What he said is nothing new. The market knows about new management, and of Petrobras asset sales. But what investors may read here in the tea leaves is that Levy is confident that Petrobras will produce its much-anticipated earnings report. Supposedly the board of directors will agree on a publishing date on Wednesday, April 22.

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Brazil’s Most Trusted Official Says Petrobras Has ‘Turned Page’

Good News, Brazil-Watchers, Dilma Not Sacking FinMin Levy

Kenneth Rapoza – Forbes, 4/1/2015

Bloomberg gives us Brazil watchers some good news: beleaguered president Dilma Rousseff is not going to sack Joaquim Levy, the country’s newly appointed Finance Minister.

“Levy is very important for Brazil today and he stands very firm,” she said in a Bloomberg interview in Brasilia. There has been a lot of speculation of late that Levy, a former Treasury secretary and asset manager at Bradesco, would be forced to resign.

Levy is the hand picked FinMin of Dilma’s predecessor and Workers’ Party strongman Luiz Inacio Lula da Silva. Levy represents Lula’s pragmatic capitalism, which is not who Dilma is. Dilma is more of a technocrat who believes the government, her government, knows exactly what it is doing.

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Good News, Brazil-Watchers, Dilma Not Sacking FinMin Levy

Brazil’s Surprising BFFs

Mac Margolis – Bloomberg View, 4/3/2015

Brazil’s Finance Minister Joaquim Levy spent seven straight hours on Tuesday trying to convince Brazilian senators that austerity was the country’s only chance to beat insolvency and keep its sovereign credit rating from falling into junk territory. “The cost of losing investment grade would be enormous,” Levy told the Senate economic affairs committee.

So, no more subsidized utility rates, underpriced gasoline, soft loans to favored companies, tax breaks or fiscal “bicycling” — putting off this month’s bills to next month — to pretty up the government books, Levy added, deflecting broadsides with good humor and dire PowerPoint graphics.

One eloquent slide showed how foreign investment surged after the country reached investment grade in 2008 and 2009, suggesting it could also tailspin if Brazil were to tumble from grace.

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Brazil’s Surprising BFFs

Brazil’s shock therapy against inflation

Silvio Cascione – Reuters, 3/3/2015

Brazil’s central bank’s two-day policy meeting kicks off later on Tuesday with all bets placed on a fourth straight interest rate increase, despite growing consensus that the country is headed for its worst economic recession in 25 years.

The benchmark interest rate, currently at an already-high 12.25 percent, is expected by the wide majority of 48 economists polled by Reuters to reach the highest in six years at 12.75 percent. Other increases are in the pipeline, and some say the Selic rate could climb to as much as 13.75 percent this year.

Monetary tightening is just one side of Brazil’s all-out war on price rises. Finance Minister Joaquim Levy, tasked by President Dilma Rousseff to plug a growing budget deficit, has already frozen dozens of billions of dollars in government spending, removing one of the major pressures over consumer prices in recent years.

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Brazil’s shock therapy against inflation

Brazil Mid-Month Inflation Quickens More Than Forecast

David Biller – Bloomberg Business, 2/24/2015

Brazil’s inflation in the month through mid-February quickened more than economists estimated, as the central bank continues to raise rates in the world’s second-biggest emerging market.

Inflation as measured by the benchmark IPCA-15 index accelerated to 1.33 percent from 0.89 percent a month earlier, the national statistics agency said on its website today. That was the fastest rate since February 2003 and above the median 1.30 percent forecast from 41 analysts surveyed by Bloomberg. Annual inflation sped up to 7.36 percent from 6.69 percent.

Policy makers in Brazil are caught between the fastest annual inflation in nearly 10 years and gross domestic product that analysts estimate will contract in 2015. The latter limits the scope for Finance Minister Joaquim Levy and central bank directors to tighten fiscal and monetary policy to slow above-target inflation, which is damping consumer confidence.

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Brazil Mid-Month Inflation Quickens More Than Forecast

Brazil’s foreign policy is in the dark

Robert Muggah – Open Democracy, 2/20/2015

If ever there was a good time for Brazil to assume more global responsibility in foreign affairs now would be it. Dangerous armed conflicts, health pandemics and climate change warrant assertive engagement from the world´s major players, including South America´s powerhouse. Brazil could play a critical role in promoting stability in an uncertain world. Worryingly, the country is nowhere to be seen.

Brazilian foreign policy is in the dark. Part of the problem is that its leaders are distracted. This is maybe not altogether surprising: the country’s economy is in the doldrums. Brazil’ new finance minister, Joaquim Levy, described Brazil´s economic prospects in 2015 as “almost flat”. Brazil is now one of the Fragile Five, alongside Indonesia, Russia, South Africa and Turkey. Unprecedented bribery scandals involving the national oil company, Petrobras, and a host of construction firms, will likely tip the already damaged economy into a recession.

Some Brazilian commentators resist a more activist foreign policy. They are understandably preoccupied with making critical reforms at home to increase productivity and competitiveness rather than promoting Brazilian interests abroad. But this is a false choice: domestic reform should not come at the expense of foreign policy. On the contrary. Brazil urgently needs to bolster its strategic interests in its own neighborhood and beyond.

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Brazil’s foreign policy is in the dark