Petrobras boomtown turns desolate as refinery’s billions vanish

Sabrina Valle and Carlos Caminada – Yahoo Business, 05/04/2016

Located just 30 miles east of Rio de Janeiro’s bustling Copacabana beach, Itaborai looks like many oil boomtowns after the bust — except the deserted stores and empty glass towers that loom over this town of 220,000 speak of some bigger cataclysm than the collapse of crude prices.

“They said this would be the new oil city,” says Jefferson Costa, one of scores of migrants from Brazil’s impoverished north lured here by a multibillion-dollar petrochemical project that was supposed to create more than 100,000 jobs. Work on the complex, known as Comperj, has stopped, and unless new investors materialize, the single refinery now standing may never produce a single drop of fuel. “It’s empty inside,” says Costa, a plumber who lost his job six months ago when construction came to a halt. “People say it will become a large warehouse.”

Comperj has become a symbol of pervasive corruption at Brazil’s state-run oil producer, Petrobras. A sprawling investigation by federal police and prosecutors dubbed Operation Carwash has revealed massive graft, implicating construction conglomerates, banks, oil service providers, shipbuilders and politicians. About 2 percentage points of the 3.8 percent contraction in Brazil’s gross domestic product last year can be attributed to the effects of the scandal on the company and its suppliers, according to estimates from Tendencias, a consulting firm based in Sao Paulo.

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Brazil’s real: how low can it go?

Joe Leahy, John Paul Rathbone – Financial Times, 02/08/2016

When Dilma Rousseff attended the 2016 opening session of Brazil’s congress this week, she appealed to lawmakers to approve tax increases to tackle a widening gap in the country’s public finances.

Most critically, the president called for the reintroduction of a tax on financial transactions, known as the CPMF, that was abandoned in 2007 after objections from business. Opposition congressmen booed her.

But with Brazil reporting a budget deficit last year that was the biggest among emerging economies except for Saudi Arabia at over 10 per cent, unpopular measures are needed to save the country from a deepening fiscal hole, analysts say

Brazil’s Rousseff to cut key fiscal goal against Levy’s warning

Lissandra Paraguassu & Alonso Soto – Reuters, 12/15/2015

Dec 15 Brazil’s President Dilma Rousseff will cut a key fiscal savings goal for next year to safeguard an iconic welfare program, a senior lawmaker with knowledge of the matter said on Tuesday, a move that could raise tensions in her economic team.

Congressman Ricardo Teobaldo said the government asked him to alter the budget guidelines bill to reduce the 2016 primary surplus goal to 0.5 percent of the gross domestic product (GDP) from 0.7 percent.

The target measures the balance of government revenues versus spending excluding debt servicing payments, and is considered a key measure of debt sustainability and fiscal health.

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Brazil: Basket case or buying opportunity?

Laura Dew – Investment Week, 9/21/2015

Investors were given yet another reason to steer clear of Brazil after political turmoil and high debt levels saw ratings agency Standard & Poor’s downgrade the country’s status from investment grade to ‘junk’ this month.

S&P said the general government deficit is expected to rise to an average of 8% of GDP in 2015 and 2016, before declining to 5.9% in 2017 – versus 6.1% in 2014.

It cut Brazil’s credit rating from BBB-minus to BB-plus, while the outlook remains negative, meaning further downgrades could soon follow.

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Desperate times, desperate moves

The Economist, 9/5/2015

When a president has single-figure approval ratings, faces calls for her impeachment, and has lost control of her political base, is she in a position to play hardball with the country’s legislators? Brazilians will soon find out.

On August 31st Dilma Rousseff, their president, sent Congress a budget for 2016 with a gaping primary deficit (before interest payments) of 30.5 billion reais ($8 billion), or 0.5% of GDP, challenging its members to close the gap. It was a break with the sound-money practices that have underpinned Brazil’s economy. It was, some critics say, illegal. Certainly nothing similar has happened since at least 2000, when Fernando Henrique Cardoso, then the president, transformed public finances.

On a charitable view, Ms Rousseff was shocking legislators into making hard decisions rather than simply blocking her fiscal proposals. A harsher reading is that she does not know how to lead Brazil out of recession. The markets took that view. The day after the budget bombshell, the Ibovespa stock index fell over 2% and the currency closed at 3.7 per dollar, its lowest since December 2002.  On September 2nd, the central bank held steady a key interest rate it had been raising since last year.

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Brazil’s economy falters, but worse may be to come

Nicolas Bourcier – The Guardian, 6/9/2015

The signs that Brazil’s economy is in trouble have been visible for a while now, but the worst could be still to come. The figures published last month for gross domestic product in the first quarter of 2015 confirmed the absence of growth that has plagued Latin America’s powerhouse for the past five years.

With GDP down by 0.2% since the new year – a fall of 1.6% compared with the same period of 2014 – Brazil has registered its worst result in six years. Even if it has actually fared better than the 0.5% drop forecast by the markets, the outlook for the world’s seventh-largest economy nevertheless looks gloomy. The figures are bad enough to reduce the already limited room for manoeuvre available to the newly appointed and ever so orthodox finance minister, Joaquim Levy. Last month he announced far-reaching austerity measures, with cuts amounting to 69.7bn reals ($22.4bn), prompting an outcry from members of his own party, who want a more flexible line.

The government led by President Dilma Rousseff is expecting a 1.2% fall in GDP, higher than the 1% forecast by the International Monetary Fund. If the first forecast is right, it would be Brazil’s worst performance in the past 25 years. “Everyone was hoping that the economy would bottom out in the first quarter,” says economist Paulo Gala, “but confidence is still deteriorating, [and] the volume of road transport is plummeting, as are car sales. The recession seems to be deepening.”

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Amid Brazil’s economic crisis, consumers struggle with debt

Jenny Barchfield – ABC News, 6/15/2015

Francisco Xavier emerges from a payday loan shop, his brow more furrowed with worry than when he entered. His loan request was denied, and he has no idea how he is going to pay out-of-control bills, including credit card payments that gobble up nearly half his monthly income.

Xavier, a taxi driver, is among the rapidly burgeoning ranks of “super debtors” — people who rose into the middle class during Brazil’s nearly decade-long boom, but now find themselves drowning in debt as Latin America’s largest economy stalls, causing inflation to heat up and unemployment to rise.

Brazil’s top credit information bureaus estimate that as of April, more than 55 million Brazilians were behind on paying off credit cards or loans. That’s 37 percent of the adult population in a country of about 200 million people, and the numbers are rising. According to the SPC credit information bureau, the lists have grown by an estimated 700,000 people since January, when the top credit bureaus began working together on combined lists for the first time.

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Brazil’s real leads gains as Embraer wins $2.6 billion in orders

Paula Sambo – Bloomberg, 6/15/2015

Brazil’s real climbed the most among major currencies as Embraer SA won jet orders worth $2.6 billion, adding to speculation that the South American country’s inflows will increase.
Executives of the company announced Monday at the Paris Air Show deals with United Continental Holdings Inc. and other foreign buyers, cementing its standing as the biggest maker of regional jets. The planemaker reached an agreement with a Chinese airline and expects growing demand in the Asia-Pacific region over the next two decades.
“Big deal announcements mean long-term, stable capital inflows and positively impact the current account and the currency,” Ipek Ozkardeskaya, an analyst at London Capital Group, said by e-mail.

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Brazil’s Economy Expanded Slightly in 2014

Jeffrey T. Lewis and Rogerio Jelmayer – The Wall Street Journal, 3/27/2015

Brazil’s economy posted in 2014 its worst performance by far under President Dilma Rousseff’s administration, a blow to her prestige as her government works to regain credibility with markets and pass an austerity program through Congress.

The country’s gross domestic product grew just 0.1% in 2014 from 2013, and expanded 0.3% in the fourth quarter from the third, Brazil’s statistics agency said Friday. GDP shrank 0.2% in the fourth quarter of 2014 from the same period a year earlier.

The agency changed the way it calculates GDP starting in the fourth quarter, including activities such as investment in research and development for the first time, to bring the methodology more in line with international standards.

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Brazil registers record deficit in current accounts

Lise Alves – The Rio Times, 1/26/2015

Brazil’s current accounts in 2014 registered a record deficit of US$90.948 billion, according to data released by Brazil’s Central Bank (CB) on Friday, January 23rd. The result was well above 2013’s deficit of US$81.108 billion and the highest registered since the CB started the series in 1947.

Last year’s annual deficit is equivalent to 4.17 percent of the country’s GDP, the worst result since 2001.

The Central Bank released both December 2014 results as well as results for the entire year. For December, the country’s current account, which is measured by the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers, registered a deficit of US$10.317 billion.

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