Christopher Sabatini – Foreign Policy, 02/10/2016
In late 2014, Brazil seemed on the verge of a meltdown. Its economy had grown a mere 0.1 percent that year, as its currency (the real) dropped like a stone and business confidence plummeted. In response, in November of that year Brazilian President Dilma Rousseff turned to a Chicago-trained technocrat — a common antidote among Latin American leaders. Domestic and international investors welcomed the appointment of Joaquim Levy, a former banker and fiscal hawk, to lead the finance ministry, but they acknowledged he would have his work cut out for him. If Levy hoped to enact the drastic fiscal cuts and structural reforms needed to fix the careening economy, he would have to first overcome the resistance of not only a fractious congress, but also many members of Rousseff’s leftist Partido dos Trabalhadores (PT) and her cabinet.
Success would ultimately elude Levy. In December 2015, he quit, handing the ministry over to Nelson Barbosa, another well-respected economist. But Barbosa lacks Levy’s credibility among investors. And the task before him has only become more unenviable. He will have to push through his predecessor’s stalled reforms, while turning around an economy that suffered a GDP contraction of 3.7 percent in 2015, staving off potential debt crisis, stabilizing the real, and avoiding what analysts predict could become Brazil’s worst crisis since 1901.
The first step to fixing Brazil’s crisis will have to involve recognizing that the rot goes much deeper than it might seem. Brazil’s troubles began with the downturn in the global commodity markets, which once bolstered the country. But the roots of the malaise trace much farther, to a historically autarkic economic model, a political system hobbled and corrupted by party factionalism and localism, and a constitutional carnaval of guarantees for social rights and payouts.
Paula Sambo – Bloomberg Business, 12/16/2015
President Dilma Rousseff’s supporters on the congressional budget committee will introduce an amendment to the 2016 budget bill that would allow the administration to aim for a surplus before interest payments of 0.5 percent of gross domestic product, said Paulo Pimenta, the government’s leader on the committee. Rousseff previously wanted to target a so-called primary surplus of 0.7 percent.
The move, which was said to be opposed by Finance Minister Joaquim Levy, is seen by analysts as a potential trigger to further credit-rating downgrades and possibly even the exit of Levy from Rousseff’s administration. The currency lost 2 percent to 3.9521 per dollar at 9:38 a.m. in Sao Paulo, the largest decline among 31 major currencies tracked by Bloomberg.
Isis Almeida and Whitney McFerron – Bloomberg, 10/14/2015
Your morning espresso may soon be a little more Brazilian.
U.S. processors of robusta beans used in instant coffee and espresso are buying from Brazil at an accelerated pace as they cut back on purchases from Vietnam, which grows almost half the world’s supply. In Europe, imports of the beans also have surged. That’s because farmers in the South American country, aided by a plunge in the value of their currency, are undercutting sales by the world’s largest producer even as the price of the commodity drops.
While Brazil has long been the biggest producer of all coffee varieties, it mostly grows the higher-end arabica beans favored by Starbucks Corp. Vietnam dominates the market for the more bitter-tasting robusta variety. When political and economic woes sent the Brazilian real down 36 percent in the past year, the most among 24 emerging market currencies tracked by Bloomberg, that helped reduce production costs for growers and turbo-charged shipments.
Rogerio Jelmayer – The Wall Street Journal, 9/30/2015
Brazil’s state-run oil company Petróleo Brasileiro SA said it will raise fuel prices across the country with immediate effect.
Petrobras, under a new administration, will raise gasoline prices by 6% and diesel prices by 4% at its refineries, the company said in a news release late Tuesday. Any change to prices at the pump is still unclear, as they are set by gas-station owners.
Petrobras needs to import gasoline and diesel fuel to meet domestic demand. The weakening of the Brazilian currency, the real, against the U.S. dollar has made those imports more expensive.
Michael Smith, Sabrina Valle, Blake Schmidt – BloombergBusiness, 05/08/2015
In mid-2013, Brazilian federal police investigator Erika Mialik Marena noticed something strange.
Alberto Youssef, suspected of running an illicit black-market bank for the rich, had paid 250,000 reais (about $125,000 at the time) for a Land Rover. The black Evoque SUV ended up as a gift for Paulo Roberto Costa, formerly a division manager at Brazil’s national oil company, Petrobras. “We were investigating a money-laundering case, and Petrobras wasn’t our target at all,” says Marena. “Paulo was just another client of his. So we started to ask, ‘Why is he getting an expensive car from a money launderer? Who is that guy?’”
Marena had spent the previous decade building cases against money launderers, and Youssef had been a perennial target. He’d been arrested at least nine times for using private jets, armored cars, clandestine pickups by bagmen, and a web of front companies to move illicit cash. But Youssef had been spared serious jail time by testifying repeatedly against other doleiros, Brazilian slang for specialists in laundering unreported cash.
The Brazilian real moved 1 percent up and down in less than two hours of trading on Tuesday as a combination of global headwinds and domestic problems made the currency vulnerable to wild swings.
The real opened more than 1 percent lower and hit 3.1722 per dollar, its weakest in more than 10 years, before erasing losses to rise more than 1 percent to 3.097.
It last traded at 3.1244, 0.2 percent stronger than Monday’s close.
Paula Sambo – Bloomberg Businessweek, 11/04/2014
Brazil’s real led emerging-market declines as an unexpected drop in industrial production in September added to concern that President Dilma Rousseff will struggle to revive Latin America’s largest economy.
The currency weakened 0.9 percent to 2.5189 per dollar at 2:02 p.m. in Sao Paulo in the biggest drop among 24 developing nations. Swap rates, a gauge of expectations for changes in borrowing costs, increased 10 basis points, or 0.10 percentage point, to 12.49 percent on the contract due in January 2017.
The real also fell on wagers that Rousseff will appoint a finance minister who will maintain policies that helped lead to Brazil’s first recession since 2009. One-month implied volatility on options for the real, reflecting projected shifts in the exchange rate, was the highest among 16 major currencies.