Brazil’s Mantega says economy speeding up; disputes critics

Reuters, 06/09/2013

Brazil‘s economy is gaining force, industrial output is rising and inflation is falling, showing that concerns about the country’s direction are misplaced, Finance Minister Guido Mantega said in the Estado de S. Paulo newspaper on Sunday.

Mantega also said he’s confident that the economy’s solid foundations, bolstered by efforts to cut taxes and spending, will eventually force the Standard and Poor’s rating agency to reverse its decision Thursday to downgrade the outlook for the country’s foreign debt rating to “negative” from “stable.”

“If it depends on the performance of the Brazilian economy, S&P will have to change their outlook,” he said.

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Not again, please! Brazil and India more vulnerable now to another crisis

Deepti Govind – Reuters, 04/25/2013

After bad economic news from Germany, China and the United States over the past few weeks, here are two more. Brazil and India, two of the world’s largest emerging economies, are increasingly vulnerable to another crisis or to the eventual end of the ultra-loose monetary policies in developed economies after five years of a severe global slowdown.

Weak demand for Brazil’s exports and the voracious appetite of local consumers for imported goods widened the country’s current account deficit to 2.93 percent of GDP in the 12 months through March, the widest gap in nearly eleven years. In dollar terms, that amounts to $67 billion.

To help fund this gap, Brazil could at first loosen the currency controls adopted in the past few years and let more dollars in. But if the dollar flows change too swiftly, Brazil would find itself with three other options: curb spending by growing less, allow a decline in the foreign exchange rate at the risk of fueling inflation, or burn part of its international reserves – which are large, at $377 billion, but not infinite.

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Brazil Central Bank sees high inflation for next 2 years

Alonso Soto & Asher Levine, 03/28/2013

Brazil’s central bank said on Thursday it expects inflation to remain relatively high in the next two years, raising its forecasts closer to the ceiling of the official target range, but it stopped short of signaling an imminent rate increase.

The bank’s quarterly inflation report confirmed market expectations that inflation is quickening despite slower growth in Latin America’s largest economy, a political liability for President Dilma Rousseff who must campaign for re-election next year.

Inflation hovering well above the center of the official annual target range of 4.5 percent, plus or minus two percentage points, has raises pressure on Brazilian policymakers to curb price pressures soon.

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Brazil Rousseff says won’t fight inflation with low-growth policy

Reuters, 03/27/2013

Brazil’s President Dilma Rousseff on Wednesday said she will not support policies that attempt to curb inflation by lowering economic growth.

“I don’t agree to policies to fight inflation that look into reducing economic growth,” Rousseff said in comments to reporters in South Africa, where she is attending a meeting of BRICS countries, broadcast by Brazilian government TV.

“Last year we had low economic growth, but inflation rose because we had a supply shock,” she added, repeating one of the arguments recently used by the central bank to justify keeping Brazil’s base Selic rate at an all-time low of 7.25 percent even as inflation neared the ceiling of a government target.

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Brazil Miracle architect emerges as ally of Rousseff’s rate cuts

Joshua Goodman – Bloomberg, 03/15/2013

Brazil should refrain from raising interest rates if President Dilma Rousseff hopes to win a “tug of war” with banks and spur faster growth, the architect of the country’s economic miracle in the early 1970s said.

Antonio Delfim Netto was finance chief when Brazil’s dictatorship jailed the then-Marxist activist Rousseff in 1970. Now, as a consultant and columnist he’s an often solitary voice praising her government’s cutting of rates to a record and use of capital controls to weaken the real.

Delfim Netto’s views run contrary to that of economists from Itau Unibanco Holdings SA, the nation’s largest bank, and JPMorgan Chase & Co., who say Rousseff’s policies on rates and the currency have been stoking inflation above the 4.5 percent target since 2010. Rousseff is on the right track and should stay the course, defying rate-swap traders who expect the central bank to raise interest rates 150 basis points by year-end, he said.

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Brazil to extend tax breaks to all manufacturers

Reuters, 03/14/2013

President Dilma Rousseff’s government plans to extend payroll tax exemptions to all Brazilian manufacturing industries to boost investment and growth in a stagnant economy, Trade and Industry Minister Fernando Pimentel said on Thursday.

“We are exempting a large part of Brazilian industry and hope to exempt all Brazil’s manufacturing industry by the end of this presidential term,” Pimentel told reporters.

Since last year, Rousseff’s government has given tax breaks to dozens of industries, such as carmakers and other durable goods manufacturers, to lower prices and bolster consumption. It exempted specific industries from payroll taxes, including the building sector, and plans to extend the exemptions to services.

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PEs in Brazil: record dealmaking, but what about an exit strategy?

Pan Kwan Yuk – Financial Times Beyond BRICS, 03/14/2013

2012 was another bumper year for private equity wheeling and dealing in Brazil.

While fund-raising cooled following a record 2010 and 2011, deal activity in Latin America’s biggest economy continued unabated. A total 147 deals, worth $5.7bn, were struck last year, an all time high, according to data from the Latin American Private Equity and Venture Capital Association (LAVCA).

But in the world of private equity, what goes in, must (eventually) come out. Given the stalled market in Brazil for initial public offerings over the last two years, will the returns live up to the hype?

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