Ex-leader says Brazil won’t follow China’s low-wage model

February 14, 2014

Rick Gladstone – The New York Times, 1/12/2014

Despite Brazil’s sharp slowdown in economic growth, the country has no intention of emulating China’s low-wage model of competitiveness as a way to promote prosperity, former President Luiz Inácio Lula da Silva said Wednesday.

Mr. da Silva, one of Brazil’s most popular and powerful politicians, who presided over a remarkable expansion in the economy and a decline in poverty during his two terms in office that ended in 2011, also said the country sees its future in investing in education and promoting a technologically skilled work force.

He spoke in an interview with editors during a visit to The New York Times, where he defended the economic progress made under his administration and the policies of his successor, Dilma Rousseff, whom he mentored. Ms. Rousseff faces re-election in October, but lacks Mr. da Silva’s popularity.

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“Fragile Five” is the latest club of emerging nations in turmoil

January 29, 2014

Landon Thomas Jr. – The New York Times, 1/28/2014

The long-running boom in emerging markets came to be identified, if not propped up, by wide acceptance of the term BRICs, shorthand for the fast-growing countries Brazil, Russia, India and China. Recent turmoil in these and similar markets has produced a rival expression: the Fragile Five.

The new name, as coined by a little-known research analyst at Morgan Stanley last summer, identifies Turkey, Brazil, India, South Africa and Indonesia as economies that have become too dependent on skittish foreign investment to finance their growth ambitions.

The term has caught on in large degree because it highlights the strains that occur when countries place too much emphasis on stoking fast rates of economic growth. The new catchphrase also raises pressing questions about not just the BRICs but about emerging markets in general

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Mantega says Morgan Stanley, HSBC err in saying Brazil is weak

January 29, 2014

Carla Simoes & Arnaldo Galvao – Bloomberg, 1/28/2014

Morgan Stanley’s report calling Brazil’s real one of the “fragile five” currencies amid an emerging market selloff is groundless, Finance Minister Guido Mantega said.

Near record-high international reserves, a solid fiscal situation, a floating exchange rate and a sound financial system will allow Brazil to weather volatility as the U.S. reduces monetary stimulus, Mantega said yesterday in an interview from his office in Brasilia.

Morgan Stanley coined the phrase “fragile five” last year to describe Brazil, India, Indonesia, Turkey and South Africa, recommending investors bet against their currencies because of wide current account deficits and fast inflation. HSBC Group last week forecast Latin America’s biggest economy will have its credit rating downgraded in 2014 because of increased public spending and weak growth.

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Fund sees Brazilian fraud as next big thing in emerging markets

December 9, 2013

Joe Leahy – Financial Times, 12/8/2013

Global investors may be growing wary of emerging markets as the US prepares to scale back its monetary largesse next year, but one fund has hit on what it hopes could be a boom industry – Brazilian fraud.

The move by New York-based hedge fund Platinum Partners to invest in the recovery of Brazilian fraud claims worth R$12bn (US$5.1bn) shows how investors are venturing deeper into the more esoteric areas of emerging markets in their quest for yield.

Under the deal, international asset chaser Martin Kenney, a Canadian lawyer whose previous cases include representing the liquidators of the assets of renowned Texan fraudster Allen Stanford, has assembled a portfolio of 10 cases in which Platinum Partners will invest.

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Mismatch: why are human rights NGOs in emerging powers not emerging?

November 19, 2013

Lucia Nader – Open Democracy, 11/15/2013

Middle-income BRICS (Brazil, Russia, India, China and South Africa) countries are becoming more politically prominent, appearing on the covers of magazines and newspapers in the developed world, and being taken more seriously by the big investment banks.

This increasing clout is also reflected in international human rights arenas. In the marble corridors of the U.N. Human Rights Council, I often hear that it is now necessary to “have Brazil on board” to pass this or that resolution.

It would be healthy to expect that human rights NGOs in the BRICS are also gaining in strength. Surprisingly, this is not so. The mismatch between strong economic growth and fragile local human rights organizations is now very apparent in Brazil.

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Is Brazil a regional hegemon?

October 31, 2013

Oliver Stuenkel – Post-Western World, 10/31/2013

Brazil’s economic rise over the past two decades has caused the country’s foreign policy making elite to seek a more prominent role for Brazil in the international community. On a global scale, it has sought to assume more responsibility and engage in international institutions, often criticizing established powers for not providing it with the status it deserves. Brazil’s newfound status has also caused Brazilian governments to reassess its regional role, although Brazil remains ambivalent about which strategy to adopt in South America. There is clearly a gap between Brazil’s global ambitions and its reluctance to adopt a more assertive role in its region. The country’s strategy in the region remains indecisive, combining restrained support for Mercosur, the creation of the Union of South American States (UNASUR) and the South American Defense Council (CSD) with a growing notion that a clearer vision is necessary to mitigate neighbor’s fears of a rising Brazil. Brazilian policy makers disagree on how they should characterize and understand their region – some see it as a source of problems, some as a shield against globalization, and some as a launching pad for global power. Brazil’s self-perception as a ‘BRICS country’ has fueled worries that it will pay little attention to regional matters (given that its trade interdependence with the region is far lower, percentage-wise, than that of its neighbors), causing critics of Brazil’s global focus to call it a ‘leader without followers’.

While Brazil has kept UNASUR relatively toothless, its decision to exclude Central America and Mexico from this institution is a clear sign that policy makers in Brasília have defined South America as Brazil’s immediate sphere of influence. With the majority of the continent’s landmass, population and economic output, and Venezuela’s faltering attempts to turn into a second pole, it is largely up to Brazil to define and design ‘South American Regionalism’. Brazil thus in theory holds a key coordinating role regarding important regional challenges, ranging from China’s growing economic importance, poverty, inequality, integrating the economy and security threats such as drug trafficking and smuggling.

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From Brazil to India, pain from currencies

September 18, 2013

Paulo Winterstein & Graciela Ibanez – The Wall Street Journal, 09/18/2013

The expected end of the Federal Reserve’s era of easy money has hit currencies in emerging markets from the rupee to the real. And that is hurting corporate profits from Bangalore to Brazil.

Consider the case of Brazil’s Gol Linhas Aereas Inteligentes, GOLL4.BR +0.09% the country’s second-biggest airline. About 60% of its costs, such as jet fuel, are in dollars, while revenue is in reais. The real fell as much as 15% after the Fed in June signaled that it would be ending its bond-buying program; as of Tuesday, it was down 9.5% year to date.

The cost of filling up one of Gol’s Boeing jets has soared to about 70,000 reais from about 50,000 reais two years ago, the airline said.

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Brazil sees BRIC limitations

September 6, 2013

Paulo Sotero – CNN, 09/05/2013

The alleged demise of the BRICS is viewed in Brazil with the same caution diplomats and foreign policy experts greeted the group’s emergence in the global scene a decade ago. At best, the BRICS were seen by Brazilian diplomats and scholars as a useful mechanism to project Brazil internationally in a rapidly changing global landscape. However, as the economies of Brazil, Russia, India, China and South Africa lost speed and altitude over the past two years, the difficulties of articulating their conflicting interests in some sort of common vision became more evident

President Dilma Rousseff’s decision to forgo this year’s New Delhi summit of IBSA, a subset of the BRICS formed ten years ago by its three democracies, is a good indication of the loss of interest for this sort of arrangement. Clearly, the role and relevance of the group will depend not only on the economic performance of its members countries in the years ahead, but also on the United States and Europe’s growth and the paths China and Russia follow in dealing with growing internal tensions that could lead to years of instability and disharmony. Syria is an obvious case in point.

Opinions regarding the BRICS’ relevance for Brazil span the spectrum. They range from the dismissive posture of the traditional establishment, which views the grouping as a largely inconsequential forum of countries with little in common, to those who have warmed to the notion of the BRICS as a useful informal arrangement that helps Brazil pursue its international interests in a rapidly changing world.

Paulo Sotero is the director of the Brazil Institute at the Woodrow Wilson International Center for Scholars.

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Emerging markets funds shun Brazil, South Africa

July 31, 2013

Joel Dimmock – Reuters, 07/29/2013

Global emerging markets equity funds have cut average weightings to Brazil and South Africa for the fourth straight quarter, according to the latest allocations data from fund research firm Lipper.

You can see a full interactive graphic of the allocations data here or by clicking on the snapshot below.

The average allocation to Brazil has fallen by 1.75 percentage points over the past year to stand at 11.6 percent of portfolios by the end of the April-June 2013 quarter. South Africa’s average weighting has fallen to 6.0 percent from 7.3 percent in the second quarter of 2012.

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Africa: breaking the rules of development cooperation – China and Brazil in African agriculture

July 15, 2013

Carol Smythyes – All Africa, 07/15/2013

New research published by the Institute of Development Studies reveals the realities of how the BRICS and Africa are engaging in agricultural development cooperation.

The questions of how Africa can feed itself, and how the agricultural sector can be a more effective engine for growth and development, have long been a target of international development efforts from western donors. But the emergence of the BRICS (Brazil, Russia, India, China and South Africa) countries as major players has raised hopes that agricultural models and experiments from Brazil or China can be transferred or adapted to African countries.

In the first-ever study on this subject, research supported by the UK’s Economic and Social Research Council (ESRC) and convened by the Future Agricultures Consortium at the Institute of Development Studies reveals some of the realities that lie behind these agricultural ‘models’ and highlights how Brazil and China are engaging with Africa in very different ways.

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