Anna Edgerton – Bloomberg, 08/16/2016
Acting President Michel Temer’s prized fiscal austerity proposal tocap public spending will only succeed if he can convince Brazil’s Congress to pass a controversial pension reform as well, according to a leading member of his economic team.
While Temer’s administration is confident it can win congressional approval this year of a constitutional amendment to limit federal spending, the inability to cut back on retirement benefits would put public finances at risk, said Mansueto Almeida, the Finance Ministry’s secretary of economic monitoring. A spending cap with growing pension obligations would squeeze other areas in the budget such as health care, he said.
“With the constitutional amendment, spending will be limited, and without pension reform, those costs are going to just grow and grow and grow,” said Almeida, who studied public policy at the Massachusetts Institute of Technology and ran a popular blog on public finance before joining the ministry.
Matt Sandy – Times, 07/27/2016
As Rio de Janeiro prepares to host the Olympic Games, beginning on Aug.5, one person won’t be at the opening ceremony—President Dilma Rousseff. Rousseff has been suspended from her office amid charges that she manipulated government accounts, and her impeachment trial is scheduled to take place during the Olympics. She spoke with TIME’s Matt Sandy from the Brazilian capital of Brasilia, where she defended herself against accusations of corruption and promised that Rio would be able to pull off the Games despite a league of doubters.
Read the interview…
Michale O’Boyle and Bruno Federowski – Reuters, 07/13/2016
Foreign investors in Latin America are warming to Brazil as a promising turnaround bet while souring on Mexico and its landmark energy reform that has yet to deliver.
Brazil has yet to recover from its worst recession in decades, inflation and interest rates remain among the highest in the region and it is saddled with a bloated public sector. In contrast, Mexico’s economy is growing at around 2 percent, has lower fiscal deficits and sounder public finances.
But while Brazil interim president Michel Temer’s reform agenda offers some promise, Mexico, once a darling of foreign investors, is now a source of disappointment. A slump in oil prices dashed hopes that President Enrique Pena Nieto’s energy sector opening in 2013 along with telecoms and banking reforms would boost foreign investment and supercharge growth while clouds are now gathering over its budget and economy.
Kenneth Rapoza – Forbes, 06/27/2016
A technical report into whether or not Dilma cooked the books on fiscal accounts in 2014 turned out in her favor. Come to find out, she did not push forward accounts, but still — according to one Brazil economist I spoke with — did commit crimes of fiscal responsibility. That will still be for the Senate to decide when suspended president Dilma Rousseff goes to trial at some point in late July, early August.
What appears clear for Brazil watchers is that the back and forth of corruption allegations and now this latest study suggests that if the country was a chicken, it would be running around with its head cut off. It’s not very appealing except for the hungriest of vultures looking for a cheap meal.
Hedge funds that like regime change politics are watching the political play-by-play closely. The latest study might have moved the needle against impeachment, though 60 senators are still expected to vote for her ouster.
Paulo Trevisani – The Wall Street Journal, 06/13/2016
BRASÍLIA—Brazil’s central bank Monday inaugurated a new leader to deal with an old challenge: taming stubborn inflation amid a shaky economy and political chaos.
Private-sector economist Ilan Goldfajn took over the post from Alexandre Tombini in an hour-long ceremony at the bank’s imposing building here. An appointee of Brazil’s suspended President Dilma Rousseff, Mr. Tombini had held the job since January 2011. On his watch, Brazil never met its 4.5% annual inflation target, as the figure stayed significantly above that level even as the economy ground to a halt in the past few years.
Mr. Goldfajn, 50 years old, was appointed by acting President Michel Temer, who will serve out Ms. Rousseff’s term if she is ousted. Mr. Goldfajn—a U.S.-educated economist who for the past decade led the economic-research department at Itaú Unibanco, Brazil’s largest private-sector bank—has pledged to meet the nation’s inflation target, without giving a time frame, even as prices are rising at a 9.3% pace, as of May.
Ideia Inteligencia, 06/09/2016
Survey published by Ideia Inteligencia on Brazilian public opinion of Acting President Michel Temer’s first few weeks to be presented on June 9th 2016 at the Brazil Institute.
public-perception – Temer first month
Simon Romero – The New York Times, 05/24/2016
RIO DE JANEIRO — Brazil’s interim president, Michel Temer, announced an array of proposals on Tuesday aimed at restoring confidence in the sickly economy of Latin America’s largest country.
Seeking to draw a contrast with Dilma Rousseff, the suspended leftist president whom Mr. Temer maneuvered to oust this month, he said he would try to repeal nationalist oil legislation, curb public spending and shut down a sovereign wealth fund.
Still, Mr. Temer’s televised briefing was light on detail as to how he planned to win approval in a fractious Congress for an array of measures like overhauling a crisis-ridden pension system that allows Brazilians to retire at an average age of 54.
Andrew Jacobs – The New York Times, 05/01/2016
BRASÍLIA — They were idealists, united in the struggle against Brazil’s military dictators.
As democracy flourished, so did their careers. One of them, Paulo Ziulkoski, became the leader of an association of Brazilian cities. The other, Dilma Rousseff, rose even higher, becoming the president of Latin America’s largest country.
But their friendship soon fell apart. During a contentious meeting with the nation’s mayors in 2012, Ms. Rousseff rejected pleas for a share of Brazil’s soaring oil revenues. After the room erupted in jeers, Mr. Ziulkoski said, she stormed up to him, poked a finger in his face and humiliated him with a string of expletives.
Kenneth Rapoza – Forbes, 04/25/2016
Inflation is down nearly 100 basis points from a few months ago, but the Central Bank of Brazil has no intention of lowering interest rates. Investors should take this coming Wednesday’s meeting as a cue whether or not there is a growth strategy anywhere in Brasilia.
Nomura Securities said that they are forecasting the Bank to keep rates at 14.25% even though inflation is coming down. Brazil’s rolling 12-month inflation was as high as 10.7% in January. It’s currently 9.4%. Nomura has close ties to Brazil’s central bank and is good gauge of which way the wind is blowing on the monetary policy committee.
Brazil’s economy, expected to contract by around 3.5% again this year, is facing a massive political crisis. It would be good if the central bank could be more independent and cut rates to boost growth. On the other hand, sentiment among Brazil’s business class is so burned out with the twin crises of politics and economics that it is going to take more than a rate hike to improve things.
Walter Brandimarte – Bloomberg Business, 03/1/2016
Brazil’s economic activity unexpectedly contracted in the beginning of 2016 and economists forecast a deeper recession for this year as a political stalemate nearly paralyzes the country.
The central bank’s IBC-BR index, which is often taken as a proxy for Brazil’s GDP report, shrank 0.61 percent in January, more than forecast by all 25 economists surveyed by Bloomberg, whose median estimate was for a 0.2 percent expansion. Economic activity as measured by the index has been declining for 11 consecutive months and, with Monday’s negative surprise, some economists are already cutting their forecasts for Brazil’s economic performance this year.
Among those, Goldman Sachs revised its 2016 forecast for the IBC-BR to a deeper contraction of 3.6 percent from 3.2 percent. “We expect the economy to continue to face strong headwinds,” the bank’s senior economist Alberto Ramos wrote in a note to client, citing a long list of obstacles including tight financing conditions, high inflation, rising unemployment, and political uncertainty.