Brazil’s real drops sharply on Levy comments

Bruno Federowski and Bernadette Baum – Reuters, 1/30/2015

The Brazilian real weakened about 2.5 percent against the dollar on Friday after Finance Minister Joaquim Levy suggested the government had no intention of keeping the currency stronger than the market would naturally dictate.

Speaking to investors and business leaders at an event in Sao Paulo on Friday, Levy suggested the real was overvalued and signaled the government will not work to keep the currency from sliding.

The real added to early losses shortly afterward, dropping as low as 2.68 to the dollar.

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Brazil’s Levy says any tax hikes to have little impact on growth

Alonso Soto – Reuters, 1/13/2015

Any tax increases implemented as part of Brazil’s push to improve the nation’s fiscal accounts will have a “minimum impact” on economic activity, Finance Minister Joaquim Levy said on Tuesday.

Speaking at a breakfast meeting with reporters in Brasilia, Levy said bringing Brazil’s gross debt below 50 percent of gross domestic product was “a positive long-term goal.” He also expressed confidence that the nation’s sovereign credit rating would not suffer a downgrade.

Levy took office this month promising to restore fiscal discipline in President Dilma Rousseff’s second term after warnings from credit rating agencies of a possible downgrade.

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Brazil’s Real Drops Most Among Major Currencies on GDP Outlook

Paula Sambo – Bloomberg News, 1/12/2015

Brazil’s real fell the most among major currencies after analysts surveyed by the central bank lowered their growth forecast for Latin America’s largest economy.

The currency slid for the first time in five days, dropping 1.5 percent to 2.6737 per dollar at the close of trade in Sao Paulo. The decrease was the biggest among 16 major currencies tracked by Bloomberg. Swap rates, a gauge of expectations for changes in borrowing costs, climbed 0.1 percentage point to 12.58 percent on the contract maturing in January 2017.

Analysts reduced their forecast for gross domestic product growth in 2015 to 0.4 percent from 0.5 percent, according to the median of about 100 estimates in a weekly central bank survey published today. Evidence of a stalled economy increases the challenges for Finance Minister Joaquim Levy, who has pledged to impose more rigorous fiscal discipline.

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The $31 Billion Bet Against Brazil’s New Finance Minister

Ye Xie and Filipe Pacheco – Bloomberg, 11/24/2014

Whoever is tapped by Brazilian President Dilma Rousseff to oversee the government’s finances in her second term, one thing is clear: There’s plenty of work to be done to win over currency investors.

While the real gained the most in three weeks on Nov. 21 amid optimism the looming cabinet shuffle will help shore up Brazil’s economy, foreigners are betting on more declines after the currency weakened to a nine-year low this month. Overseas holdings of futures contracts wagering against the real have soared 30 percent since Sept. 29 to $31.3 billion as of last week, according to data compiled by the Sao Paulo bourse. That’s just 8.6 percent shy of August’s record high.

A surge in government spending, coupled with Rousseff’s intervention in Latin America’s biggest economy, has left Brazil with its widest budget deficit in a decade and near-zero growth. Options traders are more bearish on the real than on any of its major peers.

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Brazil’s No. 2 finance ministry official to quit post in June

Reuters, 05/13/2013

Brazil’s deputy Finance Minister Nelson Barbosa, who helped design some of the government’s flagship economic projects, has handed in his resignation for personal reasons and will leave the post in June, the ministry said on Monday.

Folha de S. Paulo newspaper reported his departure over the weekend, citing loss of influence within President Dilma Rousseff’s government as the reason for his resignation.

Folha said Barbosa, once a close advisor to Rousseff, had lost access to the president with the rise of Treasury Secretary Arno Agustin, who is expected to take his place as the ministry’s executive secretary.

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Brazil’s Government Prods Top Banks to Help Ignite Economy

Rogerio Jelmayer – Fox Business/Dow Jones Newswires, 06/02/2013

An increase in lending is seen as essential if Brazil is to jump-start economic growth. While lending has more than doubled over the past 10 years, the pace of growth fell in 2012 and has been blamed, in part, for disappointing growth in 2012.

In 2012, lending by all banks increased 16.2% to a record of nearly 2.4 trillion Brazilian reais ($1.2 trillion). But that was the lowest expansion in years. By comparison, lending rose 19% in 2011 and 21% in 2010.

Brazilian gross domestic product expanded by only 2.7% in 2011 and by an estimated 1.0% last year. The consensus forecast for 2013 is better at 3.1% but still lags behind developing-country rivals China and India.

Brazil’s central bank will raise rates next year, if needed – source

Luciana Magalhaes – The Wall Street Journal, 09/18/2012

Brazil’s central bank doesn’t rule out raising its baseline interest rate in 2013 if necessary, to keep inflation within its target range, a person close to the central bank said Tuesday.

“We have an inflation targeting policy. If it becomes necessary, the central bank will raise rates in 2013 to keep the inflation in the target,” said the person, who asked not to be named.

While Brazil’s central bank has most recently been cutting interest rates, many market players are betting that the central bank will have to raise rates in 2013 to tame inflation. But top finance ministry officials have sought to play down any need for rate hikes next year.

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