A test of “Brazilience”: What next for Brazil?

Thomas Kamm – Brunswick, 04/15/2016

Brazil is on the verge of what could be the biggest crisis this crisis-prone nation has ever faced – or a cathartic break from its past. It is being subjected to a massive stress test that can either lead to a prolonged downward spiral or prove to be a pivotal moment that ultimately sets the country back on a more sustainable political and economic course. Call it a new test of what could be called “Brazilience,” Brazil’s resilience and resourcefulness in the face of crisis.

So where does all this leave Brazil? Brunswick Partner, Thomas Kamm, looks at three possible short-term scenarios, all fraught with uncertainty.

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Brazilian billionaire Joseph Safra charged with corruption

Financial Times – Joe Leahy, 04/01/2016

Brazilian prosecutors have filed corruption charges against billionaire Joseph Safra, said by Fortune magazine to be the world’s richest banker, and five others for involvement in an alleged scheme to pay off government tax auditors.

The financier, who owns London’s Norman Foster-designed “Gherkin” skyscraper, is alleged to have known of a plan by executives at his banking group in Brazil to pay R$15.3m in bribes to help reduce tax debts today amounting to R$1.8bn.

“The criminal intentions of the group is made clear by the various conversations and exchanges of messages cited in the indictment,” the prosecutors said in a statement signed in Brasília.

A Little Bit of Luck Is Pricier as Levy Targets Brazil Lotto

David Biller – Bloomberg, 6/10/2015

It just got more expensive to try your luck in Brazil after the lottery fell victim to Finance Minister Joaquim Levy’s austerity measures.

Brazilia1200x-1ns wanting to win a 50 million-reais ($16 million) jackpot in Wednesday’s Mega-Sena lottery drawing will have to pay 40 percent more to play than they did three weeks ago. That’s because the government raised ticket prices on May 24 to boost funding for everything from social programs to the Olympic Committee ahead of next year’s summer games in Rio de Janeiro.

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Brazil Investors Like Dilma’s Cabinet

Kenneth Rapoza – Forbes, 11/24/2014

Investors from New York to São Paulo are increasingly pleased with Brazilian president Dilma Rousseff’s new economics team.  The names have not been made official yet. After a tight presidential race, which tested her and her party’s approval rating following 12 years in power, Dilma needs all the help she can get.

According to the local press, Dilma’s new economic team will be introduced by month’s end. Investors are anxious to see who will replace Guido Mantega as Finance Minister. Insiders say that Joaquim Levy will be Mantega’s replacement, along with Nelson Barbosa as Minister of Planning, and Alexandre Tombini still leading the Central Bank.

Levy is the most welcome name. He’s currently the president of Bradesco Asset Management, but is global enough to understand the external market forces at work in Brazil. He has held posts at the International Monetary Fund, was a visiting economist at the European Central Bank, and was the Treasury Secretary under Dilma’s political party companheiro, Luiz Inacio Lula da Silva, who served two terms as president before handing the torch to Dilma four years ago.

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Brazil’s Batista Faces Criminal Charges

Luciana Magalhaes – The Wall Street Journal, 09/13/2014

When Brazil’s best-known businessman was hit with criminal charges over the weekend involving billions of dollars in soured deals, he didn’t appear to miss a beat. Instead, Eike Batista was roaming the world scouting for business opportunities.

“Yesterday he was in Qatar,” said one of Mr. Batista’s lawyers, Sergio Bermudes, in a telephone interview Sunday. “It was a business trip.” The attorney said Mr. Batista had also planned to go to South Korea and would return to Brazil probably by Friday.

When the entrepreneur lands, he will be facing one of the biggest challenges of his life. Prosecutors in Rio de Janeiro last week charged Mr. Batista with financial crimes and requested the freezing of 1.5 billion Brazilian reais ($641 million) in assets belonging to the businessman and people close to him, according to documents posted on the public prosecutor’s website on Saturday.

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Petrobras avoiding bond market as selloff deepens: Brazil Credit

Boris Korby & Julia Leite – Bloomberg, 04/01/2013

Petroleo Brasileiro SA (PETR4), which sold a combined $13 billion of bonds in the first quarters of 2011 and 2012, is holding off on issuing new debt as borrowing costs rise to the highest in two years versus investment-grade peers.

Declining earnings at the state-controlled company spurred by government-imposed limits on fuel-price increases and waning offshore oil output have helped push yields on its $5.25 billion of bonds due 2021 up 0.55 percentage point this year to 4.16 percent. The jump is triple the increase for emerging-market credits rated BBB- or better, which yield an average 4.18 percent, according to data from JPMorgan Chase & Co.

The bond rout is prompting the oil producer to delay plans to raise about $12 billion in debt this year, according to Vinicius Pasquarelli, an emerging-market debt trader at Standard Credit Group LLC. Petrobras, which is developing the biggest crude discoveries this century beneath the Atlantic Ocean, faces rising borrowing costs as leverage climbs to the highest in at least a decade and concern mounts that government interference is damping profits.

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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.