Brazil’s central bank vows to control inflation

Joe Leahy – Financial Times, 9/30/2015

Brazil’s central bank is willing to do whatever is necessary to control inflation while the country grapples with the thorny issue of how to rebalance the nation’s public finances, a senior official has said.

Tony Volpon (pictured), head of international affairs at the central bank, said while tax increases to balance the budget could raise prices, monetary policy would be adapted to ensure that inflation eventually converges to the official target of 4.5 per cent. Annual inflation is currently running at 9.7 per cent.

“I would much rather that we have a sustainable fiscal situation even if that means higher inflationary pressures that we need to control at our end,” said Mr Volpon in an interview at the central bank’s headquarters in Brasília.

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Brazil analysts forecast back-to-back recession for first time

Mario Sergio Lima and Matthew Malinowski – Bloomberg Business, 8/17/2015

Brazil analysts forecast that Brazil’s economy faces two straight years of recession for the first time since the Great Depression.

Brazil’s economy will shrink by 2.01 percent in 2015 and by 0.15 percent in 2016, according to the Aug. 14 central bank survey of about 100 analysts. That marks their first forecast for recession next year and compares with the previous week’s predictions of a decline of 1.97 percent in 2015 and flat growth in 2016. The last time the economy shrank for two straight years was in 1930-31.

President Dilma Rousseff is struggling to balance policies aimed at taming the fastest inflation in over a decade while reviving economic growth amid a massive corruption scandal that has complicated relations with Congress. Moody’s Investors Service this month became the second ratings company to cut the country’s sovereign credit rating to the cusp of junk. Protests on Sunday that drew half a million people into the streets will maintain the pressure on a government with record-low popularity ratings.

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Why Brazil is still a sorry underachiever

David Samuels – Star Tribune, 7/31/2015

Brazilians have a self-deprecating sense of national pride. They sheepishly accept Brazil’s inability to join the club of rich and powerful nations with the oft-heard joke that “Brazil is the country of the future … and always will be!”

This national frustration is borne of long experience. Brazil had the world’s fastest-growing economy in the first half of the 20th century, but by the 1970s growth had stalled. As the population boomed, wages fell. Crumbling infrastructure, a protected domestic economy and burdensome regulations made it hard for Brazilian products to compete on the world market. Inferior schools and a weak job market left millions in poverty, and by 1980 Brazil was competing with Haiti for the title of most-unequal country in the world.

Brazil appeared poised to finally shed this reputation as a perennial underachiever in the 1990s, when its leaders implemented smart economic policies. It got its fiscal house in order, and by the 2000s the economy was booming. Wages went up, while inflation and inequality went down. The government expanded social-welfare programs, unemployment fell and millions entered the middle class. Brazil was also lucky, discovering massive oil deposits in its offshore waters. It also played the global public-relations game well, winning both the 2014 World Cup and the 2016 Olympics.

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Brazil’s inflation rate to reach 9.12 pct in 2015

Silvio Cascione – Reuters, 7/13/2015

Economists raised their forecasts for Brazil’s end-2015 inflation rate but lowered their estimates for price increases next year, a weekly central bank survey showed on Monday.

The median forecast of about 100 financial institutions in
the poll also showed an increase in expectations for benchmark
interest rates next year.

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Brazil treads fine line between inflation and contraction

Joe Leahy – Financial Times, 06/08/2015

South America’s largest economy faces a difficult balancing act to avoid a potentially disastrous spiral of economic contraction as it seeks to control inflation.

Brazil’s planning minister Nelson Barbosa warned that he expected only a very gradual recovery from this year’s recession, in contrast with previous downturns during the past decade when the country immediately bounced back with rapid growth.

However, Mr Barbosa added that growth should still be enough for Brazil to avoid slipping into a situation in which interest rate increases to control inflation combined with an austerity programme to reduce the budget deficit only deepened the recession.

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Brazil’s Levy says weak real not big fix for economy

Reuters, 3/10/2015

Brazil’s economic growth depends more on the approval of austerity measures needed to rebuild investor confidence than on a weaker currency, Finance Minister Joaquim Levy told O Globo newspaper.

One day after the Brazilian real tumbled to its weakest level in more than 10 years, Levy downplayed the notion that a weak currency is the key to making Latin America’s largest economy grow again.

“The idea that a weaker currency is the big solution to Brazil is not correct, despite its popularity in some circles,” he said in an interview published on Tuesday.


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Brazilian Real Advances on Outlook for Rousseff’s Economic Team

Filipe Pacheco – Bloomberg, 11/10/2014

Brazil’s real rose for a second day on speculation President Dilma Rousseff will appoint an economic team that will revive growth and on wagers the U.S. Federal Reserve will avoid an early increase in interest rates.

The currency gained 0.3 percent to 2.5522 per dollar at the close of trade in Sao Paulo after dropping 3.2 percent last week. Swap rates, a gauge of expectations for changes in Brazil’s borrowing costs, fell 0.04 percentage point to 12.61 percent on the contract maturing in January 2017. The real advanced amid optimism that the next finance minister will move away from policies that helped lead Brazil into a recession in the first half of the year. Today’s increase was the biggest among 16 major currencies tracked by Bloomberg after the South Korean won.

“There has been a lot of expectation that a new economic team will be able to restore growth,” Camila Abdelmalack, an economist at CM Capital Markets in Sao Paulo, said in a telephone interview.

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