Arnaldo Galvao, Anna Edgerton and Mario Sergio Lima – Bloomberg, 04/17/2016
Rousseff’s presidency is hanging by a thread after Brazil’s lower house of Congress voted in favor of her impeachment, a decision that cheered investors just as it threatens to bring down the curtain on 13 years of leftist rule.
The opposition garnered 367 votes, 25 more than the two-thirds majority it needed to send the impeachment motion to the Senate.
“The commencement of the impeachment process is authorized,” lower house speaker Eduardo Cunha said at the end of the session that was broadcast live on public screens across the nation.
Katy Barnato – CNBC , 03/29/2016
Brazil’s political system is set to spin further out of control Tuesday as the biggest party in the Senate quits the ruling coalition, a move that will hike the odds on President Dilma Rousseff’s impeachment.
The Brazilian Democratic Movement Party (PMDB) announced Tuesday, as expected, it would pull six ministers from Rousseff’s Cabinet, ordering them to either resign or face ethics proceedings, Reuters reported Tuesday. If Rousseff is impeached, it would put Vice President Michel Temer, leader of the PMDB, next in line for the presidency, Reuters said.
Analysts are divided as to how Brazil’s economy and political situation might fare in the wake.
Paulo Sambo and Felipe Pacheco – Bloomberg, 02/23/16
Brazil’s sovereign rating was cut to junk by Moody’s Investors Service, the last of the major ratings companies to strip the country of its investment grade, as President Dilma Rousseff struggles to shore up fiscal accounts amid deepening political turmoil.
The country’s benchmark stock gauge declined the most in two weeks and the currency weakened after the rating was reduced two steps to Ba2. The outlook is negative, meaning more downgrades may be coming, Moody’s said in a statement Wednesday.
Brazil’s credit metrics have deteriorated “materially” in the past few months and will worsen over the next three years, according to the ratings company, which also cited the negative impact of political gridlock on the government’s efforts to close a budget deficit and undertake structural reforms. The cut — Brazil’s third in as many months from major ratings companies — adds pressure on Rousseff to win lawmakers’ support for measures to raise taxes and reduce spending as she fights off efforts to impeach her.
Reuters – Fortune, 02/21/16
Brazilian economic downturn has soured the auto market.
General Motors Co will reconsider plans for new investment in Brazil if the economic and political situation does not improve, the company’s president Dan Ammann said in an interview published on Sunday.
Brazil was until recently one of the world’s five biggest auto markets, but it has sunk into the worst recession in 25 years and business confidence has been undermined by political uncertainty and a bid to impeach President Dilma Rousseff.
Paula Sambo, Andressa Lelli and Filipe Pacheco – Bloomberg, 8/11/2015
Brazil’s real and the Ibovespa slid as China’s yuan devaluation fueled concern that demand from the nation’s top trading partner will falter. Stocks and the currency pared losses after Moody’s Investors Service signaled a cut to junk isn’t likely any time soon.
The real dropped 1.1 percent on speculation that trade inflows from the Asian nation will slump and as Goldman Sachs Group Inc. said it may weaken to 4 per dollar in the next 12 months. Vale SA, which gets a third of its revenue from China, extended this year’s plunge to 24 percent. Commodity companies in the MSCI Brazil fell 3.4 percent, the most among 10 industries.
Brazilian assets joined a global selloff that pushed a gauge of emerging-market equities into a bear market, following a 20 percent tumble from a September peak. China devalued the yuan as policy makers at Asia’s largest economy stepped up efforts to combat the deepest slowdown since 1990 and support local exporters.
Gavin Lumsden – CityWire Money, 7/17/2015
Outside the UK and US investors are often wary of single country funds, disliking the lack of diversity they offer.
The experience of JPMorgan Brazil (JPB +) over the past five years suggests this is wise. Since its launch in April 2010 the investment trust has lost shareholders 45% of their money. After a good first year, it was literally downhill all the way for the unfortunate investors! In the last financial year the shares fell 12%.
Of course this has been a tough period for all funds investing in emerging markets with the slowdown in China and the consequent hit on commodities combining with fears of a capital flight to the US when interest rates rise.
Anderson Antunes – Forbes, 11/20/2014
One of the most famous songs by the late Brazilian rock star and songwriter Raul Seixas is entitled ‘Rent,’ in reference to what he considered to be the best solution for Brazil: literally, to rent the country for foreigners. The song was composed in 1980, at a time when Brazil was going through a difficult economic period marked by hyperinflation.
Fast-forward to 2014. Today the ghost of price increases gone out of control has come back to haunt Brazilians, partly due to a government-sponsored rise in fuel prices that resulted in consumer prices advancing 6.54% in the 12 months through mid-November, down from a rise of 6.62% through the previous month but still above the 6.5% ceiling of Brazil’s Central Bank target, according to the median of 22 market forecasts for the IPCA-15 inflation index.
Add to that a total lack of confidence from investors, a growing budget deficit, falling industrial production and rising poverty. Even the stability of the Brazilian job market, one of the few bright spots for the government, has begun to show signs of difficulties ahead: For the first time since October 1999 the weekly payroll numbers showed a net loss of 30,000 jobs last month, well below the market expectations of a gain of 56,000.