Brazil’s faltering economy needs some tough love

Samantha Pearson – Financial Times, 5/12/2015

For Brazil’s economists, 2015 will certainly be a year to forget. Latin America’s biggest economy is expected to contract by more than 1 per cent this year, marking the country’s worst recession in 25 years.

Meanwhile, inflation is set to end the year above 8 per cent, breaking the target range for the first time since 2003.

To add to the country’s woes, the corruption scandal at state-controlled oil company Petrobras — believed to be the biggest of its kind in Brazilian history — has the potential to slow growth further and accelerate job losses.

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Brazil’s faltering economy needs some tough love

Mapped: One-in-five murder victims in world is Brazilian, Colombian or Venezuelan

Andrew Marszal and Harriet Alexander – The Telegraph, 5/7/2015

One-in-five murder victims around the world is Brazilian, Colombian or Venezuelan, a study has shown, despite the three countries containing less than four per cent of the world’s total population.

The Homicide Monitor data project compiled by the Brazil-based Instituto Igarape reveals the high rates of homicide around Latin America and the Caribbean, where a third of all of the world’s homicides occur.

The region contains only eight per cent of the world’s total population. Honduras (85.5 murders per 100,000 inhabitants), Venezuela (53.7) and the US Virgin Islands (46.9) have the highest murder rates per population in the world.

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Mapped: One-in-five murder victims in world is Brazilian, Colombian or Venezuelan

Brazilian Economy Struggles to Take Off

Loretta Chao and Rogerio Jelmayer – The Wall Street Journal, 5/4/2015

SAO PAULO, Brazil—With Brazil dogged by drought, a sluggish economy and a corruption scandal at its most important company, businesses in Latin America’s largest economy have little to be optimistic about.

Economists expect Brazil’s gross domestic product to contract 1.18% this year and growth of just 1% in 2016. Federal prosecutors are in the midst of an investigation involving hundreds of millions of dollars allegedly skimmed from Brazil’s state-run oil giant, Petroleo Brasileiro SA, by the country’s top construction companies. A multiyear drought is threatening water supplies in São Paulo state, which accounts for 40% of Brazil’s industrial production.

All that makes this a fraught time for business in Brazil, which, fueled by a commodities boom, reached 7.6% economic growth in 2010 but has been slowing ever since. Amid bad news and uncertainty, the hope that the country would become an economic superpower has fizzled. Executives and investors say sentiment about Brazilian business inside and outside the country is the lowest it has been in years.

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Brazilian Economy Struggles to Take Off

Brazil’s March Unemployment Rate Climbs in Blow to Rousseff

David Biller and Mario Sergio Lima – Bloomberg Business, 4/28/2015

Brazil’s March unemployment rate climbed to the highest level in three years as Latin America’s largest economy slips closer to recession amid rising interest rates and fiscal tightening.

The jobless rate rose to 6.2 percent from 5.9 percent a month earlier, according to data released by Brazil’s national statistics agency (IBGE). That was higher than the 6.1 percent median estimate from 32 economists surveyed by Bloomberg.

Market reaction to the report was mixed. Swap rates fell, while the currency rose and stock futures pointed to a higher opening in Sao Paulo.

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Brazil’s March Unemployment Rate Climbs in Blow to Rousseff

Brazil’s reality show

Ilan Goldfajn – Financial Times, 4/21/2015

I have just returned from abroad. It felt like déjà vu from a distant past. Explaining Brazil has become complex again. “I read about corruption accusations, popular protests, deficits and crises; what is happening in Brazil?” I was asked by an important investor. The answer inevitably tends to be long and full of Buts and Ifs.

Nevertheless, I will make an effort to summarize it here in a straightforward way. Brazil did not invest enough during the favorable commodity cycle. Policymakers did not recognize the end of the cycle in time. When they did, they tried to go back to a past that no longer existed. Now, Brazil must adjust everything at once to avoid a worse crisis. But markets are dynamic: with the recent depreciation of the real, there are already investors looking for opportunities. That is the reason Brazilian assets rebounded lately.

All Latin American economies – from Argentina and Venezuela to Chile and Peru – are experiencing declining growth. This is a sign of a common factor: the end of the favourable global cycle of commodity boom and growth in China and abundant capital flows to emerging markets. Corruption accusations and investigations are surfacing in many Latam countries such as Brazil and Mexico, but also in Chile, which signals that even the tolerance to such deviations is cyclical.

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Brazil’s reality show

More austere, accommodating Rousseff paying off for Brazil

Brian Winter and Anthony Boadle – Reuters, 4/10/2015

The “new Dilma” is starting to produce results.

By embracing power-sharing deals and budget cuts that she shunned during her first term in office, President Dilma Rousseff has begun to ease the economic and political crisis plaguing Brazil, congressional leaders and economists say.

Rousseff’s decision this week to hand formal responsibility for negotiating with Congress to Vice President Michel Temer, a leader of the Brazilian Democratic Movement Party (PMDB), was a milestone that should help ease tensions with the biggest party in her coalition and dissuade it from sabotaging her economic agenda as it did earlier this year, legislators said.

Brazil’s stock and currency markets rallied as investors hoped the more stable political climate, and new signs that Rousseff is shifting toward more market-friendly policies, will eventually help Latin America’s largest economy recover from what is expected to be a moderate recession this year.

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More austere, accommodating Rousseff paying off for Brazil

Exclusive: U.S. bets on Brazil, extends new invitation to Rousseff

Brian Winter – Reuters, 3/24/2015

The Obama administration has again invited Brazil’s President Dilma Rousseff for a state visit to Washington, a diplomatic breakthrough that both sides hope will lead over time to greater trade between the two biggest economies in the Americas.

Rousseff had originally been scheduled to make a state visit, which involves a black-tie dinner at the White House and is considered the strongest expression of friendly ties between allies, in October 2013.

But the leftist leader canceled her trip after she was angered by revelations that the U.S. National Security Agency (NSA) spied on her personal communications. She said it was “incompatible” with a relationship among allies.

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Exclusive: U.S. bets on Brazil, extends new invitation to Rousseff