News from Brazil

Brazil Weekly, March 28th

In Uncategorized on March 28, 2010 at 11:17 am

POLITICS

A volatile mix of vast new oil wealth and election-year politics is straining relations between Brazil’s states and complicating President Luiz Inacio Lula da Silva’s efforts to pass a landmark oil reform before the October polls. An amendment passed by Congress’ lower house this month that would take special income from Brazil’s handful of oil-producing states and distribute it among all 26 states has sparked protests and outrage in the losing regions (Reuters).

President Luiz Inacio Lula da Silva pledged to maintain economic stability by controlling inflation and ensuring fiscal discipline before this year’s national elections. “We are not going to risk economic stability. It has to be maintained,” Lula said (Reuters).

President Luiz Inacio Lula da Silva saidhe expects to learn as soon as next week about Central Bank President Henrique Meirelles’ political future (Reuters).

Brazil’s Supreme Court will shelve an investigation of alleged tax crimes by central bank President Meirelles after a request from prosecutors (Bloomberg).

Sao Paulo state Governor Jose Serra widened his lead over Brazilian Cabinet Chief Dilma Rousseff, Folha de S. Paulo reported. The Datafolha poll gave Serra the support of 36 percent of voters and 27 percent for Rousseff (Bloomberg).

Twenty years after the Collor Plan, the ex-president apologized. The current senator, who resigned from the Presidency of the Republic in December 1992 at the end of the impeachment procedures, states that his fall was “orchestrated by big companies” that did not accept losing privileges and competition with foreign products, Fernando Collor said to Agência Senado.

FOREIGN AFFAIRS

Agriculture ministers from Brazil, Russia, India and China, which together have a third of the world’s arable land, agreed to pool resources to combat famine that affects more than 1 billion people globally. The ministers from the countries collectively known as BRIC signed a pact to create a joint agricultural information base that will help each country to calculate production and consumption balances and establish national grain reserves (Reuters).

The Brazilian mining institute Ibram said the threat by European steel companies to take local iron ore miner Vale before the European Commission on antitrust charges was a desperate act of “colonialism.” (Reuters).

President Luis Inácio Lula da Silva’s visit to Israel and Palestine concluded in Ramallah, as he expressed his wish that an independent Palestinian state become a reality as soon as possible during a final address to the media (Rio Times).

ECONOMY

Brazil’s economy is at risk of “overheating” and the country’s currency is “overvalued,” JPMorgan Chase & Co. strategist Ben Laidler said at a conference in New York (Bloomberg).

Brazil’s stock market is forming a “bubble” and may suffer a “correction” next year as valuations soar, according to Gerard Cremoux, co-head of Latin America investment banking at UBS AG (Bloomberg).

Brazil’s unemployment rate rose in February less than forecast by economists, as a recovery in Latin America’s largest economy continued to draw people into the workforce. The jobless rate in February rose to 7.4 percent in February, compared to 7.2 percent in January (Bloomberg).

Brazil’s capital markets and banking associations joined with the stock exchange to create an organization designed to promote the country as a business hub for Latin America (Bloomberg).

BANKING

Goldman Sachs Group, the world’s most profitable securities firm, poached seven bankers from rivals in Brazil to boost its local bond and stock underwriting and securities trading business (Reuters).

Caixa Economica Federal, a government-controlled lender, plans to be the first Brazilian bank to issue local debt with a maturity of at least two years after the central bank opened up the market for such sales (Bloomberg).

OIL & GAS

Petrobras ruled out borrowing to replenish its capital base and could issue new preferred shares  to raise funds for investments (Reuters).

A new well in Brazil’s massive offshore Tupi area has shown high flow rates and could produce up to 30,000 barrels per day (bpd), Petrobras said (Reuters).

BP’s Brazil assets, purchased from Devon Energy Corp. this month, will produce at least 100,000 barrels of oil a day by the end of the decade (Bloomberg).

OGX Petroleo e Gas Participacoes SA said it discovered hydrocarbons in the Albian section of the 1- OGX-8-RJS well of Brazil’s Campos Basin (Bloomberg).

OGX may report its first dry well at offshore oil fields as the company controlled by Brazilian billionaire Eike Batista starts drilling in new areas next month (Bloomberg).

Two big oil related events are heading for Rio this year. The biennial Rio Oil and Gas Expo and Conference will take place in September and the 33rd IAEE International Conference early June (Brazil Weekly).

With the presence of the president of the Republic, Luiz Inácio Lula da Silva, Petrobras will inaugurate the Southeast Northeast Integration Gas Pipeline (Gasene), the biggest pipeline in length built in Brazil in the past ten years. The natural gas transportation network in the country expanded between 2003 and 2010 from 5451 kilometers to 9219 kilometers (Brazil Weekly).

Petrobras’ average oil and natural gas production in Brazil and abroad in February topped-out at 2,560,490 barrels of oil equivalent per day (boed). This was 3.5% more than a year ago (2,474,680 boed) and 1.4% above the total volume lifted last January (Brazil Weekly).

BIOFUELS

An expected rise in Brazil’s oil output will not threaten its fast-growing biofuels sector as more petroleum will be destined for export while most of its cane-derived ethanol is consumed at home, a government biofuel official said (Reuters).

Wild price volatility in Brazilian ethanol in 2009, which caused prices to double after a panic-driven plunge, should ease as the sector consolidates with wealthy multinationals moving in. Marcos Jank, head of the Brazilian sugarcane industry association Unica, said the year brought two exceptional misfortunes to the sector – inability to repay large debts taken on to fund expansion and unusually wet weather that prevented much cane being harvested (Reuters).

BUSINESS

Cemig, the Brazilian power company controlled by Minas Gerais state, is interested in acquiring assets owned by rivals Ampla and Energias do Brasil to speed up growth in electricity distribution, Chief Executive Djalma Bastos said (Reuters).

Management of John Deere’s Brazilian grain planter and harvester manufacturing plant in Horizontina settled a four-day strike by workers late last week (Reuters).

A Chinese mining company has agreed to buy the Itaminas iron ore mine from a Brazilian business magnate for $1.2 billion. Valor Economico said mine owner Bernardo de Mello sold the 3 million tonne per annum facility to the Chinese state-backed East China Mineral Exploration and Development Bureau (ECE) (Reuters).

Braskem, Latin America’s largest petrochemicals company, may open a second factory to produce polyethylene from sugar cane-based ethanol, once a first plant starts up around October (Reuters).

General Motors GM.UL will invest 1.4 billion reais ($778 million) to modernize and expand two plants in Brazil (Reuters).

Brazil’s high court delayed a decision for two weeks on whether to end Pfizer Inc.’s patent for Viagra in Brazil, the world’s third-biggest market for the impotence drug, after a judge asked to review the case before voting in a key ruling for the $2.5 billion generic drug market (Bloomberg).

REAL ESTATE

Cyrela, Brazil’s largest real estate developer, posted a massive jump in profits in the fourth quarter as it sold more apartments, cut spending and set aside less money for taxes (Reuters).

TRAVEL

Situated on the palm-fringed coast of Brazil’s Bahia state, Trancoso still looks like the hippie getaway that first made the town popular 20 years ago, with its uneven cobblestone streets and dirt roads. Colorfully painted low-rise wooden houses are the norm, even those that now sell $35 wineglasses and $3,000 paintings. Read more about the “freest place in Brazil” (New York Times).

RIO

Rio’s reputation for violent crime precedes it. Films such as ‘City of God’ and ‘Tropa de Elite’ (Elite Troop) have only compounded this image in the eyes of the world, and the city is frequently cited as one of the most dangerous places on earth. When looking to uncover the statistics behind the claims however, the waters are somewhat muddy (Rio Times).

DEFENCE

The president of the Committee on External Relations and National Defense, senator Eduardo Azeredo (PSDB-MG), who also took part in the reception to the king and queen of Sweden at the Senate, recalled that the technical report from the Brazilian Aeronautics about the purchase of 36 fighters to modernize the Brazilian Air Force indicates advantages to the Gripen NG, of the Swedish company Saab (Agencia Senad0).

The Committee on External Relations and National Defense approved, on Thursday (24), an information request to the government on the effects that the announced cuts in the Union Budget will have on strategic programs in the Defense sector. The questions will be sent by the committee to the minister of Planning, Budget and Management, Paulo Bernardo (Agencia Senado).

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