News from Brazil

Business & Economy

In Brazil on November 26, 2010 at 9:06 am

ECONOMY

Brazil is no stranger to boom-and-bust cycles, having watched one economic leap after another descend into crisis throughout its history. Those days look long gone. Now, instead of joking about their country’s chronic inability to live up to its potential, Brazilians of all political stripes are boldly staking claim to a starring role in global economic affairs. Read the full analysis at Reuters.

Although 50 percent margins on certain products may seem outrageous, a closer look into the business landscape in Brazil may explain how high taxes, complicated regulations, workforce costs generate risks and real costs that drive up the final price of products and services (The Rio Times).

Brazil is the country that has the highest tax burden among the BRICs (Brazil, Russia, India and China). The total taxes, levies and contributions collected in the country is 34% of Gross Domestic Product (GDP). In Russia, the charge is 23% of GDP in China is 20% and in India, a country whose tax structure is more like the Brazilian, the total revenue amounts to 12.1% of GDP (India-Brazil Chamber).

Foreign direct investment in Brazil soared to 6.8 billion US dollars in October, the highest for the month since records were started. This was higher than last month with 5 billion and four times October a year ago with 1.6 billion, according to the latest release from the central bank (Mercopress).

Brazil’s current account gap widened to a record in the year through October as credit expansion and record low unemployment boosted imports and spending by Brazilians abroad. The deficit in the current account, the broadest measure of trade and services, was $3.7 billion in October, pushing the annual gap to a record $48 billion, the central bank said (Bloomberg).

Companies that aim to take over rivals through bidding in the stock market will face tighter oversight to protect minority investors from risks such as asymmetric information and scant transparency (Reuters).

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AVIATION

Embraer has commenced the first phase of its new construction project in Évora, Portugal, a 330,000-square-foot (30,660-square-meter) facility dedicated to manufacturing complex airframe structures and components in composite materials. The completion of this unit is scheduled for the end of 2011, while the production phase will start in 2013 (Embraer, pdf).

The chief of the International Air Transport Association or IATA sharply criticized the poor condition of Brazil airports, saying that the situation could put the country in a very bad light during the World Cup and the Olympic Games if the government does not improve capacity and renovate aging infrastructure (Mercopress).

Brazil’s National Civil Aviation Agency (ANAC) announced it would punish airlines which overbook during the holiday season. The measure, to take effect from Dec. 17 to Jan. 3, is part of a contingency plan to avoid chaos in the country’s airports during the season (Xinhua).

AGRI

Global sugar supplies may fall short of demand next year as Brazil, the world’s largest exporter of the sweetener, razes and replants enough farmland to cover the state of Connecticut. Producers in the Center South, Brazil’s main producing region, plan to replant about 1.4 million hectares (3.5 million acres), or 20 percent of their farmland, to replace aging plants (Bloomberg).

HIGH SPEED

A consortium of Japanese companies led by Mitsui & Co will not take part in a tender by the Brazilian government for a high-speed railway project expected to cost around $19 billion. The group made the decision amid uncertainty over whether the project would be profitable over 40 years, during which time the companies would hold management responsibility (Reuters).

BANKING

Brazilian industrial conglomerate Camargo Correa agreed to sell its stake in holding company Itausa for about $1.5 billion. The likeliest buyer of Camargo’s holdings in Itausa could be Petros, the pension fund of state-owned oil company Petrobras’ workers (Reuters).

Bradesco, Brazil’s second-largest private sector bank, plans to issue new shares worth 1.5 billion reais ($868 million) to boost its capital base and modernize its facilities (Reuters).

The controlling shareholders of Banco PanAmericano, the Brazilian bank that received an emergency 2.5 billion real ($1.5 billion) capital injection last week, said the bank is not for sale as speculation mounts of possible bids for the lender (Reuters).

BIOFUELS

Data from the U.S. Environmental Protection Agency (EPA) shows that eight Brazilian sugarcane processing mills have already completed the paperwork required by the U.S. government for their ethanol to be accepted into the United States as an “advanced renewable fuel,” as called for by the Renewable Fuel Standard (RFS) (UNICA).

MINING

Vale SA’s biggest shareholder, the Brazilian pension fund Previ, doesn’t plan to substitute Roger Agnelli as chief executive officer, Folha de S.Paulo said, citing an interview with Previ President Ricardo Flores. Flores will work to improve the relationship between the company and the Brazilian government (Bloomberg).

OIL

Ecuador took control of the local operations of Brazil’s Petrobras  after the company refused to sign a new service contract (Reuters).

President-elect Dilma Rousseff is likely to keep Jose Sergio Gabrielli as chief executive of oil group Petrobras for at least another year to help boost the government control of the nation’s oil wealth (Reuters).

Picture: Petrobras CEO Sergio Gabrielli (Petrobras picture)

Brazilian state oil company Petrobras’ refining investments are crucial to ensuring Brazil’s long-term energy supply as fuel consumption soars in fast-growing nations such as India and China, CEO Jose Sergio Gabrielli said (Reuters).

REAL ESTATE

Agente Imóvel, a website dedicated to real estate, compared the average price of one bedroom apartments  in the main Brazilian state capitals.  It concluded that Brasília is the most expensive, four times more than nearby Goiânia.

PDG Realty, Brazil’s largest real estate developer, sees no risk of a bubble in the country’s housing market despite surging sales and a red-hot economy (Reuters).

TELECOMS

Brazil’s telecommunications regulator eased restrictions in the country’s fast-growing cable TV market to allow increased competition and help bring down subscription fees (Reuters).

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