News from Brazil

Business & Economy

In Brazil on December 4, 2010 at 2:50 pm

ECONOMY

For years, the local subsidiary of Carrefour (France) has vied for pole position in Brazil’s retailing sector with Pão de Açúcar, a local chain controlled by Casino (also France). But now a corporate scandal in Brazil has led Carrefour, the world’s second largest retailer, to take a one-off charge of €550m (US$723m) this year. The result has not only forced Carrefour to downgrade its 2010 profit target; it has also forced a widespread review of Brazilian business practices (The Economist Intelligence Unit).

Brazil’s real BRBY, one of the world’s most overvalued currencies, has begun creeping back towards the two-year high it hit in October. Exports are harder to sell abroad, manufacturers are struggling to compete with a flood of cheap imports and the current account deficit has reached record proportions. If the real strengthens past the closely-watched 1.70-per-dollar level, the following measures could be taken according to Reuters.

Risks that investors will face in Latin America’s largest economy over the next 12 months include slowing economic growth, heightened intervention to stem a currency rally and an increased role of the state in key industries (Reuters).

Brazil expects a more complicated recovery due to uncertainties in U.S. and European economies, the country’s deputy central bank governor, Luiz Awazu Pereira da Silva, said (Reuters).

AVIATION

Brazil’s civil aviation regulator suspended sales of domestic tickets by airline TAM for all flights through Dec. 3 after cancellations and delays topped the industry average (Reuters).

BANKING

Royal Bank of Scotland is planning to launch a Brazilian global markets venture before the end of the year, as the UK government-owned lender seeks to re-establish itself in key emerging market countries following three years of retrenchment (Reuters).

Banco do Brasil SA may complete the purchase of a 10 percent stake in Santiago-based lender Corpbanca by the end the first quarter next year (Bloomberg).

BIOFUELS

The launch of Honda’s CG 150 Fan, the third Flex-Fuel motorcycle introduced in Brazil by the Japanese manufacturer, is a testament to growing consumer demand for this type of product on the market. According to the Brazilian Sugarcane Industry Association  (UNICA), the success of motorcycles that can handle gasoline and ethanol, launched in Brazil by Honda in 2009, is similar to what happened with Flex automobiles (UNICA).

Brazil’s sugar and ethanol industries will need $36 billion in investment by 2020, said Andy Duff, a food and agribusiness researcher at Rabobank (Bloomberg).

SPORTS & BUSINESS

IMG Worldwide, the sports and entertainment giant, has formed a joint venture with the Brazilian conglomerate EBX Group to develop sports businesses in Brazil. Behind the deal are two charismatic billionaires: Ted Forstmann, the owner of IMG, and Eike Batista, founder of EBX. The two men are looking for opportunities in a country with a vibrant economy. Sports-crazed Brazil is also hosting the World Cup in 2014 and the Olympics in 2016 (New York Times).

The 2016 Olympic Games in Rio have signed up their first domestic sponsor. Brazil’s second-largest bank, Bradesco, will pay at least $320m (£205m), which is the minimum sum set by the games’ organising committee for the finance and insurance services categories (BBC).

According to the BBC, FIFA board members Ricardo Teixeira of Brazil, hosts of the next World Cup, Confederation of African Football (CAF) chief Issa Hayatou and South American (CONMEBOL) head Nicolas Leoz took bribes (Reuters).

AGRI

In a clear signal of the lack of qualified labour which is suffering the booming Brazilian economy, the powerful Marfrig meats’ processing group admitted it was having difficulties to fill 3.000 vacancies with competent personnel (MercoPress).

MINING & STEEL

Vale inaugurated its Tres Valles copper plant, the mining company’s first project in Chile. Located in Salamanca in the IV Region of Coquimbo, the plant, whose annual production capacity will be 18.5 kt of copper cathodes, will be the company’s first to produce cathodes on an industrial scale using the hydrometallurgical process. Total investment in the construction phase was US$140 million (BW).

Operational profit at Brazil’s Gerdau, the world’s No. 2 maker of long steel for the construction industry, is unlikely to improve in the 2011 first quarter due to weak demand, persistently high raw material costs and fierce competition (Reuters).

OIL & GAS

Brazil’s Congress has modified laws relating to the country’s oil sector which could increase development of its offshore oil fields. The bill ensures that the state-run oil company Petrobras will have a 30% stake in any new joint exploration ventures in Brazil’s offshore fields (BBC).

Petrobras may import as many as 40 cargoes of liquefied natural gas by the end of the year. Irregular rainfall affected hydropower production in Brazil this year and the country turned to gas to produce electricity, Marcio Demori, LNG trading manager for the company said at the World LNG Summit in Barcelona (Bloomberg).

Petrobras reports that it opened up the commercial bidding on three tenders for up to 28 rigs, all to be built in Brazil, to meet the demand for drilling in the pre-salt area. The three tenders will be handled by their respective bid committees who will evaluate all the proposals before releasing the final result.  Petrobras is yet to decide on the number of rigs to be contracted for each type of operation, depending on the number of proposals submitted, the benefits offered and the timeframe (BW).

Petrobras Chief Executive Officer Jose Sergio Gabrielli said he’s only guaranteed to remain at his post until Dec. 31, when Brazilian President Luiz Inacio Lula da Silva leaves office. O Estado de S. Paulo newspaper reported Nov. 7 that Rousseff may name Maria das Gracas Foster, the head of Petrobras’s natural gas and energy divisions, to replace Gabrielli or as cabinet chief (Bloomberg).

HIGH SPEED

A group of 22 companies led by South Korea’s Hyundai Heavy Industries plans to bid for the right to build and operate a high-speed rail link in Brazil, even as the government might delay the process (Reuters)

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