News from Brazil

Brazil Business & Economy News

In Brazil on October 28, 2011 at 11:08 am

ECONOMY

Is the government of President Dilma Rousseff, in office since January, giving priority to other goals, such as sustaining growth and preventing the overvaluation of the currency, rather than keeping inflation low? And has the Central Bank lost its independence? Read on at The Economist.

Brazil’s total federal debt rose in September as the Treasury issued new debt at home and abroad, the government reported this week. The country’s federal debt load increased 2.3% in the month to Reais 1.809 trillion (1.02 trillion dollars), from Reais 1.768 trillion in August, the Treasury said in a statement (MercoPress).

Brazil’s Central Bank says direct foreign investment in Brazil in the first nine months of 2011 has totaled $50.5 billion. That’s the highest since it started to measure investment in 1947 (Washington Post).

The Brazilian economy has made a rapid recovery from the global economic crisis, but further reforms are necessary to boost long-term growth, spur investment and further reduce poverty, according to the OECD’s latest Economic Survey of Brazil (OECD).

“The OECD looks back and underestimates Brazil’s capacity to respond to the challenges today,” said Brazil’s Economic Policy Secretary Marcio Holland. Holland said the OECD is “underestimating the Brazilian economy’s capacity to recover from shocks” caused by external events (Xinhua).

For decades, Brazil’s poor had little else to cling to than their meager possessions and scant hopes for a better future. But a government program now is helping lift tens of millions in dire need out of poverty, in the process creating a vast new Brazilian consuming class (Yahoo).

When Brazil’s central bank in August reversed course suddenly, cutting its benchmark interest rate after a series of rate hikes, it was accused of succumbing to political pressure to spur economic growth at the cost of faster inflation. Nearly two months on, many economists are over their initial shock and are coming around to the bank’sway of thinking. The central bank’s weekly market survey showed inflation expectations for 2011 declined for the first time in eight weeks (Nasdaq).

After steadily appreciating for the previous 18 months, the real did a U-turn in July and promptly plummeted about 15 per cent against the dollar during the third quarter. A victory for Mantega’s currency war, perhaps, but very bad news for companies such as Vale that have almost all their debt in dollars. Most companies don’t bother to hedge all of their debt in Brazil: it’s expensive, people believed the real was a one-way bet, and you can always rely on the central bank to step into the market if things get really ugly (FT Beyond Brics).

Brazilian retailers and consumer goods companies’ third-quarter results were likely their worst in a year and a half, due to a broad economic slowdown, waning consumer confidence and tighter credit, a Reuters poll of analysts found.

Brazil’s ‘BBB’ ratings are supported by its strong external liquidity buffer with foreign exchange reserves at USD350.6 billion, its net sovereign external creditor status, the flexibility of its macroeconomic policy framework, and a healthy banking system (Reuters).

President Dilma Rousseff is pushing allies in Congress to approve changes to the pension system for government employees, a move Banco Bradesco SA says may pave the way for an upgrade of the nation’s credit rating (Bloomberg).

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BUSINESS

During Brazil’s rise, several economic sectors have attained global prominence, but the Internet has been a notable exception. Nasdaq does not have a single Brazilian Internet company listed, and the country’s own exchange has very few. But start-ups are being nurtured now by a small range of venture caital funds  (New York Times).

The BNDES approved a credit limit of R$ 2.46 billion for Braskem S.A. Funds are earmarked to support the investment plan of the petrochemical company in the states of Bahia, Alagoas, Rio de Janeiro and Rio Grande do Sul (BNDES).

Odebrecht United States has begun its first port project in the country. The Wharves Strengthening Program involves the reinforcement of 1,600 meters of cargo dock walls at the Miami Port, and also includes the improvement of the infrastructure in the area of loading and unloading cranes (Odebrecht).

The Brazil Business presents an outlook of the economic profile of the five Brazilian regions, covering the viable segments and the impact Pre-Salt exploitation and the 2014 World Cup have over these states.

Brazil’s EBX group, controlled by billionaire industrial magnate Eike Batista, is planning to build a $3 billion fertilizer plant in Brazil together with Egypt’s Orascom Construction Industries, EBX said (Reuters).

Eike Batista, Brazil’s richest man, also wants to help Taiwanese technology giant Foxconn with its plans to produce Apple products such as the iPad in the country, the latest twist in a much-hyped deal that could be worth up to $12 billion (Reuters).

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AGRI ETC.

Producers in Brazil’s fast-expanding biodiesel sector are lobbying the government to raise the mandatory blend of the renewable fuel in regular diesel as production capacity far overshoots demand (Reuters).

AUTOMOTIVE

PSA Peugeot Citroen will invest 3.7 billion reais ($2.1 billion) in Brazil to double its production by 2015, Trade and Industry Minister Fernando Pimentel said. The announcement followed a report that Volkswagen AG is also negotiating with authorities to build a $2 billion factory in Brazil — the latest foreign automaker looking to raise local output after a tax increase on imported cars (Reuters).

The Brazilian government is working on a program to stimulate the production of vehicles manufactured with locally-made parts, in a bid to protect industrial production and jobs, Finance Minister Guido Mantega said (Reuters).

Anhui Jianghuai Automobile Group Co. plans to more than double annual sales in Brazil by 2015 after its publicly traded unit’s shares plunged by almost a third this year amid slowing sales growth in China (Bloomberg).

AVIATION

Embraer and Azul Linhas Aéreas Brasileiras signed a contract for the purchase of 11 EMBRAER 195 jets. The transaction increases the airline’s total orders for Embraer E-Jets to 52 aircraft. The value of this latest acquisition, at list price, is USD 497.2 million. Deliveries are scheduled to begin in 2013 (Embraer).

JetBlue canceled the deliveries of 12 Embraer SA E190 aircraft that had been scheduled for delivery in 2014, 2017 and 2018 under a previously announced plan to limit its E190 fleet to no more than 75 planes, the airline said. JetBlue said in June it was working with Embraer to remarket 25 remaining E190s it had ordered (Bloomberg).

Boeing, Embraer and the São Paulo State Research Foundation (FAPESP) announced plans to collaborate on long-term aviation biofuels-related research and development, a move that represents another major step toward the creation of a sustainable aviation biofuels industry in Brazil. Azul, GOL, TAM and Trip airlines will be strategic advisors in the program (Embraer).

Brazil has begun a process of inviting in private investors and granting concessions to renovate and manage airports across the country. Infraero, a government corporation that runs many Brazilian airports, will maintain a 49 percent stake in the joint ventures formed with investors (Miami Herald).

Brazil’s antitrust regulator Cade ordered airline Gol Linhas Aereas to freeze its takeover of smaller rival WebJet while it weighs the case, following reports earlier in the year that it could suspend the deal (Reuters).

A small Chilean airline said it dropped its appeal against larger rival LAN’s planned takeover of Brazil’s TAM, removing a major hurdle to the creation of one of the world’s top airlines (Reuters).

TELECOMS

Heating competition among Brazil’s telecommunications companies likely pressured operating profit margins in the third quarter, with mixed results for their bottom-line results, a Reuters survey of analysts found.

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