News from Brazil

Brazil Business & Economy News

In Brazil on November 18, 2011 at 10:31 am

ECONOMY

Brazilian economic activity dipped in the third quarter despite a slight rise in September, according to central bank data. Economists are worried that Brazil’s economy is slowing more than expected as it feels the impact of global financial turmoil, with industrial production stagnant this year and inflation around six-year highs (Reuters).

The Latin American economy has entered a declining phase and will further slow down in coming months according to a report from the Brazilian think-tank Getulio Vargas Foundation, FGV (MercoPress).

Brazil braced for a sharper-than-expected slowdown as a key indicator of economic activity fell and the government reportedly considered easing curbs on credit and investment (Reuters).

A week after erroneously reporting it had slashed France’s AAA credit rating, Standard & Poor’s slipped up again when it got its new long-term rating for Brazil wrong. The ratings agency initially said it had raised Brazil’s sovereign rating to BBB-. It swiftly corrected that, though, since the rating already stood at BBB- and the agency had actually boosted it to BBB (Reuters).

In fact, the market had upgraded Brazil long ago. For example, when Brazil sold $1bn of 30-year bonds earlier this month, they were yielding less than 5 per cent while the yield on 30-year bonds in A-grade Italy was trading at around 7 per cent. Brazil certainly has its problems (poor education and health services, corruption, a ridiculously complicated tax system — to name but a few). But when it comes to safe places to keep your money, the country is gradually proving that it now a much better bet than most of the developed world (FT Beyond Brics).

Small lenders stand to bear the brunt of the pain if Brazil’s consumers run into financial trouble. Many Brazilians haven’t been trained in the use of formal credit or in how to control debt. With inflation running at close to 7 percent and credit-card companies charging interest rates of 12 percent per month or more, some are already feeling the pinch. The default rate on consumer loans stood at 6.8 percent in September, up from 5.7 percent at the start of the year (Bloomberg).

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BUSINESS

A U.S. based insurance company is being prosecuted for selling life insurance policies in Brazil without being legally registered in the country. National Western Life, which is headquartered in Texas, will receive the biggest fine ever imposed by Brazil’s financial regulator: R$11 billion (US$6.2 billion) (The Rio Times).

Marcelo Odebrecht, Managing Director of Odebrecht S.A., received the CEO of the Year award during an event promoted by Latin Trade Magazine on October 28 at the Four Seasons Hotel in Miami (Odebrecht).

AGRI ETC.

The world’s top beef producer, Brazil’s JBS , said it expects its financial results to improve in the fourth quarter over the third and said prospects for 2012 were looking brighter than this year (Reuters).

Credit ratings agency Moody’s changed its outlook for Brazilian meat processor Marfrig from stable to negative, citing what it feels is a deterioration in Marfrig’s credit viability due to strong competition in the Brazilian protein sector in recent months, higher commodity prices, a global economic slowdown and currency volatility (MercoPress).

Brazil could overtake the United States in overall coffee consumption in the next few years as increasing wealth in Brazil is driving a rise in locals’ thirst for espressos and cappuccinos, according to the country’s coffee association head (Reuters).

But coffee output at the Cooxupe cooperative, Brazil’s largest exporter, will be 15 percent smaller in the 2012-13 season than the last high-yielding year because of dry weather, said Lucio Dias, commercial director (Bloomberg).

AVIATION

Embraer, the world’s third-largest commercial planemaker, expects to generate business worth $14 billion from the Middle East region by 2030, a top official said (Reuters).

Embraer and Alcoa announced they have signed a new technology sharing agreement that will utilize Alcoa’s proprietary aluminum alloys, advanced design and manufacturing techniques, and its fastener technologies to support Embraer’s development of new high-performance metallic fuselage and wing solutions for its family of aircraft (Marketwatch).

Brazil will need 701 new aircraft valued at about $82 billion in the next 20 years to meet surging domestic demand, Airbus SAS said. Airbus, the world’s largest aircraft maker, aims to sell as many as 26 A380 super-jumbo jets in the South American nation (Bloomberg).

BANKING

Brazil’s Banco Cruzeiro do Sul, which specializes in payroll-deductible loans, is transferring management of half of its asset-backed receivables fund to Banco Bradesco to help lure financing (Bloomberg).

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MINING & STEEL

Ternium, Latin America’s second-largest steelmaker, is in talks to buy a stake in Brazilian rival Usiminas as industry conditions for mills deteriorate. Ternium said it is discussing with members of Usiminas’ controlling bloc the potential acquisition of a minority stake in the Brazilian company. No agreement has been reached between the parties (Reuters).

OIL & GAS

A joint venture between France’s Technip and Brazil’s Odebrecht has been awarded a $1 billion contract from state-run Petrobras for the charter and operation of two pipeline installation vessels for five years (Reuters).

Daewoo Shipbuilding & Marine Engineering said that it had won an order of about $500 million to build two ships for the joint venture of Brazil’s Odebrecht and France’s Technip (Reuters).

Brazilian federal police have opened a probe into U.S. oil giant Chevron over alleged pollution linked to an oil spill at its offshore Frade project (Reuters).

British oil and gas firm BG Group said a well in Brazil pumped more oil than expected and that it had been given more time to understand the oil field before having to declare its commercial viability (Reuters).

Petrobras, the fifth- biggest oil company by value, has “many, many, many” offers for the $13.6 billion of assets it plans to sell, including fields in the Gulf of Mexico, its chief executive officer said (Bloomberg).

REAL ESTATE

PDG Realty, Brazil’s biggest homebuilder, started generating cash from operations in the third quarter as the company laid out its plans for a more cautious scenario next year (Reuters).

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