News from Brazil

Brazil Business & Economy News

In Brazil on February 17, 2012 at 11:50 am

ECONOMY

Economic activity in Brazil rose 0.57 percent in December from November, the second increase in a row, adding evidence of a rebound after interest rate cuts and tax incentives (Reuters).

Finance Minister Guido Mantega said Brazil’s GDP grew three percent in 2011, rejecting the Central Bank’s estimate of 2.79 percent (Xinhua).

Growth will pick up speed in the second half of the year and reach an annualized pace of more than 5 percent, due to government stimulus measures, Finance Minister Guido Mantega said (Bloomberg).

In December, the volume of retail trade sales in the country increased by 0.3% in comparison with that of the previous month, in the seasonally-adjusted series. Nominal revenue recorded the same percent change. As a result, the sector completed a period of four months with positive rates for volume of sales and 38 months in a row for nominal revenue. The other indexes, without seasonal adjustment, registered increase of 6.7% in volume of sales over December 2010 and the same figure accumulated in the year. Nominal revenue had rates of 10.1% over December 2010 and of 11.5% in the year (IBGE).

Finance Minister Guido Mantega denied a report the government is considering raising taxes on floating-rate debt investments, saying that no tax increases of any kind are planned at this time (Reuters).

BUSINESS

Merck & Co plans to form a joint venture with two Brazilian pharmaceutical companies to sell medicines in Brazil, the U.S. drugmaker said (Reuters).

German truck maker MAN SE said profitability will take a hit this year from the impact of new emissions standards in Brazil which could push down demand in this key market by an estimated 15 percent in the first half (Reuters).

General Mills Inc agreed to buy Brazilian food company Yoki for 2 billion reais ($1.16 billion), in a move marking its return to Latin America’s largest consumer market (Reuters).

In a globalized world like the one of nowadays, it is hard to control the economic interaction between countries and even all the barriers to imports are not enough to control a phenomenon called parallel imports (The Brazil Business).

AGRI ETC

The U.S. health regulator declined a request by orange juice producers to allow a higher tolerance of a banned fungicide in juice imports, a decision that will force Brazil to stop exporting concentrated orange juice to the United States (Reuters).

AUTOMOTIVE

Brazil in March will ease a tax increase charged on imported cars for automakers investing to build local assembly plants. The surcharge of as much as 30 percent was implemented last month, amid protests from Chinese automakers, to stem a surge of imported cars. Companies that may benefit include Anhui Jianghuai Automobile Group Co from China and Germany’s Bayerische Motoren Werke AG, both of which have announced plans to invest in Brazil (Bloomberg).

The BNDES has approved financing of R$ 307.4 million for automaker Hyundai Motor Brasil to set up an industrial plant in the city of Piracicaba (state of São Paulo) to manufacture passenger vehicles (BNDES).

AVIATION

Gol Airlines pulled its new perpetual non-callable three senior unsecured note (bond), something many in the market expected. The bond had a minimum size of US$100m, with initial price guidance of 11.50%, “a big, sexy yield,” said a senior DCM banker in London, but not enticing enough to make it past the finish line (Reuters).

TAM, Brazil’s largest airline, cut its travel demand estimate for this year and will further lower the size of its fleet, signaling that an economic slowdown will hamper revenue (Reuters).

Embraer, the world’s third-largest commercial planemaker, booked an order for 10 regional planes from Brazilian airline Azul through the exercise of options, as the carrier grows its network of lower-traffic routes (Reuters).

Brazil’s Senate Commission on Infrastructure Services said it will invite aviation authorities to explain the bidding process for the Guarulhos, Viracopos and Brasilia airports. Senator Francisco Dornelles said he considered it “important that it is explained to the commission how it will be possible to reach the quality of service desired with the resources that will be left after the payment to the government” (Bloomberg).

Brazil is considering new rules for the next round of airport auctions because President Dilma Rousseff has concerns about the winners of last week’s bidding. The government is worried that some of the companies that won the rights to manage the Viracopos, Guarulhos and Brasilia airports don’t have enough experience in the business (Bloomberg).

A Brazilian airliner safely made a forced landing after a passenger had a “psychotic attack,” entered the cockpit and assaulted a pilot, crew members and passengers who tried to subdue him, witnesses said (NDTV).

BANKING & FINANCE

Credit availability for large Brazilian companies was “moderately restrictive” in the final three months of last year and will remain so in the first quarter, said Carlos Hamilton, the central bank’s director of economic policy, citing a survey of 22 financial institutions (Bloomberg).

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MINING & STEEL

Vale, the world’s largest iron ore producer, said it is selling 80 percent of its ore using spot prices, nearly completing a historic shift to market-based pricing for the principal raw material used in steel. The new system was prompted by Chinese steelmakers, Vale’s largest client group, who wanted to benefit more quickly from falling iron ore prices (Reuters).

Switzerland is demanding that Vale SA, the world’s No.2 iron-ore producer, pays five years in back taxes, Swiss newspaper Tages-Anzeiger’s website reported (Reuters).

Billionaire Eike Batista, whose investments range from iron ore to coal, said he’s in talks with sovereign wealth funds and other potential “strategic partners” to sell a stake in his AUX gold unit (Bloomberg).

Steelmaker Gerdau has an “extensive list” of potential partners for a plan to spin off a mining unit that has about 2.9 billion tonnes of iron ore reserves, Chief Executive André Gerdau Johannpeter said (Reuters).

OIL & GAS

Brazil’s consumption of gasoline rose 19 percent in 2011 to 35.5 billion liters, the National Petroleum Agency said, because of soaring vehicle sales and a spike in the price of ethanol. Overall, Brazil’s consumption of fuels rose by 3 percent last year to 121.5 billion liters, the agency said, including a 5.2 percent increase in diesel to 51.8 billion liters (Reuters).

Petrobras’ new chief executive, Maria das Gracas Foster, said her concern is to increase oil and gas output but she did not plan to expand the investment budget for Brazil’s state-run oil company (Reuters).

Graca Foster was appointed Petrobras new CEO last Monday. The self-made woman, nicknamed “the Iron Lady of Oil” by Brazilian press,  grew up in a favela in Rio de Janeiro and started working when she was 8 years old as a rag-picker. Maria das Gracas Foster becomes the first woman to head the Brazilian oil giant, the largest company in South America. Who is she (Forbes)?

Petrobras said it reduced output from the offshore P-43 production platform after it leaked about 30 barrels of oil into the sea. It’s the latest in a series of small spills in one of the world’s most promising new oil frontiers that have elicited fines ranging from tens of million to several billions of dollars and even criminal indictments against some oil company executives (Reuters).

Petrobras also cut its 2012 target for additional oil output by 30 percent, citing delays in building a ship. The company said it would add 336,000 barrels of new oil output a day in Brazil this year, down from its previous estimate of 480,000 (Reuters).

Brazil’s state development bank BNDES has approved the first two loans as part of a 4 billion reais ($2.3 billion) program to finance oil equipment and service providers at a time when the country plans to more than double oil production by 2020 (Bloomberg).

Sete Brasil Participacoes SA, an oil-rig provider owned by Petrobras, banks and pension funds, will spend $27 billion by 2020 on drilling units (Bloomberg).

PORTS & LOGISTICS

About a quarter of Brazil’s shipments of soy and corn to world markets were disrupted after a dry bulk carrier collided with and damaged a major grain terminal at Santos Port (Reuters).

China’s Dalian Port said it was seeking more cooperation with Brazil’s Vale, appearing to reach out to the world’s largest iron ore producer after Beijing banned its giant ships from docking in China last month (Reuters).

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