News from Brazil

Brazil Business & Economy News

In Brazil on March 30, 2012 at 12:14 pm

ECONOMY

In its latest bid to slow dollar inflows in a “global currency war,” Brazil has dealt an unexpected blow to its own commodity exporters, choking off medium-term trade financing at a vulnerable time for the sector. Exporters say the central bank went a step too far on March 1, when it quietly implemented a 6 percent financial transactions tax on medium-term loans offered to exporters by banks, a critical tool used by major commodity producers across the globe to finance their operations. (Reuters).

Brazil’s central bank lowered its 2012 inflation outlook to below the government’s target but raised its forecast for higher inflation in 2013, reinforcing the view that its current cycle of interest rate cuts is soon coming to an end (Reuters).

Analysts lowered their forecasts for Brazil’s gross domestic product growth in 2012 to 3.23 percent, from 3.3 percent the prior week (Reuters).

Finance Minister Guido Mantega extended a tax break on the so-called IPI tax on home appliances for three months and cut it for four consumer products, including furniture. The tax breaks will cost the government 489 million reais ($269.52 million) in lost revenue (Reuters).

Brazil’s labor market, which is already operating near full employment, has room to handle faster economic growth without stoking inflation, central bank President Alexandre Tombini said (Bloomberg).

Brazil’s economy slowed less than analysts expected in January as demand for goods and services helped offset a contraction in industrial production. Brazil’s seasonally-adjusted economic activity index, a proxy for gross domestic product, fell 0.13 percent in January, the central bank said today. Analysts expected a 0.5 percent decline, according to the median estimate in a Bloomberg survey.

Brazil will issue sovereign bonds in the real in the near future, Treasury Secretary Arno Augustin said. According to Augustin, it is important to issue bonds in the local currency to help halt the depreciation of the U.S. dollar against the real (Xinhua).

Almost one in five manufactured goods consumed in Brazil during 2011 was imported, according to the ‘commercial opening coefficient’ survey undertaken by the country’s National Industry Confederation, CNI, and released this week in Sao Paulo (MercoPress).

BUSINESS

Brazilian criminal charges against energy industry employees over an oil spill have made foreign workers leery of new legal risks, but so far concerns seem to be outweighed by the lure of good-paying jobs and a famously laid-back lifestyle. The big question among expatriates is whether last week’s charges against Chevron Corp, Transocean and 17 of their staff are political grandstanding in a country actively seeking foreign expertise to help develop its newfound oil riches, or a real risk of doing hard time (Reuters).

Abu Dhabi state investment fund Mubadala said it will buy a $2 billion stake in Brazil’s Eike Batista’s EBX Group, providing fresh capital to the Brazilian conglomerate as it boosts spending on oil, ports, shipyards, mines and electricity (Reuters).

Batista, 55 reiterated his goal to overtake Carlos Slim, currently the world’s richest man with a net worth of $70.7 billion, by 2015. Batista’s fortune fell $375 million after shares of OGX, his largest holding, fell 2.4 percent in Sao Paulo trading (Bloomberg).

Brazilian consumers spend an average of $240 a year on beauty products, matching the consumption of more mature markets such as the U.S. and U.K. (CNBC).

Brazil is a tech savvy.  It’s elections are all digitized.  People can sit at home and watch national election data unfold straight from a government’s website, without watching the evening news.  Technology at Brazilian banks is some of the most innovative around, not only for security matters, but also for the myriad of ways that Brazilians have grown accustomed to paying bills — through checks and money orders and bank receipts — all facilitated online. Brazilian computer engineers have come up with proprietary tech to compliment their society and their business. So, yes, Brazil is more than just oil and minerals.  But will their tech talents ever translate into a company like India’s Infosys (Forbes)?

AGRI ETC.

Brazil, the world’s biggest coffee producer, may stockpile beans to help farmers as production this year climbs to a record, according to the Agriculture Ministry. Coffee output will probably rise to a record in the 2012-13 season starting in July as trees enter the higher-yielding half of a two-year cycle, the government said. Production is expected to be 49 million to 52.3 million bags, exceeding the high of 48.5 million bags in 2002, according to a Jan. 10 report from Conab, the government’s crop forecasting agency. A bag of coffee weighs 60 kilograms (132 pounds) (Bloomberg).

Marcos Jank is stepping down as President of the organization, the most important institution representing Brazilian producers of ethanol, sugar and bioelectricity (Unica).

AVIATION

Avianca Brazil plans to add 50 new planes to its fleet in the next five years, an expansion valued at nearly $4 billion that could weigh on Brazilian airline ticket prices in coming years. German Efromovich, the airline’s owner, said a contract for the aircraft could go to Airbus or Boeing this year (Reuters).

Chile’s LAN Airlines expects a share swap to complete the takeover of Brazil’s TAM in six weeks, wrapping up the multibillion dollar takeover by mid-May, LAN’s Chief Executive Enrique Cueto said (Reuters).

Gol Linhas Aereas , Brazil’s second-biggest airline, saw fourth-quarter net income tumble 58.9 percent from a year earlier as a spike in operating expenses ate into profit (Reuters).

The world’s two largest planemakers laid out forecasts for Latin America, where they see a market for 100 new commercial planes or more yearly for the next two decades as consumer spending expands with economic growth above the global average (Reuters).

Amid projections for rapid growth in airline traffic in Brazil, and an expected surge in passengers related to the upcoming soccer World Cup and Olympic Games, the country will have to greatly upgrade and expand its airports, according to a report published by Standard & Poor’s Ratings Services, in which they project an estimated doubling in the number of passengers by 2030 (Reuters).

Embraer and British Airways signed a contract for the sale of one more EMBRAER 190 (E190) jet. The aircraft will be operated by London City Airport (LCY)-based BA CityFlyer, British Airways’ wholly owned regional subsidiary. When delivered during the third quarter of 2012, it will bolster the airline’s total fleet size to 14 E-Jets (Embraer).

BANKING & FINANCE

Back to the game. That’s where billionaire Andre Esteves is leading Brazil with a share sale that may open the market for initial public offerings and ease the economy’s reliance on government loans. A successful pricing may show the way for a pipeline of 40 proposed initial offerings that the Sao Paulo stock exchange estimates at $28 billion, and could offer a template for reducing the government’s role as a top provider of loans to private businesses (Bloomberg).

HSBC, Brazil’s No. 2 foreign lender, named Andre Brandão as head of its Brazil division. Brandão replaces Conrado Engel, who left the bank this month to oversee retail banking at rival Santander Brasil (Reuters).

Bank lending in Brazil rose in February, recovering from a slight dip the previous month, as state-controlled banks stepped up disbursements to help the government fight an abrupt slowdown in Latin America’s largest economy (Reuters).

Vinci Partners Investimentos Ltda., the Brazilian investment firm founded by former Banco Pactual SA executives, is seeking to raise as much as 2 billion reais ($1.1 billion) for a private-equity fund (Bloomberg).

BM&FBovespa SA, Brazil’s biggest securities exchange, said a local lower court ordered it to pay 8.42 billion reais ($4.62 billion) in a civil case related to central bank futures trading around the time of the 1999 currency devaluation (Bloomberg).

MINING & STEEL

Vale, the world’s No. 2 mining company, expects to win permission “within months” to unload its big, new iron-ore ships at Chinese ports, a move that will help ensure efficient delivery of raw materials to China’s growing economy, a senior executive told Reuters.

Vale is moderately optimistic about the outlook for iron ore and expects significant demand from top consumer China, Claudio Alves, global marketing director, said (Reuters).

Vale denied all accusations of tax irregularities in Switzerland and said it’s prepared for dialogue with the Swiss government in an attempt to find a joint solution to the allegations. In recent weeks, Vale has been the subject of news reports citing Swiss politicians who allege the world’s second biggest mining company has disrespected a tax exemption accord with the government by using its Swiss operation to receive profits from abroad on which no tax has been paid (Fox Business).

OIL & GAS

Core Laboratories, an oilfield services company that specializes in boosting the output of wells, said it was consciously not invested in the red-hot Brazilian energy industry because it was too tough to make money there (Reuters).

Offshore oilfield equipment maker FMC Technologies Inc said it signed a four-year equipment supply deal with Brazil’s state-controlled oil company Petrobras, which will help it generate up to $1.5 billion in revenue (Reuters).

Brazil’s largest oil workers union filed a lawsuit against U.S. oil company Chevron and drilling firm Transocean that seeks to cancel their rights to operate in the country as the result of an offshore oil spill last November (Reuters).

Chevron has said they “will vigorously defend the company and its employees” against criminal charges filed by Brazilian prosecutors for an oil leak last November, dubbing the charges “outrageous and without merit.” The response came just hours after Brazilian prosecutors launched new charges against Chevron, the rig operator Transocean, and seventeen employees of both companies (The Rio Times).

Petrobras has room to leave fuel prices unchanged in 2012 but will have to raise prices at the pump if Brent oil prices stay at $120 a barrel long, the company’s chief executive said (Reuters).

Saipem, the Milan-based oil services contractor, expects to increase business in Brazil with companies including Petrobras and OGX Petroleo e Gas Participacoes SA as the South American country seeks to more than double oil output in the next decade (Bloomberg).

TOURISM

Brazil is Latin America’s fastest-growing travel and tourism economy and direct contribution to GDP is forecast to grow at 7.8% in 2012 (MercoPress).

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