News from Brazil

Brazil Business & Economy News

In Brazil on May 11, 2012 at 11:17 am


Inflation in Brazil should be tamer in the next three months than it was in April, central bank president Alexandre Tombini said, suggesting higher prices are unlikely to interfere with looser monetary conditions (Reuters).

Brazil’s central bank has “total autonomy” to decide on monetary policy without interference from other areas of government, the bank’s chief said in response to a newspaper editorial. Alexandre Tombini, who has led an aggressive rate-cutting cycle in Latin America’s top economy, was responding to an editorial from local newspaper Estado de S. Paulo that claimed the bank had lost its de-facto autonomy to set interest rates (Reuters).

Automobile production and sales in Brazil fell in April from March, as inventories climbed to their highest level since the global financial crisis of 2008, raising the specter of idling production lines and continued weak industrial output (Reuters).

Brazil’s efforts to boost economic growth with the most aggressive interest rate cuts are driving away investors, reducing equity valuations to five-year lows and fueling the world’s biggest currency tumble. MSCI Inc.’s Brazil Index has dropped to the cheapest level since 2006 versus global shares as investors pulled $869 million from the nation’s mutual funds this year, the only country among the four largest emerging markets to post outflows, according to data compiled by Bloomberg and EPFR Global. Brazil’s debt handed foreign investors the worst losses since September last month (Bloomberg).

Brazil’s real is going the other way. Strengthening since the financial crisis of 2008, it is now in the process of weakening, most of it by design. The local currency has gone from a strong point of around R$1.68 in late February to R$1.975 on Thursday morning.  Currency speculators think it’s going to 2.20, but can a weaker real save Brazilian industries (Forbes)?

Brazil’s use of installed industrial capacity fell for a second consecutive month in March, despite a continued recovery of industrial sales during the period, Brazil’s National Confederation of Industries, CNI, announced (MercoPress).


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Braskem, Latin America’s largest petrochemical company, posted net income of 152 million reais (77.4 million) for the first quarter, down 50 percent from the same period a year before (Reuters).

Braskem is looking to switch its U.S. polypropylene plants onto feedstock from shale gas as the cost of crude oil derivatives hurts profits. Chief Executive Carlos Fadigas said the company is nearing a decision on whether to build its own plant processing propane from natural gas or form a joint venture with a guarantee to buy the project’s output (Reuters).

Construction group Camargo Correa said it would offer cash to take over Portuguese cement maker Cimpor and would preserve the company’s name and strategic outlook (Reuters).

Activity in Brazil’s services sector grew strongly in April, led by near record-high business confidence, underpinning an economy hit by weak manufacturing output, a survey showed (Reuters).


Brazil’s 4 billion-real ($2.1 billion) drive to revive sugar-cane production has faltered as government bureaucracy and a curb on foreign loans choked credit needed to finance planting. Cane refiners, who also grow the crop, couldn’t complete paperwork in time to qualify for loans from the state development bank known as BNDES before the main planting season ended last month, said Maurilio Biagi Filho, president of the ethanol producer Grupo Maubisa. In March, the government imposed a tax on overseas borrowing to stifle capital inflows that are boosting the currency (Bloomberg).

Sugar output in Brazil’s Center South, the world’s largest producing region, dropped 35 percent in the second half of April as mills delay the start of crushing after prices plummeted (Bloomberg).

JBS SA, which became the world’s largest beef producer through more than 10 acquisitions in the past five years, said it wants to make more purchases as it bets on increased profit margins in the beef sector (Bloomberg).


Chile’s LAN Airlines said it was launching the share swap offer that would complete its takeover of Brazil’s TAM to create LATAM Airlines Group, the largest carrier in Latin America and one of the world’s biggest airlines (Reuters).

Gol Linhas Aéreas committed to a smaller fleet for the next three years, as part of a plan by Brazil’s second-largest airline to control costs after posting its third loss in a year. The airline said it was cutting routes by as much as 2 percent this year after 8.2 percent growth in 2011. The combined fleet of Gol and recently acquired Webjet unit will also shrink from 150 planes last year to 138 at the end of 2012 (Reuters).

Azul Linhas Aereas Brasileiras SA, the Brazilian airline startup founded by David Neeleman, plans to hire about 300 flight-crew members this year as its fleet expands while competitors retrench (Bloomberg).


Net income at Caixa Econômica Federal surged 46 percent in the first quarter as Brazil’s largest mortgage lender ramped up lending, underscoring the growing clout of state-controlled banks (Reuters).


Brazil’s highest court suspended the payment of about 24 billion reais ($12.4 billion) in back taxes by mining company Vale, handing the world’s largest iron ore producer a temporary victory in a dispute with the government (Reuters).

Vale has stopped hiring vessels from some Chinese shipping firms in retaliation for Beijing’s efforts to keep the miner’s huge ships out of the country, traders and industry sources said (Reuters).

Alcoa Inc., the largest U.S. aluminum producer, said returns on $3 billion of investments in Brazil “have not yet come” because of “unbelievably high” energy costs (Bloomberg).


Petrobras said it had signed a $1.7 billion deal with local industrial construction companies Odebrecht, OAS and UTC Engenharia for the supply of oil platforms (Reuters).


Homebuilder Gafisa expects its recent turnaround attempt to pay off soon, after posting a narrower first-quarter loss as it scaled back new projects in response to a year of delays and cost overruns (Reuters).


Luca Luciani, head of Brazil’s second biggest wireless phone group TIM Participacoes, who has been embroiled in an investigation into irregular SIM cards, has resigned, the group’s parent company Telecom Italia said (Reuters).


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