By Tony Volpon of Nomura
Why has growth in Brazil been so disappointing these past two years, falling from 7.5 per cent in 2010 to below 1 per cent in 2012? There are two competing responses. The first, favored by the government, puts the blame mainly on external factors, such as the European crisis and the growth slowdown in China. The second emphasizes supply-side constraints, whether in poor infrastructure or tight labor markets.
Though these two explanations are not mutually exclusive, they are hard to fully square up with the data. Continue reading »
After a few weeks of mixed news on the economy, could it be that the government’s “salt bath” (or banho de sal grosso in Portuguese), which in Brazilian superstition is something one does to ward off bad luck, is yielding results? Continue reading »
For much of this year, the Brazilian real has been one of the world’s worst-performing currencies. That largely served Brasilia well: it wanted a weaker real to help boost the slowing Brazilian economy. Lately, though, the real has been clawing back lost ground; during the first half of August, it even outperformed its Latin American peers.
But this week the central bank decided it had had enough. After a lengthy market absence, it intervened on Tuesday to stop the currency from strengthening further. The magic number it seemed to be defending? About 2 reals to the dollar. Continue reading »
Banco Cruzeiro do Sul, literally Southern Cross Bank, is the kind of horror story every regulator should fear.
Though small and systematically irrelevant, the flagrant malpractice allegedly committed on its books is the kind of thing that can bring a whole system into disrepute.
To recap, the bank was taken over by the central bank and put under the administration of the FGC, the country’s deposit guarantee fund, after the discovery of “non-existent assets” on its books. This from Moody’s:
On August 15, 2012, the FGC published a Special Opening Balance Sheet as of June 4, 2012, which presents a negative equity position of R$2.237 billion after adjustments of R$3.11 billion largely related to non-existent assets, insufficient provisions for loan losses and contingencies, and the reversal of profits on repurchased loans.
Continue reading »
Brazil and Argentina must be green with envy. Economists are increasingly downbeat on Brazil’s growth, cutting their 2012 forecast again (to 1.75 per cent). Argentina’s latest official data, showing flat activity in June was only good because it was not as bad as expected. And then here comes Chile with expansion of 5.5 per cent in the second quarter and 5.4 per cent in the first half, better than market expectations, and the fourth straight quarter of growth. Continue reading »
We all know about the backlash against the corporate chief executives who try to award themselves extravagant pay raises even after delivering rubbish financial results.
But what about employees of central banks who want pay raises to compensate for inflation even though they are meant to be the very people responsible for curbing price hikes?
That may sound strange but that is what is happening in Brazil. Continue reading »
When a central bank has to release a press statement reminding everyone that it remains an autonomous institution and is not under political pressure from the government, you know something is up. Continue reading »
Two bits of data released by Brazil’s central bank on Monday make it even more likely the bank will cut its policy interest rate to within a whisker of its all-time low on Wednesday.
But even then, the rate will still be pretty high. And if market expectations are to be believed, it will get higher again before long.
Continue reading »
Brazil’s central bank has cut its benchmark interest rate by 50 basis points to 10.5 per cent.
No surprises there, then.
Here’s the accompanying statement: Continue reading »
No wonder Brazil’s finance minister, Guido Mantega, got in such a huff about the strength of the real last year, inciting a global currency war wherever he went.
New data from the central bank on Wednesday shows that a whopping $65.28bn in dollar inflows poured into Brazil in 2011 — almost triple the previous year’s total of $24.35bn. Continue reading »
What better way to start the new year than by holding a bond sale and showing everyone who is boss.
Brazil once again flaunted its enviable position in global debt markets on Tuesday by selling $750m of its 2021 dollar-denominated bonds at a yield of 3.449 per cent (150 basis points above comparable US Treasury bonds). Continue reading »
Brazil’s central bank cuts interest rates by 50 basis points to 11 per cent, as expected. Here’s the (very short) statement:
Continuing the process of adjusting monetary conditions, the central bank’s monetary policy committee (Copom) decided unanimously to reduce the Selic to 11 per cent, without bias. The Copom understands that by timely mitigating the effects of a more restrictive global environment, a moderate adjustment in the base rate is consistent with the convergence of the inflation scenario with the target in 2012.
Just when we thought the two-speed element of Brazil’s economy was coming to an end, new credit numbers have come out that show the consumer is still racing along.
Even as industrial output has gone into reverse and the economy is showing signs of having recorded flat or even negative growth in the third quarter, credit demand remains resilient. Continue reading »
Brazil’s capital markets are growing up fast. From a slow start, of fewer than 10 initial public offerings in the decade up to 2003, they have recently sped up and in 2007 alone hosted 86 equity deals worth more than $41bn.
However, an FT Special Report argues that Brazil’s financial markets have yet to reach their full potential and, as global conditions bite, must act fast if they wish to keep growing. Continue reading »
Back in August, the central bank started slashing interest rates even though annual inflation was above the already generous inflation target of 4.5 per cent, plus or minus 2 percentage points.
When asked if the central bank will manage to push prices back within range by December (the official deadline to the meet the target), Central Bank President Alexandre Tombini (pictured) now tends to avoid the question by saying inflation will converge with the centre of the target in 2012. Continue reading »