There is no doubt that emerging market (EM) investors have cheered up considerably of late. Following a torrid January and February, virtually all asset classes in the EM universe appear – on aggregate at least – to be gaining in value.
The bellwether stock index, the MSCI EM index, is up 9.6 per cent from its low on February 5. EM sovereign bonds are yielding an average of 5.51 per cent, down 0.37 per cent since January 1. Local currency bonds are, in many cases, producing stellar returns sharpened by windfall currency gains. Indeed, some EM currencies are among the world’s best performers, with the Indonesian rupiah rising 7.81 per cent, the Brazilian real gaining 7.3 per cent and the Indian rupee climbing 2.8 per cent so far this year. Continue reading »
Some good news at last for the beleaguered Brazilian government: GDP growth in 2014 was 2.3 per cent, including 0.7 per cent in the fourth quarter, beating surveys by Reuters and Bloomberg which both had a consensus for 0.3 per cent in Q4.
Among those heaving sighs of relief will be the central bank, whose widely-followed GDP indicator, the IBC-Br, had suggested a marginal contraction in activity in the fourth quarter, which would have put Brazil into a technical recession (two consecutive quarters of contraction). Continue reading »
If investing is all about value creation, the latest batch of figures from Brazil’s central bank make for sobering reading. They show the rich returns you can make when investing in Brazil goes right – and the huge losses that result when it goes wrong. Over the past three years, foreign direct investors and buyers of Brazilian portfolio assets have suffered value destruction on a colossal scale.
An analysis of central bank figures by beyondbrics shows that ,taken together, flows of foreign direct investment to Brazil and foreign investment in Brazilian portfolio assets were worth more than $260bn between January 2011 and November 2013. Over the same period, in spite of those inflows, the value of such assets held by foreigners fell from $1,351bn to $1,327bn, a loss of $24bn, implying value destruction of more than $284bn in less than three years. Continue reading »
By Paulo Sotero of the Woodrow Wilson Center
Low expectation is the best thing going for Dilma Rousseff as she prepares for her first appearance as Brazil’s president at the annual conclave of global business leaders in Davos this week. Her absence from the World Economic Forum over the past three years was explained by officials in Brasília as a political decision, indicative of her low regard for the annual assembly of the masters of globalization. Things have changed. Continue reading »
Brazil’s economic growth continues to disappoint.
After data in December showed Brazil’s economy shrank in the third quarter of last year for the first time since 2009, the central bank’s IBC-Br index, a monthly proxy for gross domestic product, on Friday showed economic activity fell 0.3 per cent in November from a month earlier. Continue reading »
Imagine you’re Brazil’s central bank president, Alexandre Tombini.
It’s an election year and your boss is Dilma Rousseff. Growth is slowing and high interest rates are boosting debt servicing costs for voters who are up to their eyeballs in debt. Continue reading »
The 13th in our series of guest posts on the outlook for 2014 is by Marcos Troyjo of Columbia University
As a new year begins, uncertainties generally abound. But that is not true about Brazil in 2014. Quite the contrary. The world can clearly see what is coming Brazil’s way: a country treading below potential.
When Luiz Inácio Lula da Silva was campaigning for president in 2002, he wanted to signal his willingness to stick to the tenets of economic stability established by Fernando Henrique Cardoso and yet push for change in other fronts. He did so by writing a ‘Letter to the Brazilian People’. Continue reading »
Twenty-nine year old Cidcleide earns R$1,040 a month ($447) working as a hospital cleaner in Natal, in Brazil’s north-east. Three months ago she bought a house under the government’s subsidised mortgage scheme Minha Casa, Minha Vida – My House, My Life. Previously, she and her two daughters – aged 9 and 13 – were living with an aunt in a nearby favela, eight to a house.
Cramped living conditions are not uncommon in Natal. This is a city of around 800,000 people with a shortfall of 40,000 homes, local authorities say; nationally, Brazil’s housing deficit is close to 8m. Continue reading »
If Dilma Rousseff hadn’t been too busy hosting the French president on Friday she probably would have been doing a victory lap around Brasília on the back of somebody’s motorbike.
After an onslaught of negative economic news over the past few months, data on Friday showed activity rose more than expected in October. The central bank’s IBC-Br index rose 0.77 per cent in October from September, compared to an estimate of 0.5 per cent from analysts surveyed by Reuters. Continue reading »
It has become one of Brazil’s longest-running soap operas, or ‘telenovelas’: where is the country going to buy its new fighter jets?
Brazil has been talking about refurbishing its air force for more than a decade now, flaunting around a contract for 36 fighter jets that is seen as one of the most coveted deals in the global defence industry. While the contract itself is estimated to be worth at least $4bn, maintenance and follow-on deals would be worth even more. Continue reading »
Tuesday’s release of Brazil’s latest GDP figures was bad enough on its own: third quarter growth came in much lower than expected, delivering the worst quarter for five years. But it contained an added element of badness for Guido Mantega, finance minister, who has reportedly had his ear burnt by his famously straight-talking boss, president Dilma Rousseff.
Why? Mantega’s ministry told Dilma’s office last week that GDP growth in full year 2012, previously reported at a measly 0.9 per cent, would be revised upwards to a more respectable 1.5 per cent – something Dilma made much of. And then Tuesday’s figures spoiled it all. Continue reading »
Is there no end to the gloom surrounding Brazil?
The government statistics agency said on Tuesday that GDP had contracted by a seasonally-adjusted 0.5 per cent in the third quarter from the second quarter, more than the 0.3 per cent contraction predicted by a Bloomberg survey of 38 economists. Continue reading »
When Vale agreed to settle multi-billion dollar tax claims this week, Brazil’s President Dilma Rousseff must have breathed a huge sigh of relief.
After all, she really needs the cash. That became more evident than ever on Friday when the country posted its smallest primary budget surplus for the month of October on record.
Central bank data showed a primary budget surplus of only R$6.2bn ($2.7bn) last month – the lowest figure for October since authorities started tracking the data in 2001 and far below economists’ median estimate of R$9.75bn, according to Reuters.
While that came as a nasty surprise it was not totally unexpected. Brazil’s public finances have been deteriorating for a while as the government remains reluctant to reduce spending ahead of presidential elections next year. Continue reading »
Brazil’s central bank has increased its benchmark interest rate by 50 basis points to 10 per cent, as expected.
Here’s the accompanying statement:
Giving continuation to the adjustment of the benchmark interest rate, which began with the meeting in April 2013, the Copom (central bank’s monetary policy committee) decided unanimously to raise the Selic rate to 10 per cent a year, without bias.
Continue reading »