Brazil economy

An index of confidence among Brazilian manufacturers suggests things aren’t as grim as all that, after an index of consumer confidence published on Tuesday hit a post-crisis low.

But the uptick in the manufacturing confidence index produced by the Fundação Getulio Vargas – the same academic institution that prepared the consumer index – does not bear close inspection.

Source: FGV/IBRE. Click to enlarge

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Another reminder of the challenges facing Dilma Rousseff as she struggles to put together an economic team for her second term in office: consumer confidence is at its lowest ebb since the depths of the global financial crisis in December 2008.

Source: FGV/IBRE

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By Marcos Troyjo of Columbia University

As Dilma Rousseff struggles to assemble a new economic team after the bitter political strife that led to her re-election by a thin margin, a tension has built up between continuity and change.

The divide between the “more of the same”, “nothing is wrong” discourse that Dilma’s marketing gurus had her voice during the campaign and the no-nonsense imperatives of economic reality that compel her to shift course is now a major cause of dispute in her own political support base. Read more

Ministers resign all the time and there’s nothing unusual about one of them handing in his or her notice as the head of government is preparing to unveil a new cabinet for a second term in office. But Marta Suplicy’s resignation as Brazil’s minister of culture on Tuesday had a peculiar sting in the tail.

After the usual stuff about how happy she was to have achieved all she had done in the job, Suplicy delivered what journalists sometimes refer to as a “nut paragraph”: Read more

When Dilma Rousseff was re-elected as president of Brazil on October 26, she promised to be a much better president than she had been during her first term (which ends on December 31). Whatever she meant by that, analysts do not seem to believe it will result in a pick up in economic growth. The central bank’s latest weekly survey of market economists, on the contrary, shows the consensus on GDP growth this year falling to just 0.2 per cent (the black line in the chart) and that for 2015 falling to a not much better 0.8 per cent (the red line). Read more

Two central banks surprised the world last week with unexpected hikes in interest rates in the face of panicky financial markets. Raising rates a startling 150 basis points, the Central Bank of Russia was reacting sharply to yet another week of runs on the rouble. (It fell further this week nonetheless.)

The other, the Central Bank of Brazil, increased the cost of borrowing by a more modest 25 basis points. It seemed to be attempting to re-establish its independence credentials after the previous weekend’s presidential elections and subsequent worries that economic policy would tend towards the populist and the inflationary.

Yet just as with the advanced economies’ central banks – the Bank of Japan ramping up quantitative easing just as the Fed withdraws – monetary policy has diverged rather than unified in the big emerging economies. Read more

Brazil’s market has been in a state of mild depression since President Dilma Rousseff was re-elected just over a week ago – only ‘mild’ because many believed Aécio Neves of the business-friendly PSDB party never stood a chance.

However, there is still one topic of conversation guaranteed to raise a hopeful smile or a few extra points on the country’s Bovespa stock index, and that’s Rousseff’s next choice of finance minister. Read more

For a few days, it appeared that former president Luiz Inácio Lula da Silva had disappeared from the campaign for re-election of his comrade and protégé, incumbent president Dilma Rousseff.

But with only five days left before the second-round run-off on October 26, he reappeared in fine form, ripping into rival candidate Aécio Neves of the centrist PSDB in a speech in Pernambuco, the only state in Brazil’s poor and politically important northeast where Dilma lost in the first round of the elections on Oct 6. Read more

Like the country’s soap operas, Brazil’s presidential elections have been full of drama, improbable story lines and last-minute cliff hangers. Monday night was no different.

Just as Brazilians were beginning to wonder whether Aécio Neves of the centrist PSDB party could actually win this Sunday’s vote, a Datafolha poll showed President Dilma Rousseff ahead for the first time since the first round of elections on October 5. The results are still too close to call though, falling with the polling firm’s margin of error. Read more

As if to add substance to complaints from emerging market policymakers about being ignored, a matter mainly affecting middle-income countries became the subject of close global attention only when it emerged as a bone of contention between the US and Europe.

The snappily-titled “investor-state dispute settlement” (ISDS) process, where companies have the right to sue governments for disadvantaging their businesses, has been the subject of deep controversy for years. But since the most vocal discontents were nations like Argentina and Venezuela that complain about more or less everything, it took well-organised campaigning and official German opposition to an ISDS chapter in the US-EU Transatlantic Trade and Investment Partnership (TTIP) to make it a central concern. Read more

The coalition of small parties behind Marina Silva are edging closer to supporting Aécio Neves of the pro-business PSDB party in the second round-run-off of Brazil’s presidential election.

The Brazilian Socialist Party, the leading party behind the candidacy of Ms Silva, who dropped out after placing third in the first round of voting on Sunday, on Wednesday became the second grouping in her coalition to say it was opting for Mr Neves.

The party said it would support Mr Neves, who placed second in the first round, on condition that “an agreement would be discussed and signed concerning policies, considering the urgency to create the necessary environment for a new cycle of development”. Read more

Hat tips to a couple of beyondbrics readers for this one: the coining of a new economic predicament in the form of the stagno-squeeze, in which zero growth and rising prices leave governments and citizens squeezing every last drop of benefit from what they already have, given the difficulty of obtaining or producing anything more.

And how apt that Brazil’s government should immediately demonstrate the stagno-squeeze in action, by raiding its sovereign wealth fund to plug a widening hole in its budget. Read more

What is this? Brazil is withdrawing $1.5bn from its sovereign wealth fund to plug a hole in its budget.

President Dilma Rousseff justified the move saying the sovereign wealth fund was the equivalent of saving for a rainy day – and that a rainy day had arrived. With Brazil’s economy not growing, the government is missing its budget targets. Read more

As Brazil’s polling day draws closer, another data point emerged on Friday for the voters’ consideration: consumer price inflation is back above the upper limit of the government’s target range and shows no sign of falling back soon.

The IBGE, Brazil’s statistics office, said CPI in the month to mid-September was 0.39 per cent, bringing the accumulated rate over the past 12 months to 6.62 per cent. That was above the consensus forecast of 0.35 per cent for the month, according to Bloomberg. Read more

Another week and yet another cut in the consensus on Brazilian GDP growth this year. The central bank’s weekly survey of 100 market economists has notched up 16 consecutive weeks of downward revisions to bring the consensus on GDP growth to just 0.33 per cent this year. The outlook for 2015 also fell, to 1.04 per cent.

At least the central bank’s survey is not alone. The OECD, also on Monday, in its latest Economic Outlook cut its forecast of Brazilian growth to just 0.3 per cent this year and 1.4 per cent in 2015. That’s down from an expected 1.8 per cent in 2014 and 2.2 per cent in 2015 at the OECD’s last Economic Outlook in May. Read more