10 June 2009 | Brazil Economic Scan

10-June-2009

Brazil Economic Scan

In this edition: Brazil may slow pace of interest rate cuts, brazil's economy enters recession, Brazil expects more coordination with other BRIC countries, Petrobras starts blog to respond to questions over tax probe, Brazil's Bovespa index falls.

Top headlines

Brazil May Slow Pace of Interest Rate Cuts as Economy Rebounds

• Policy makers, led by bank president Henrique Meirelles, will reduce the so-called Selic rate by 0.75 percentage point to 9.5%, according to 27 of 46 economists surveyed by Bloomberg. The bank cut the rate by at least 1 point at each of its past three meetings, lowering it to a record 10.25%.
• “It’s time for the central bank to fine tune interest rate cuts given the economy has clearly rebounded,” Zeina Latif, chief economist at ING Bank NV in Sao Paulo, said in a telephone interview. “The need for stronger ammunition would only be justified if the economy wasn’t recovering.” (Bloomberg)

Brazil's economy enters recession

• Brazil has gone into recession after its economy contracted by 0.8% in the first three months of 2009. Most economists define a recession as being two consecutive quarters of negative growth.
• The figure from statistics agency IBGE was still better than expected and a big improvement on the 3.8% decline in the last three months of 2008. (BBC)

Brazil expects more coordination with other BRIC countries

• Brazil said on Monday it hopes for more political, economic and commercial coordination with Russia, India and China, the three other BRIC countries. Many expect BRIC to become the engine of the world economy in coming years.
• Brazilia's undersecretary general of political affairs responsible for BRIC issues, at the Foreign Ministry, Roberto Jaguaribe,said that the summit at Yekaterinburg will not have a defined agenda, but topics to be discussed will be related to financial and economic issues. (Xinhua)

Petrobras Starts Blog to Respond to Questions Over Tax Probe

• Petroleo Brasileiro SA, the Brazilian oil company under investigation after a newspaper alleged tax evasion, is starting a blog to publish its responses to inquiries about the probe.
• Petrobras said it will disclose all media requests and the state-controlled producer’s responses as lawmakers prepare to examine allegations that the company evaded 4.4 billion-reais ($2.3 billion) of taxes and overpaid for pipelines and ships. (Bloomberg)

Brazil’s Bovespa Falls on Gerdau Closures; Bolsa Advances

• The Bovespa fell -0.9% to 53,157.13. The index is up +42% for the year. In other Latin American markets, Mexico’s Bolsa rose +0.7% to 25,107.43 and Chile’s Ipsa slipped -0.4%. The real strengthened +1.1% to 1.9416 per U.S. dollar after Brazil’s economy contracted less than forecast.
• Gerdau, Latin America’s biggest steelmaker, lost more than -2% after Banco Santander SA said a decision to suspend production at U.S. mills signaled weak demand from one of its biggest markets. Petrobras, as Brazil’s state-controlled oil company is known, slid for a third day after it said it will cut diesel prices by 15% starting today. (Bloomberg)

Source: Brazil Economic Scan

7 June 2009 | Brazil Economic Scan

7-June-2009

Brazil Economic Scan

In this edition: Brazil likely to cut the Selic rate by at least 75 bps, Nestle Brazil says coffee and sugar prices may rise, Bradesco builds on retail franchise in Banco Ibi acquisition, Brazil bond yields jump on speculation of end to rate cuts, Vale leads gains in metal stocks following Rio Tinto deal collapse.

Top headlines

Brazil Likely To Cut Base Rate By At Least 75 BPS

• Amid weak economic activity and tame inflation, the Brazilian Central Bank likely will cut its Selic base interest rate by at least 75 basis points next week. Of 19 analysts consulted in a Dow Jones Newswires survey, 10 said they expect the central bank to cut the Selic rate by 75 basis points from the current level of 10.25% annually, while 8 said the rate will likely fall 100 basis points. Only one is expecting a milder 50-point cut.
• Currently, the rate stands at its lowest level ever, amid Brazilian government efforts to combat effects of the global crisis on the Brazilian economy. So far this year, the monetary authority has cut the Selic rate by 350 basis points. The bank will decide on the Selic rate June 10. (Wall Street Journal)

Nestle Brazil Head Zurita Says Coffee, Sugar May Rise

• Nestle SA, the biggest buyer of Brazil’s coffee and sugar, said prices for the commodities may increase this year as growers worldwide fail to invest in expansion and demand for food increases faster than output.
• Food commodity prices are climbing, gaining +8.6% this year after the global credit crunch and surging fertilizer prices prompted growers in the most important producing nations to pare output, Bloomberg’s Food & Fiber Index shows. Prices are still down -5.7% from a year earlier. (Bloomberg)

Brazil's Bradesco Advances In Credit-Card Industry

• With an eye on strengthening its credit-card business, Brazil's Banco Bradesco SA (BBD) Friday announced the acquisition of Banco Ibi, the consumer-finance arm of major retailer C&A.
• Bradesco will pay for Banco Ibi for stock worth some 1.4 billion Brazilian reals ($720 million), mindful of the bright prospects for the local retail sector. Bradesco will pay with its own shares, representing 1.6% of the bank's capital. (Wall Street Journal)

Brazil Bond Yields Jump on Speculation Rate Cuts May End

• The yield on bonds due January 2010 climbed eight basis points, or 0.08 percentage point, to 9.19% at 5:41 p.m. New York time. Brazil’s currency dropped -1.2% to 1.9615 reais per U.S. dollar. The Bovespa stock index slipped -0.2%.
• “There’s an expectation the central bank’s statement that follows next week’s rate cut will bring a more hawkish tone, signaling that the rate-cutting cycle is near its end,” said Nick Chamie, head of emerging-market research at RBC Capital Markets, in a telephone interview from Toronto. (Bloomberg)

Vale Leads Gains for Metal Stocks as Rio Scraps China Deal

• Vale SA led gains for Brazilian metal producers after rival Rio Tinto Group scrapped an investment from Aluminum Corp. of China, easing concern that China would import less from the world’s biggest iron ore miner.
• “China is Vale’s biggest client and acquiring a natural resources company could have been a big danger for the company,” said Bernardo Lobao, a metal analyst at Rio de Janeiro-based BNY Mellon Arx, which manages $2.2 billion. “It distances the possibility that China would buy Rio Tinto.” (Bloomberg)

Source: Brazil Economic Scan

3 June 2009 | Brazil Economic Scan

3-June-2009

Brazil Economic Scan

In this edition: Brazil's trade surplus narrows to $2.65 bln in May, Brazil seeks to ensure Petrobras pre-salt exploration, Bradesco CEO cuts 2009 loan growth view, Brazilian stocks attract record monthly foreign inflows, brazilian stocks fall slightly.

Top headlines

Brazil May Trade Surplus Narrows To $2.65B

• Brazil's foreign trade surplus narrowed in May to $2.65 billion from $3.71 billion in April as both imports and exports declined in the face of a persistent global crisis.
• The May figure was slightly higher than analyst expectations. A Dow Jones poll of eight analysts predicted a May trade surplus of $2.34 billion. The surplus in May of 2008 was $4.07 billion. The big May, 2008 surplus was due to a surge in exports following a customs workers strike. (Wall Street Journal)

Brazil Seeks to Ensure Petrobras Pre-Salt Exploration

• Brazil wants to ensure that state- controlled Petroleo Brasileiro SA has access to new oil exploration rights in the country’s pre-salt offshore region, home to the largest oil find in the Americas in 30 years.
• Energy Minister, Edison Lobao, said that Brazil’s pre-salt oil deposits already discovered will at least double the country’s proved crude reserves, currently estimated at about 14 billion barrels, or 20 years of Brazil’s needs. (Bloomberg)

Bradesco CEO cuts 2009 loan growth view on GDP

• Brazil's second-largest private sector bank Bradesco cut its forecast for lending growth in 2009 as a slowdown in the economy reduces demand for credit, Chief Executive Luiz Carlos Trabuco Cappi.
• Lending should grow slightly more than 10 percent in 2009, down from a previous estimate of 15%, Trabuco said. Bradesco's total credit portfolio fell 0.5% at the end of March from December to 214.3 billion reais ($111.3 billion). (Reuters)

Brazil Stocks Attract Record Monthly Foreign Inflow

• Foreign investors bought 6.08 billion reais ($3.16 billion) more in stocks than they sold in May, according to data reported by the Sao Paulo-based exchange BM&FBovespa SA on its Web site. That surpassed the previous monthly record of 6 billion reais in April 2008.
• “At the end of the day, stocks trade on earnings growth and cash flow growth and Brazil looks attractive,” said Audrey Kaplan, who helps manage $23.4 billion in equities at Federated Investors Inc. in New York. (Bloomberg)

Brazil Stocks Fall on Commodity Slump, Valuations; Bolsa Climbs

• The Bovespa slid -0.9% to 53,999.52, the biggest decline since May 21. The gauge’s 44% surge this year sent it to 22 times the combined reported earnings of companies on the index. That’s the highest price relative to profit in at least five years.
• Vale SA lost -2.5% after Goldman Sachs said it sees “downside risk” to the miner’s iron ore shipments in the second quarter. Homebuilder Gafisa SA fell the most in the Bovespa index after it announced plans to sell new shares. Empresa Brasileira de Aeronautica SA, the world’s fourth-largest aircraft maker, declined -4.6% after Bank of America Corp. said it may not reach its sales target for this year. (Bloomberg)

Source: Brazil Economic Scan

31 May 2009 | Brazil Economic Scan

31-May-2009

Brazil Economic Scan

In this edition: Brazilian Finance Minister says economy will grow 3-4% in 2010, ICAP uses 'Radiohead' commissions for Brazil stocks, Braskem taps Peru and Venezuela in an expansion program, Brazil soft drinks sector can weather economic storm, Brazil stocks end up 5%.

Top headlines

Brazil Finance Minister Says Economy To Grow 3% To 4% In 2010

• The Brazilian economy is in a process of recovery and will grow between 3% and 4% in 2010, Finance Minister Guido Mantega said Thursday.
• A central bank survey of analysts forecasted Monday that gross domestic product will fall 0.53% in 2009 and rise 3.5% in 2010. One of the key reasons for the recovery is strong domestic demand, fueled by a substantial increase in the spending power of average Brazilians in recent years. (Wall Street Journal)

ICAP Uses ‘Radiohead’ Commissions for Brazil Stocks

• The London-based firm opened in Brazil in April, trailing behind Goldman Sachs Group Inc., Credit Suisse Group AG and Morgan Stanley. ICAP’s customers can choose the fee they’ll pay, from as little as 5 reais ($2.50) per trade, compared with 20 reais charged by Agora Corretora, the country’s largest electronic broker for individual investors.
• The strategy is meant to mimic British rock band Radiohead’s pay-what-you-want offer for digital downloads of its “In Rainbows” album. (Bloomberg)

Braskem Taps Peru, Venezuela in Expansion Program

• Braskem SA, Latin America’s largest petrochemicals producer, plans to invest $2.5 billion in a polyethylene plant in Peru, said Cleantho de Paiva Leite, Braskem’s director of international projects.
• Sao Paulo-based Braskem, which holds a 50% share of Brazil’s resins market, also is working on engineering studies for a $1.1 billion petrochemical plant in Venezuela with state- owned Pequiven SA, de Paiva said in an interview in Lima. (Bloomberg)

Research - Brazil soft drinks sector can weather economic storm

• Total volume sales of soft drinks were up 7.5% in Brazil last year, representing a growth surge of some 1.4bn litres. Crucially, the carbonates sector - the third biggest in the world - registered an aggressive 7% upturn, its best performance in over ten years.
• Euromonitor forecasts 10.3% growth for carbonates between 2008 and 2010; 12.2% growth for bottled water; 15.7% growth for fruit/vegetable juices; and 9% growth for RTD tea. Meanwhile, it only anticipates 0.1% growth for concentrates, the sector that flourished when economic growth last hit the buffers. (Just Drinks)

Brazil Stocks Gain on Improving Global Outlook; Bolsa Drops

• The Bovespa gained +0.3% to 53,197.73. The index rose +5.2% this week and +12% in May on speculation interest-rate cuts and rising commodity prices will bolster an economic recovery. The real advanced +1.7% against the dollar today, capping its biggest monthly gain in more than six years, on increasing appetite for emerging-market assets.
• CSN gained for a sixth day, rising +3.8% to 48.50 reais. Usinas Siderurgicas de Minas Gerais SA rallied +6.3% to 39.50 reais after Banco Santander SA said the company has an “attractive” valuation for 2010. The Bloomberg Base Metals 3-Month Price Commodity Index rose +2.6% to 143.59. (Bloomberg)

Source: Brazil Economic Scan

26 May 2009 | Brazil Economic Scan

26-May-2009

Brazil Economic Scan

In this edition: Brazil to tighten fund regulation, Turkey and Brazil look to boost trade and partnerships, Brazil's BTG poaches 6 Credit Suisse bankers, Brazilian bond yields drop on rate cut speculation, Brazilian stocks climb on Monday.

Top headlines

Brazil to Tighten Fund Regulation to Stem Risk

• Brazil plans to tighten regulation of its $592 billion mutual fund industry to improve disclosure and protect investors as record low interest rates may prompt managers to replace government debt with stocks.
• Comissao de Valores Mobiliarios, the Rio de Janeiro-based securities commission, will demand retail funds disclose costs, simplify prospectuses and limit holdings of derivatives and assets that may be hard to sell, Carlos Alberto Rebello Sobrinho, a superintendent, said in an interview. (Bloomberg)

Turkey, Brazil look to boost trade, partnerships

• Brazilian President Luiz Inacio Lula da Silva and business leaders visited Istanbul on Thursday to secure a stronger foothold in Turkey's domestic market and make good on its regional ties.
• Trade between Turkey and Brazil, which totalled a little more than $1 billion last year, could grow by as much as 400 percent in the short term, Brazil's Foreign Trade Minister Miguel Jorge said on Thursday. (Reuters)

Brazil's BTG poaches six Credit Suisse bankers

• BTG, an investment bank formed by Brazilian billionaire and former UBS executive Andre Esteves, hired six bankers from rival Credit Suisse, the Swiss bank said on Thursday.
• The new hires include Marco Goncalves, a director and head of mergers and acquisitions for Credit Suisse in Brazil, and come about one month after Esteves made a comeback with the $2.5 billion surprise purchase of Banco Pactual from UBS. (Reuters)

Brazilian Bond Yields Drop on Prospects for Further Rate Cuts

• Brazil’s local-currency bond yields dropped the most in a week on the prospect of further cuts in interest rates after analysts forecast a steeper contraction for Latin America’s largest economy this year.
• “The contraction forecast for the economy supports the call for further interest-rate cuts,” said Paulo Petrassi, who helps manage 45 million reais ($22.2 million) in assets at Leme Investimentos in Florianopolis, Brazil. (Bloomberg)

Brazil Stocks Gain as Consumer Confidence Climbs; Bolsa Rises

• The Bovespa index added +0.5% to 50,816.24. The BM&FBovespa Small Cap index gained +0.6% to 692.41. Mexico’s Bolsa index climbed +0.4% and Chile’s Ipsa increased +1.4%. U.S. markets were shut for a holiday.
• Vivo added +0.8% to 37.70 reais. Redecard SA, which processes credit- and debit-card transactions, advanced +1.4% to 26.89 reais. Gol rallied +1.9% to 8.70 reais. The airline’s planned share and bond sale are easing liquidity concerns, said Victor Mizusaki, an analyst at Itau Corretora in Sao Paulo. (Bloomberg)

Source: Brazil Economic Scan

21 May 2009 | Brazil Economic Scan

21-May-2009

Brazil Economic Scan

In this edition: Brazil economy to expand 1% says ministry, Perdigao-Sadia merger to create world poultry giant, Maritima sees growth after Sompo stake sale, Drogasil to add 40 drugstores in 2009, the Bovespa closed down slightly.

Top headlines

Brazil Economy to Expand 1% This Year, Ministry Says

• Latin America’s biggest economy will grow 1% this year, a forecast reduced from 2%, the Budget Ministry said. Economists expect gross domestic product to shrink 0.49%, according to the median estimate of analysts surveyed May 15 by the central bank.
• The ministry said it has room to increase public spending by 9.1 billion reais ($4.5 billion) this year, after it reduced its target for a primary budget surplus, or surplus before interest payments, by 23.7 billion reais, according to the Budget Ministry statement. (Bloomberg)

Brazil merger to create major world poultry giant

• The combination of Brazilian food companies Perdigao and Sadia creates a global behemoth that looks poised to dominate the world poultry market.
• The deal brings together Brazil's two biggest poultry and pork producers, creating a company called Brasil Foods with annual sales of more than 22 billion reais ($10.59 billion). The two companies held a combined market share just shy of 25 percent. (Reuters)

Brazil Maritima sees growth after Sompo stake sale

• Brazilian insurance company Maritima expects to grow sharply in the next 5 years after selling a stake to Yasuda, a local unit of Sompo Japan Insurance Inc, the Brazilian company's finance chief said on Wednesday.
• Maritima aims to be among the country's top five insurers by sales in five years, climbing from its current position as 10th largest, after selling the 50% stake to Sompo for 336 million reais ($166.4 million), Maritima's Milton Bellizia said. (Reuters)

Brazil’s Drogasil to Add 40 Drugstores as Crisis ‘Never Came’

• Drogasil has set aside about 40 million reais ($19.6 million) for new stores, CEO Roberto Ely said. The company added 46 locations last year and gained 20 more so far in 2009, bringing its total to 264.
• “We’ve established a rhythm of opening 40 stores a year, which is a number we can easily absorb into our structure,” Ely said. “Since last year people have talked about the crisis but nobody knew how long or strong it would be. In our industry, apparently, it never came.” (Bloomberg)

Bovespa Falls for a Second day as Builders Tumble; Bolsa Rises

• The Bovespa erased gains in the last hour of trading for a second day, joining a slide in U.S. stocks after the Federal Reserve predicted a deeper recession. The index slipped +0.2% to 51,245.09. The BM&FBovespa Small Cap index dropped +1.1% to 694.59.
• Cyrela, Brazil’s biggest homebuilder, fell -3.5% to 14 reais. Gafisa SA, the second-largest, sank -4.1% to 18.60 reais. Rossi Residencial SA declined -3% to 7.71 reais. Brazil’s homebuilders rose 78 percent this year, on average, according to Goldman. (Bloomberg)

Source: Brazil Economic Scan

19 May 2009 | Brazil Economic Scan

19-May-2009

Brazil Economic Scan

In this edition: Brazil in recession in Q1 but "recovering quickly", Brazil to sell 10 and 30 year bonds to set benchmarks, Brazil to add 1m jobs in 2009, CM Capital hiring traders and acquiring brokerages in Brazil, Bovespa surges 5% on Monday.

Top headlines

Brazil Saw Recession In 1Q But Is Bouncing Back, Mantega Says

• Brazil probably entered a technical recession in the first quarter, but the economy is recovering quickly and will likely register 3% to 4% growth in the fourth quarter, Finance Minister Guido Mantega said.
• "There were already signs of recovery in March," he said, citing rising commodity prices and increased credit levels as key factors in the comeback. He added that the economy will quickly get back on track in 2010, registering 3% to 4% expansion for the year. (WSJ)

Brazil to Sell 10-, 30-Year Bonds to Set Benchmarks

• Brazil may offer more 10- and 30-year bonds. “Our strategy is to keep offering 10- and 30-year bonds,” said Deputy Treasury Secretary Paulo Valle, “That helps improve the liquidity in these important benchmark points.”
• The government sold $1.78 billion of 10-year notes in January and May, part of a wave of new issues by developing nations as the global financial crisis eased. Developing-nation governments and companies sold more than $57 billion of debt this year through the first week of May, up from $34.8 billion during the same period in 2008. (Bloomberg)

Brazil to add 1 mln payroll jobs in 2009 -minister

• Brazil's economy is on track to add more than 1 million payroll jobs in 2009, Labor Minister Carlos Lupi said on Monday.
• Official data showed that Brazil's job market improved for the third straight month in April, adding 106,205 payroll positions. (Forbes)

CM Capital Hires Brazil Traders, May Buy Brokerage

• CM Capital Markets Holdings SA’s Brazilian unit is hiring traders and may acquire brokerages to expand its three-month-old stock trading business, part of a push by international brokers into Latin America’s biggest market.
• Competition is growing in Brazil’s stock and derivatives trading market as international brokers open local businesses. ICAP Plc, the world’s biggest brokerage of transactions between banks, started trading Brazilian stocks and fixed-income securities in April. (Bloomberg)

Bovespa Gains, Erasing Last Week’s Losses, on Rate Speculation

• The Bovespa rose the most in two weeks, surging 2,455.63, or +5%, to 51,463.02. The index lost -4.7% last week. The BM&F Bovespa Small Cap index added +4.9% to 705.82.
• Gafisa SA and B2W Cia. Global do Varejo gained more than +6%, on speculation lower borrowing costs will boost consumer spending. Cia. Vale do Rio Doce, the world’s biggest iron-ore producer, jumped +6.3% after rival Rio Tinto Group said China may be stockpiling steel on speculation government spending will drive demand. Cosan SA Industria & Comercio added more than +6% on the prospect of sugar producers in India resuming imports. (Bloomberg)

Source: Brazil Economic Scan