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