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