The Brazilian economy is set to grow 3% in 2012 after the modest 2.7% of last year, but following the relaxation of monetary policy it runs the risk of ‘overheating’, according to the IMF World Economic Outlook, WEO (MercoPress).
Borrowing costs have started to fall at last, but the hard part lies ahead, writes The Economist. Anywhere except Brazil, the supposedly cut-price loans it offers would look more like usury. Interest on overdrafts, for example, has fallen from 157% a year to 51%. For Brazilians with recent memories of hyperinflation, an overdraft at 51% a year is an unheard-of bargain (The Economist).
Economic activity in Brazil slipped in February for the second month in a row, the central bank said, in data showing that Latin America’s biggest economy remains stagnant despite interest rate cuts and government measures to spur growth. Brazil has been flirting with recession since the second half of last year as local manufacturers struggle with high business costs and a strong currency (Reuters).
Nomura Securities’ managing director in New York, Tony Volpon, said he believes falling industrial production is the prime suspect behind the poor growth. While consumer demand remains robust, evidenced by strong retail sales growth so far this year (Jan: 7.8% y-o-y, Feb: 9.6% y-o-y), industrial production is running negative, at -3.9% y-o-y as of February. The production of capital goods, in particular, shrank 16% y-o-y, a figure last seen during the height of the financial crisis (Forbes).
Economists raised their forecasts for 2012 inflation in Brazil to 5.08 percent from 5.06 percent, a weekly central bank survey showed (Reuters).
Brazil’s government for next year expects faster growth and a weaker currency than economists forecast, according to the 2013 budget guidelines proposed by the administration of President Dilma Rousseff. The real will trade at an average exchange rate of 1.84 per U.S. dollar, while the economy will expand by 5.5 percent in 2013 (Bloomberg).
Asian investors flush with hundreds of billions of dollars in cash now see Latin America as a top business opportunity, and they’re flooding into manufacturing, construction and other industries, particularly in up-and-coming countries such as Brazil, Peru and Mexico. That’s transforming the lucrative relationship that was based primarily on exporting raw materials to Asia, an arrangement that frustrated governments eager to stimulate their own manufacturing (Washington Post).
Brazil’s weaker than expected February retail sales is not the start of a new trend. Brazilians are still shoppin’ til they’re droppin’ (Forbes).
Petrobras and mining company Vale, the two biggest companies in Brazil, have signed a memorandum of understanding to pursue joint ventures in various areas. The companies will work together on potassium production, nitrogen fertilizer, thermoelectric, petroleum derivatives, gas, biodiesel and logistics projects (MercoPress).
Nearly six in 10 Brazilian employers say they have trouble filling vacant posts due to a lack of available talent, the highest rate in the Americas, according to a survey by employment services company ManpowerGroup (Reuters).
The board of Portugal’s top cement-maker Cimpor says a takeover offer from Brazil’s Camargo Correa is too low and lacks detail on its plans for Cimpor’s future, but would not recommend to shareholders whether they should sell or keep their stakes (Reuters).
Bombardier Inc’s train unit aims to supply the world’s highest capacity monorails for fast-growing cities in Brazil and India from a factory near Sao Paulo, bucking a trend of flagging industrial investment in Latin America’s biggest economy (Reuters).
Portuguese investment company Ongoing Strategy Investments SGPS SA has closed a deal to acquire Brazilian news portal IG, Folha de S. Paulo reported. IG is the fifth-largest portal in Brazil, with 23.5 million unique visitors in March, the newspaper said, citing research firm Ibope (Bloomberg).
Marriott will add 12 hotels in Brazil, where it currently operates five (Bloomberg).
Brazilian beverage giant, Ambev, announced on Monday that it had entered into a strategic alliance with the Dominican Republic’s biggest company, E. Leon Jimenes SA (ELJ), to form the leading beverage company in the Caribbean. Their combined business operations will include beer, malt and soft drinks in the Dominican Republic, Antigua, St. Vincent and DR, as well as exports to sixteen countries throughout the Caribbean, the U.S. and Europe (The Rio Times).
Chicago-based CareerBuilder is making its first foray into South America with the acquisition of CEVIU.com.br, the largest information technology job site in Brazil (Chicago Tribune).
Dedini SA Industrias de Base, the Brazilian company that builds ethanol mills, has received 20 requests to supply quotes this year to companies considering new production facilities as the industry seeks to meet rising demand for the renewable fuel (Bloomberg).
Embraer , the world’s third-largest commercial aircraft maker, said its order backlog fell to its lowest level in more than five years, underlining doubts about global demand for regional jets. The company delivered 21 commercial planes in the first quarter but booked only 12 new orders in the segment, drawing down its backlog to $14.7 billion (Reuters).
Several international operators have expressed interest in the privatization of Portuguese airline TAP, its chief executive Fernando Pinto said, attracted by its fast-growing routes to South America and Africa (Reuters).
TAM reduced its estimate for an increase in domestic demand for this year to between 7 percent and 9 percent from a previous guidance of 8 percent to 11 percent (Bloomberg).
BANKING & FINANCE
Brazil still doesn’t need to change rules on savings accounts, one of the country’s most popular investments, after the central bank cut its base interest rate to a near all-time low of 9 percent, Finance Minister Guido Mantega said. As falling interest rates drive down returns in most of Brazil’s bond funds, investors are encouraged to move their money into savings accounts known as “poupanca,” which are tax free and pay out a fixed interest of 0.5 percent per month plus a variable rate (Reuters).
State-controlled lender Banco do Brasil said it was cutting interest rates further on consumer and business loans to reflect a central bank rate cut. The move comes a day after Brazil’s biggest lenders Banco Bradesco and Banco Itau cut interest rates to compete with cheaper loans from state lenders Banco do Brasil and Caixa Economica Federal (Reuters).
André Esteves, the chief executive of the Brazilian bank BTG Pactual, was fined 350,000 euros ($457,000) by the Italian financial regulator for insider trading (The New York Times).
BTG Pactual, Brazil’s largest independent securities firm, said that a European regulator’s ruling in an insider trading case against Chief Executive Andre Esteves would have no effect on the bank’s activities (Reuters).
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MINING & STEEL
Brazil’s raw steel production rose 2.2 percent in March from a year earlier to 3.1 million tonnes, driven by flat steel output, according to Instituto Aço Brasil, the industry group representing steelmakers. Rolled steel production grew 3.4 percent from a year before to 2.4 million tonnes. IMports also grew (Reuters).
OIL & GAS
A new prosecutor in the case against Chevron Corp and drilling firm Transocean Ltd for an offshore oil spill said he will seek to suspend the companies’ operations in Brazil, a sign that he may be just as tough on the companies as his predecessor (Reuters).
Brazil, where solar installations last year were less than 1 percent of those in world leader Germany, is developing policies that may boost rooftop panel sales to $3 billion within 20 years. Homeowners and businesses in Brazil may now trade electricity generated during the day by rooftop solar systems to utilities in exchange for the power they consume at night, under rules announced by the Brasilia-based power regulator Agencia Nacional de Energia Eletrica (Bloomberg).
MPX and global player E.ON AG of Germany have signed definitive agreements for the creation of a joint venture that will be the largest private energy company in Brazil. Together, the companies will develop conventional and renewable energy generation projects, as well as engage in supply and marketing activities in Brazil and Chile (EBX).
Telecom company Grupo Oi is stepping up investments to boost its slipping share of a hotly contested wireless market and boost operating profits 45 percent by 2015. Oi said it plans to invest 6 billion reais ($3.3 billion) annually from 2012 to 2015, up from nearly 5 billion reais last year (Reuters).