Archive for the ‘Brazil’ Category

The retreat of U.S. interests from Latin America has left a vacuum for the Chinese to fill

| January 22nd, 2015 | No Comments »
Wall Street Journal WSJ-01 BY ILAN BERMAN You have to feel a bit sorry for the Obama administration. The White House in December announced plans to normalize diplomatic relations with Cuba, including establishing a U.S. Embassy in Havana and formally revisiting Cuba’s status as a state sponsor of terrorism. The move was a clear effort by Washington to distinguish itself in a new international theater.

But that gambit was soon eclipsed by another: In a meeting that could herald a significant shift in the Western Hemisphere’s balance of power, China hosted a high-profile summit earlier this month with the Community of Latin American and Caribbean States, or Celac.

Celac is a relatively recent invention. Conceived in 2010 at a meeting in Caracas hosted by Venezuelan strongman Hugo Chavez , it is designed to deepen integration among Central and South American states—while excluding the U.S. and Canada. The 33-member bloc explicitly styles itself as an alternative to the U.S.-led Organization of ... Read More

The cost of Brazil’s closed economy

| January 16th, 2015 | No Comments »
Financial Times

By Otaviano Canuto, Cornelius Fleischhaker and Philip Schellekens

Brazil’s is an unusually closed economy as measured by trade penetration, with exports plus imports equal to just 27.6 per cent of GDP in 2013. Brazil’s large size is often used to explain its relative lack of openness. But this argument does not stand up to scrutiny: among the six countries with larger economies than Brazil’s, the average trade-to-GDP ratio is 55 per cent. Given the size of its economy, we would expect Brazil’s trade to be equal to 85 per cent of GDP, three times its actual size.

Controlling for other dimensions of country size (surface area and population) and structural features often associated with trade openness (urbanization, manufacturing share in GDP) still cannot adequately explain Brazil’s lack of openness.

Lack of trade dynamism at the company level Brazil’s lack of openness becomes even more apparent if we look ... Read More

Race on the high seas: Cartels feature new, faster smuggling boats

| January 16th, 2015 | No Comments »

By Perry Chiaramonte

Latin America’s drug cartels are leaving the U.S. Coast Guard in their wake, with new and faster speedboats law enforcement officials say are virtually undetectable by radar.

The new boats, nicknamed “Picudas,” after a tropical fish whose long, thin bodies they resemble, are made of fiberglass, making them invisible to radar and efficient with fuel. While older smuggling vessels took as long as three days to make the trip from Costa Rica to Jamaica, the Picuda can make the trip in two.

Dialogo, a newspaper published by the Pentagon’s Southern Command, quoted one Coast Guard source that called the craft “a wave-breaking go-fast wonder that defies radar detection.” The boats give the bad guys a leg up on authorities trying to cut off the flow of South American drugs, according to the article.

“They [cartels] are being forced to do something that they would rather not,” Adam ... Read More

‘Bullet Caucus’ in Brazil Signals Political Shift to the Right

| January 15th, 2015 | No Comments »
The New York Times


SÃO PAULO, Brazil — Paulo Telhada rolls his eyes, denouncing Brazil’s support for the leftist government of Venezuela. He frowns, grumbling about gun control measures.

But when the subject turns to how many people he killed as a police officer on São Paulo’s streets, he gives a broad smile.

“More than 30,” said Mr. Telhada, 53, a rising star in Brazilian right-wing political circles, having recently won a seat in São Paulo’s state legislature in a landslide.

“I feel no pity for thugs,” he added, emphasizing that he did not enjoy working in a fancy office. “But I know my future lies in politics now.”

Their rising influence points to a major shift in Latin America’s largest democracy. While Brazil is governed by President Dilma Rousseff — a former leftist guerrilla who promotes the sway of ... Read More

Latin America 2015: Time for Reform

| January 13th, 2015 | No Comments »

By Daniel Zovatto

Latin America is starting off 2015 with a clear economic slowdown. The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) projects a modest recovery (2.2 per cent) with respect to last year (in 2014 growth was only 1.1 per cent, the lowest since the 2009 crisis), though these calculations may vary due to several factors.

The world economy is not helping. The downward trend in raw materials prices, scant dynamism in global demand, and the appreciation of the dollar are three factors that work against the region today.

Venezuela and Argentina, are facing very complex economic contexts. Venezuela is in the midst of stagflation (aggravated by plummeting oil prices); and Argentina is experiencing negative growth, high inflation, and the unresolved conflict with the “vulture funds.”

The two largest economies of the region, Brazil and Mexico, are facing their own demons. Brazil President Dilma ... Read More

Why Brazil Is A Surprisingly Closed Economy

| January 13th, 2015 | No Comments »
Business Insider


According to traditional macro-level measures of trade penetration (share of exports and imports in GDP), Brazil is an unusually closed economy. For Brazil this measure was only 27.6% in 2013 – a figure among the lowest in the world. Notably, Brazil’s trade openness lags far behind its peers among the BRICS countries, all of which reached trade-to-GDP ratios of at least 50% in recent years.

Figure 1. Brazil’s relative closed-ness to tradeWDL

Brazil’s size is often used to explain the country’s relative closedness. As the comparison with other large economies already indicates, this argument does not hold up to close scrutiny. While it is true that large economies tend to exhibit lower percentages of exports and imports to GDP, this feature fails to explain the exceptionally low levels of trade penetration observed in Brazil.

Looking at 2013 data from 176 countries available ... Read More

South American nations struggle to find new economic model

| January 12th, 2015 | No Comments »
Financial Times

By John Paul Rathbone

Four years ago, when the China-driven commodity price boom was in full swing and south-south ties were all the rage, Dilma Rousseff began her first term as Brazil’s president with a symbolic gesture — jetting off to Beijing.

Now, as commodity prices collapse alongside China’s slowing economy, Ms Rousseff has begun her second presidential term by saying she wants to rebuild relations with Washington. She has barely mentioned Beijing.

The shift reflects broader changes in South America’s commodity-dependent economies, where the abrupt collapse in energy, food and metals prices has opened up dangerous trade and financing gaps that could force deep economic and political change.

In Colombia and Peru, where commodities account for two-thirds of exports, current account deficits are forecast to reach 5 per cent of gross domestic product this year — a level not seen since the 1990s when the region was associated with default.

Soya-rich ... Read More

Brazil Limits Public Spending to Shore Up Investors’ Trust

| January 8th, 2015 | No Comments »

By Raymond Colitt and David Biller

Brazil’s federal government capped spending even before Congress approved its 2015 budget in an effort to showcase its fiscal discipline in President Dilma Rousseff’s second term.

The government trimmed by 1.9 billion reais ($710 million) the amount of money it can spend a month, according to a statement posted on the Planning and Budget Ministry’s website. The move represents a 33 percent cut to the upper limit of some expenditures. Spending regulated by the Constitution and scholarships funded with public resources, among other key items, were excluded from the measures.

Facing the risk of a further credit rating downgrade, the Rousseff administration has cut pension and labor benefits and reduced credit subsidies to help meet a primary budget surplus target, which excludes interest payments, of 1.2 percent of gross domestic product this year. Since Rousseff first took office, the nominal budget deficit more ... Read More

The Petrobras scandal explained

| January 6th, 2015 | No Comments »
The Economist

NEARLY as ominous as the economic cloud hovering over Dilma Rousseff is the scandal surrounding Petrobras, the state-controlled oil company. It nearly cost her re-election, and could yet spoil her second term as Brazil’s president.

The affair began in March, when federal police arrested Paulo Roberto Costa, Petrobras’s chief of refining from 2004 to 2012, in a money-laundering investigation. Mr Costa, seeking leniency, confessed to far more than that. Construction companies that won contracts from his division diverted 3% of their value into slush funds for political parties, he said. Police identified 10 billion reais ($3.7 billion) of suspicious payments, making the petrolão(the “big oily”) Brazil’s biggest corruption scandal.

In November police arrested two dozen executives from Brazil’s six largest construction firms and another former Petrobras bigwig; 30 people have been indicted. Most of the alleged bribe-takers belong to the Workers’ Party, which Ms Rouseff leads, or to her ... Read More

Brazil Leader Starts Term on Shaky Ground

| January 5th, 2015 | No Comments »
Wall Street Journal WSJ-01


BRASÍLIA—President Dilma Rousseff began her second term in office with promises to fight corruption and fix the economy, acknowledging the many challenges facing Brazil over the next four years.

In an inauguration ceremony that was upbeat but drew sparse applause and little spontaneous celebration by her supporters, Ms. Rousseff extolled her legacy of poverty reduction while outlining a vision to get Latin America’s largest economy back on track.

“We will prove that it is possible to make adjustments to the economy without repealing rights that have been won or betray social commitments,” she said in a speech in Brazil’s Congress attended by cabinet members, foreign dignitaries, allied lawmakers and other officials.

Her pledge came as Brazil confronts flat growth, stubbornly high inflation, ballooning debt and a potentially explosive corruption scandal at state-controlled oil giant Petróleo Brasileiro SA, or Petrobras.

The tone stood in contrast to 2011, when she was first inaugurated and Brazil’s economy was ... Read More

Brazil Central Bank Sees Inflation Above Target Through 2016

| December 23rd, 2014 | No Comments »

By Mario Sergio Lima and Raymond Colitt

Brazil’s central bank forecasts inflation will remain above the center of the target range for two more years, reinforcing the chance of further rate increases.

Inflation will end 2016 above target at 4.9 percent if the central bank raises the key rate to 12.5 percent next year, according to the central bank’s quarterly inflation report published today. If borrowing costs remain unchanged at 11.75 percent, consumer prices will rise 5 percent in 2016, according to the report’s reference outlook.

“The committee doesn’t rule out an increase in inflation in the short term and anticipates it will tend to remain elevated in 2015,” the central bank wrote. “The committee will do what’s necessary for inflation to enter a long period of decline.”

A weaker real and increases in regulated prices are fueling inflation, which according to policy makers ... Read More

Brazil’s Rousseff to slash budget to regain confidence

| December 19th, 2014 | No Comments »

Brazilian President Dilma Rousseff is planning a package of budget cuts and tax increases worth as much as 100 billion reais ($36 billion) in an aggressive attempt to recover investor confidence at a time of growing strain on emerging markets, senior government officials told Reuters.

The fiscal adjustment, which is at the high end of market expectations, is the latest sign that Rousseff is adopting a significantly more austere and business-friendly agenda for her second term, which will start on Jan. 1.

It also comes as some of Brazil’s peers are moving to shield themselves from falling commodities prices and a general loss of confidence in emerging markets. Russia’s central bank hiked interest rates by 6.5 percentage points this week amid recent heavy declines in oil prices and its currency. 

After a long boom last decade, Brazil’s economy has averaged less than 2 percent annual ... Read More

Brazil Charges 35 in Petrobras Scandal

| December 12th, 2014 | No Comments »
ABC News


Prosecutors investigating a sprawling kickback scheme at Brazil’s state-run oil company Petrobras filed charges Thursday against 35 people, including executives from some of the nation’s biggest construction firms.

The formal charges cap a months-long investigation dubbed “Operation Car Wash,” which is proving to be one of Brazil’s biggest corruption schemes yet uncovered with authorizes saying they’ll seek the return of nearly $400 million from the accused.

Authorities allege top officials from Petrobras operated the kickback scheme on contracts worth upward of $4 billion, with money from the inflated contracts eventually being fed back to the governing Workers’ Party and other top parties for political campaigns.

“These people stole the pride of Brazilians,” Prosecutor-General Rodrigo Janot said at a news conference in the southern city of Curitiba, where a top informant in the case is being held. “We’re far from being at the end” of the investigation.

Prosecutor Deltan Dallagnol added that “we’ve begun to destroy the ... Read More

Brazil’s economy in a funk marked by low productivity and ‘creative accounting’

| December 9th, 2014 | No Comments »
From the Washington Post

By Dom Phillips

SÃO PAULO — Valter Barros, co-owner of a small electronics components factory in the São Paulo suburbs, was unimpressed with the Brazilian government’s battle last week to pass a controversial fiscal measure economists dubbed “creative accounting.”

He was not alone. As lawmakers arrived in Brasília this week for a vote on a measure that would effectively permit the government to ignore all of a legally mandated $45 billion budget surplus for this year, protesters jeered and held up 100 Real notes.

This was not the first time the administration of newly reelected President Dilma Rousseff had moved the goalposts to meet its targets.

The government’s budgetary woes are a consequence of Brazil’s underperforming economy. Critics trace the economy’s troubles back to the government’s policies. Brazil, they say, needs to overcome the barriers that hold it back: crippling tax burdens, torturous bureaucracy, expensive labor legislation, rising inflation, poor education and a lack of infrastructure, all of which result ... Read More

Brazil Prepares Indictments in Oil Company Graft Case

| December 8th, 2014 | No Comments »
The New York Times


  Brazil’s prosecutor general said over the weekend that he was preparing to indict at least 11 executives from the country’s largest construction companies on charges including bribery and money laundering, in connection with a graft scandal shaking Brazil’s oil industry and the government of President Dilma Rousseff.

In pressing ahead with the case, Rodrigo Janot, the prosecutor general, is opening the way for a trial that would focus scrutiny on growing testimony about a web of illicit dealings between former executives at Petrobras, the state-controlled oil company, powerful contractors and political figures in Ms. Rousseff’s government.

“We are following the money and we will reach all of these perpetrators,” Mr. Janot said Saturday night in an interview with the Globo television network.

The scandal, which involves claims of bribes to obtain contracts with Petrobras, stunned Brazil’s business establishment in November, when ... Read More

Brazil Recovery May Hinge on Choices Rousseff Makes in New Term

| December 8th, 2014 | No Comments »

By Jessica Brice and Filipe Pacheco

In early October, a few weeks before Brazil’s closest presidential election since the country’s return to democracy in the 1980s, 100 executives gathered at an American Chamber of Commerce event in Sao Paulo for another sort of vote. When polled about the country’s economy, more than half of the attendees said their outlook would improve — as long as President Dilma Rousseff lost her re-election bid. Two-thirds expected economic performance to worsen if she earned a second term.

It’s the lack of confidence in Rousseff’s leadership — amid high inflation, currency interventions and deteriorating fiscal accounts — that investors say will be her biggest challenge, Bloomberg Markets magazine will report in its January 2015 issue. Rousseff, who prevailed by a margin of 4 percentage points on Oct. 26, must now try to stave off a credit-rating downgrade and revive growth in Latin America’s biggest economy, which slipped ... Read More

Corruption Curses Mexico and Brazil

| December 4th, 2014 | No Comments »
Article appeared in The Weekly Standard


Call it a tale of two countries. Two would-be Latin American powerhouses, both with populations surpassing 100 million people – and both with weak presidents who are beset by corruption problems. Both, in other words, are severely underperforming countries, whose chronic inability to live up to their potential continues to undermine growth, stability, and hope for the future. 

Begin just south of the United States border in Mexico, a one-time success story, which has been reeling for months. The trouble began in late September, when 43 students were kidnapped and murdered in Iguala. An appalling and grizzly atrocity to be sure, made worse by the alleged involvement of local law enforcement and even the mayor of Iguala. Local authorities in the southern state of Guerrero (home of Iguala) are evidently horrifically corrupt – they have been bought off by the local drug cartels. Unsurprisingly, Mexico has been rocked by weeks of protests as ... Read More

Japan’s profile rises in the Americas

| December 4th, 2014 | No Comments »
The Miami Herald


As Asian rival China invests billions in Latin America and snaps up strategic commodities, Japan also is looking at the region with new interest.

Shortly after Chinese President Xi Jinping’s Latin American tour in July, Prime Minister Shinzo Abe made a 10-day, five-nation swing through Latin America and the Caribbean.

His trips to Mexico and Brazil were the first bilateral visits by a Japanese prime minister in a decade, and his trip to Chile was the first such visit by a Japanese prime minister since 1996. Abe’s stop-over in Port of Spain marked the first time that a Japanese prime minister had ever visited the twin-island nation of Trinidad and Tobago, and his trip to Colombia also was the first official visit for a Japanese prime minister.

In September, Abe also held a summit with Panamanian President Juan Carlos Varela while both were attending the U.N. General Assembly and they discussed ... Read More

Petrobras’s $100 Million Man Tops Graft Haul in Scandal

| December 3rd, 2014 | No Comments »

By Sabrina Valle

Brazil’s biggest money laundering and corruption scandal just got bigger with a high-level executive’s pledge to return $100 million and testify against colleagues including his former boss at state-run Petroleo Brasileiro SA. (PETR4)

Pedro Barusco, a third-tier executive who reported to the head of the engineering division until 2010, contacted prosecutors and confessed he took bribes from construction companies, according to the text of a Nov. 18 decision by a judge to put Barusco’s former boss under preventative arrest. Barusco also took cash from SBM Offshore NV (SBMO), the Dutch oil platform supplier, said a person with direct knowledge of the probe, who asked not to be named because the information is confidential.

The testimony from Barusco threatens to implicate more people in the scandal as prosecutors probe the origins of his allegedly ill-gotten fortune. Petrobras management has been dealing with the crisis as it struggles ... Read More

Latin America, Caribbean 2014 Growth Likely Reached Only 1.1%

| December 2nd, 2014 | No Comments »
Wall Street Journal WSJ-01 By ROBERT KOZAK Growth in Latin America and the Caribbean likely reached only 1.1% this year, the slowest rate of expansion since 2009, but will jump back up to twice as high next year, the United Nations Economic Commission for Latin America and the Caribbean said.

The organization, known as Eclac, said Tuesday that Central America, including the Spanish-speaking Caribbean and Haiti, will post the best expansion in gross domestic product in the region next year, rising by 4.1%. The English-speaking Caribbean will lag with an expansion of 2.2%. South America will expand 1.8% next year, it added. Overall the area will expand 2.2% in 2015, it said.

A slump in demand in developed economies and the slowing of growth in emerging economies, especially China, hit Latin America and the Caribbean nations hard this year. China has become an important trading partner, especially for raw materials, for many countries in the region.

The agency said an economic deceleration became ... Read More

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