What Explains Brazil’s Surfing Boom?
New York Times; March 25
“Brazil has hit a rough patch. Inflation is back up, the gross domestic product has been middling for years and corruption scandals are rampant. This economic downturn is already hurting Brazilians, and seems to have reached Brazilian surfing as well.”

Petrobras Stock Gaining Today As Brazil President Outlines Recovery Course
TheStreet.com; April 1
“Shares of Petroleo Brasileiro Petrobras SA (PBR) are higher by 6.32% to $6.39 in late morning trading on Wednesday, following a Bloomberg report stating Brazil’s President Dilma Rousseff has outlined a plan she hopes will lead the South American country into economic recovery and away from the scandal surrounding allegations of bribery at the state run oil company.”

Mahindra & Mahindra says to stop selling vehicles in Brazil
The Indian Express; April 1
“Mahindra is withdrawing from Brazil’s passenger vehicle sector, a major market for global automakers, due to a sluggish economy, changes in local regulation and a depreciating currency…[additionally], about 94 percent of cars in Brazil run on ethanol, whereas Mahindra’s cars use diesel, which makes up just 6 percent of the market.”

 

Key Challenges: Corruption and Crumbling Confidence

What Investors Think of Brazil Political and Currency Risk
Forbes; March 25
“[Brazil] has oil. It’s the No. 1 orange juice exporter, coffee exporter, sugar exporter, iron ore exporter, beef exporter and the No. 2 soybean exporter. It has a diverse economy and strong banks. It has a growing consumer class and they’re constantly aching to spend like crazy North Americans…. Nobody cares… [a] survey of investment professionals shows is that, near term, the bravest are neutral on Brazil.”

Why Brazil’s currency is having a real tough time
MarketWatch; March 27
“’Brazil’s expansionary monetary and fiscal policy in the aftermath of the global recession caused it to lose policy credibility, and that’s why Brazil has high interest rates and high inflation today,’ said Bill Adams, senior international economist for PNC Financial Services Group.”

Brazil uncovers multibillion-dollar tax fraud
Business Insider; March 28
“Dozens of Brazilian firms, including industrial companies and banks, are under investigation amid allegations they paid $5.9 billion in bribes to tax officials, police said Saturday… The new scandal, dubbed Operation Zeal, comes following a federal police probe into an alleged scam at CARF, an offshoot of Brazil’s tax authority that oversees appeals on tax disputes.”

Taxmen on the take
The Economist; April 4
“Unlike the petrolão, the tax imbroglio does not implicate top politicians. It centres instead on the Administrative Council of Fiscal Resources (CARF), part of the finance ministry, which hears appeals by firms that feel wronged by the tax collectors…”

“Assuming the dodgy rulings are eventually reversed, however, revenues will get a welcome boost. That would be good news for the treasury: the finance minister, Joaquim Levy, is struggling to keep his promise to deliver a primary (ie, before interest payments) surplus of 66 billion reais this year and to maintain Brazil’s investment-grade credit rating.”

State of the State: Managing Deficits, Growing Exports

In Fiscal Setback, Brazil Posts Primary Deficit for February
Wall Street Journal; March 31
“The Brazilian government recorded a 2.3 billion Brazilian reais ($712 million) primary deficit in February… [this] makes it harder to meet this year’s target of a surplus of 1.2% of gross domestic product, an aggressive goal set by the government to win back credibility with foreign investors as well as domestic business leaders and consumers.”

“Bruno Rovai, an economist at Barclays in New York… said that as long as President Rousseff’s administration continues to show resolve in increasing savings, credit-ratings firms probably will leave the country’s debt at investment grade.”

Brazil’s Industrial Production Declines in February
The Rio Times; April 1
“Brazilian industrial production decreased by 0.9 percent in February in relation to January, when it had registered a positive variation of 0.3 percent after two months of declines… According to the IBGE, the February index was affected by the negative results of automobile production, which fell by 1.7 percent, tobacco (-24 percent) and IT and electronic equipment (-4.2 percent).”

Brazil’s post unexpected trade surplus in March
Reuters; April 1
“Brazil posted a trade surplus of $458 million in March, government data showed on Wednesday, beating market expectations for a deficit that month.”

Curated by Perry Nunes, Geoskope Junior Associate