Economic Woes Persist

Brazil: Engine trouble
Financial Times, August 3
“The country has gone from being a motor of the world economy as one of the fast-growing so-called Bric nations to the sick man of the large emerging markets…. Among large emerging markets, only Russia is expected to do worse this year, according to International Monetary Fund GDP forecasts.”

IMF Lowers Growth Forecast for Brazil
Brazil Business Today; July 13
“The IMF’s latest World Economic Outlook report has downgraded its annual growth projections for [Latin America’s] top two economies, Brazil and Mexico.

Brazil is expected to see its economy shrink by 1.5 percent, half a percentage point more than the agency predicted in its previous quarterly report released in April.”

Brazilian Businesses Struggle to Cope with Country’s Austerity Program
Financial Times; July 14
“Most industrialists acknowledge the need to tackle the budget deficit, which at 7 per cent last year was the worst in a decade. But many industries in Brazil are heavily dependant on government protection, subsidies and tax incentives to survive in an economy that the World Bank regards as one of the world’s least competitive.

Critics feel the axe is falling too heavily on the wrong areas, such as exports, investment and manufacturing.”

New Reports that “Double Whammy of High Rates and Inflation Are Weighing on Latin America’s Largest Economy”
Wall Street Journal; July 26
“Brazil’s version of the Federal Reserve will almost certainly raise its benchmark Selic interest rate next week for the 16th time in just over two years in a bid to fight escalating inflation.

Trouble is, prices aren’t cooperating. Brazil’s annual inflation rate recently hit 9.25%. That is more than double the official 4.5% target and up substantially from 6.5% in April 2013, when the bank started raising rates.”

Brazil Finance Minister Delivers Bad News about National Budget
Financial Times; July 26
“Instead of a primary fiscal surplus — the budget balance before interest payments — of 1.2 percent of gross domestic product for 2015, Mr. Levy said he would now deliver something closer to zero and even left open the possibility it could turn into a deficit.

The announcement drove Brazil’s currency, the real, to a 12-year low against the dollar the following day and knocked 2.18 per cent off the benchmark Ibovespa stock index amid speculation over whether Brazil can maintain its investment grade rating.”

Brazil Corruption Could Mean Lower Credit Rating, Impeachment
Barrons; July 28
“S&P cited a culture of political and corporate corruption in Brazil that is stifling the country’s Congress and economy. But S&P stopped short of lowering Brazil credit ratings. While Brazil is able to prosecute corruption ‘in contrast with other emerging economies,’ S&P said the lack of political cohesion means policy implementation is materially ‘at risk.’”

Still Some Companies Find Reason to Believe

GM to double Brazil investment through 2019
Reuters, July 28
“General Motors Co plans to double its investment in Brazil to 13 billion reais ($3.8 billion) through 2019 and introduce a new family of vehicles into the country….”

Xiaomi Registers an Unexpectedly Big Debut in Brazil
Forbes; July 6
“Xiaomi’s launch event for its first non-Asian market of Brazil, scheduled for last Tuesday, was destined to be a quieter affair…

Around 130 local journalists turned up to cover the event which, according to Barra, marked it as being one of the biggest public events in the history of Brazil. ‘You only see [that much press] for a presidential event,’ he says. ‘It just doesn’t happen for a brand or company. We feel extremely lucky that we’ve had a warm welcome. I had tears in my eyes throughout the presentation.’”

Priceline Group Moves to Take Advantage of the Brazilian Market
TechCrunch; July 6
“Hotel Urbano, a hotel search and booking platform and one of Brazil’s fastest growing startups, has raised an additional $60 million in strategic funding from discount travel conglomerate Priceline Group.

Meredith Agrimedia Launches its First International Venture in Brazil
CNNMoney; June 25
“Meredith Agrimedia, the leading marketing and media partner for the U.S. agricultural community, today announced it will launch its flagship Successful Farming brand in Brazil, one of the world’s largest producers of agricultural products. This represents the first international relationship for Meredith Agrimedia, which is owned and operated by Meredith Corporation.

Successful Farming and will launch by October 2015 in the Portuguese language as part of a joint venture with Spring Media Group, one of Brazil’s leading media companies. It will start as a digital resource for Brazilian agricultural landowners and professionals, and offer national and multi-national advertisers and marketers both national and local opportunities to reach them. Other media platforms, including a print magazine, are expected to follow.”

Visa Sets its Sights on a New Facility in Brazil
ZDNet; July 7
“Credit card giant Visa has announced that it will open an innovation lab in Brazil in [the] second half of 2015.

The facility will be based in São Paulo and will work as a mirror of One Market, the 112,000 square foot innovation center and office space the company opened in San Francisco a year ago.”

Private Equity Firms Raise Funds in Brazil Despite Challenges
New York Times; July 27
“The private equity firm Hamilton Lane is raising its second fund of funds here from local investors, seeking 300 million reais, or about $90 million, according to a person with knowledge of its plans…

Another private equity firm, Spectra Investments of Brazil, plans to start raising its third fund of funds in September, looking to obtain 300 million to 400 million reais, its founding partner, Ricardo Kanitz, said. Earlier this year, it closed its second fund of funds, at 160 million reais.”

A New Tone Emerges from Brasília

Rousseff Focuses on Economic Diplomacy
The Economist; July 4
“Some substantial work has been done. On a visit to Brazil in May the Chinese prime minister, Li Keqiang, pledged $103 billion in loans and investments that will upgrade ports and other transport infrastructure. At a summit in Brussels last month Brazilians toiled to unlock trade negotiations between the European Union and Mercosur, an ineffectual regional trade bloc nobbled by Argentina’s protectionist president, Cristina Fernándex; these are poised to restart after more than a decade in the works, once Argentines pick a new leader in October.

Earlier Ms. Rousseff had signed a (modest) trade deal with Mexico and a co-operation agreement with the OECD, a club of mostly rich countries which Brazil looks increasingly keen to join. In August she will host Germany’s chancellor, Angela Merkel. There is talk of a visit to Japan before the end of the year.”

Brazil Looks to Team Up with Wall Street on Infrastructure
Reuters; June 29
“Now, doing her best to absorb the lessons of the earlier failed infrastructure plan, President Dilma Rousseff is making a new push to lure 198.4 billion reais ($64 billion) in infrastructure funds.

She and other Brazilian officials visited New York on Monday, touting an open and transparent bidding process for contracts to operate roads, railways, airports and harbor terminals.

She closed out an infrastructure-themed conference with a speech emphasizing the strong ties between her nation and the United States and how better investment and trade can benefit both countries.”

Rousseff Meets with Silicon Valley Leaders
Reuters; July 1
“Brazil’s President Dilma Rousseff capped off her U.S. tour on Wednesday with a visit to Silicon Valley, where she met with top technology executives and took a ride in Google Inc’s self-driving car.

Rousseff used her visit to strengthen ties with U.S. technology companies after visiting Washington, D.C. and New York City earlier in the week.

During her visit, Google announced it would inaugurate a new engineering space in Belo Horizonte in November that will more than double the number of engineers working in Brazil on some of the company’s core products.”

Curated by John Metcalfe, Geoskope Junior Associate