Building a Better Brazil

Brazil's GDP Grew 9% in Q1

2010-06-08T22:31:00.002-04:00

The Brazilian economy grew 2.7% in the first quarter over the fourth quarter of last year. Comparing with last year's first quarter, GDP grew 9%. Surging domestic demand is likely to force the central bank to raise interest rates to cool down the economy.

By John Santos

For Brazil, It's Finally Tomorrow

2010-03-30T00:11:00.001-04:00

For Brazil, It's Finally Tomorrow
How the country of the future has at last made it—and what remains to be done
By PAULO PRADA

For the past century, Brazil has been a land of great potential—but few results. With runaway inflation and stratospheric national debt, the country was too much of a mess for anyone to take it seriously on the world stage.

The Journal Report
See the complete Brazil report.
. Brazil: Economic Giant
5:18
Dow Jones Newswires' Eduardo Kaplan sits with Paulo Vieria da Cunha, a partner of the investment firm Tandem Global Partners, to discuss Brazil's role as an economic giant and how it has redefined the global economy.
.How times have changed.

Consider this: In the face of the worst global economic crisis since the Great Depression, Brazil's economic output dipped a tiny 0.2% last year, and is expected to grow as much as 6% this year. Everyday Brazilians have been too busy buying washing machines, cars and flat-screen televisions to even notice the downturn.

Brazil is already the biggest economy in Latin America and the 10th-biggest in the world. By 2050, it will likely move into fourth place, leapfrogging countries including Germany, Japan and the U.K., according to a study by Goldman Sachs.

Clearly, Brazil has turned a corner—and is now a nation with the heft, ambition and economic fundamentals to become a world power. But the country has enormous challenges it must overcome before it can fully live up to its potential.

Edel Rodriguez
.Its public sector is bloated and riddled with corruption. Crime is rampant. Its infrastructure is badly in need of repair and expansion. The business environment is restrictive, with a labor code ripped from the pages of Benito Mussolini's economic playbook. Brazil also risks patting itself on the back so much that it fails to see the colossal work that remains to be done.

"There's too much good happening at the moment for the country not to take advantage of it," says Ricardo Amorim, a well-known financial consultant in São Paulo. "Brazil has never had as much opportunity as it will have in the years ahead."

Big Promise
Brazil has always had a lot to live up to, simply because of its size. The country is bigger than the continental U.S. and has almost as many people as Germany, France and the U.K. combined. Yet except when it came to soccer and music, many Brazilians themselves tended to believe the notion—apocryphally attributed to Charles de Gaulle—that "Brazil is not a serious country."

Things started changing in the 1990s. The government adopted strict monetary policies and a laser-like focus on balancing the books. That fiscal prudence has given the country remarkable cash reserves—and breathing room during crises.

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Agencia Estad0/Associated Press

Getting an education.
.For instance, when the big downturn hit in 2008, private lending began to dry up. So the government, flush with cash reserves and the keys to an aggressive development bank, ordered state-run lenders to open the credit taps. The banks complied, lending out record amounts last year to Brazilians eager to join the country's quickly growing consumer class. Internal demand soared, softening the blow of the slowdown.

"This is a different Brazil than 10 years ago," President Luiz Inácio Lula da Silva boasted recently. Back then, he said, "the crisis in Greece would have already bankrupted Brazil."

What's more, there's now a political consensus to avoid the mistakes of the past. Until recently, elections in Brazil were considered make-or-break contests between irresponsible, populist proposals and the voices of investment, stability and growth. Now neither leading candidate from the right or left in October's election is expected to stray far from current economic policies, a functional blend of pro-business market rules and social-welfare programs.

Even a pledge for a bigger state role in the economy by Dilma Rousseff, Mr. da Silva's outgoing chief of staff and his hand-chosen successor as the party's candidate, isn't scaring off the business community. "It's refreshing to have an election and see there's no fuss about either outcome," says Andrew Béla Jánszky, a Brazilian investment lawyer in the São Paulo office of Shearman & Sterling LLP. "For once, stability is almost a given."

The hard work has also enabled Brazil—already a leading exporter of iron ore, steel, coffee, soybeans, sugar and beef—to soar in sectors it once only dreamed about. After decades of research and investment, Brazil in 2007 discovered mammoth new oil beds beneath the Atlantic that are expected to double output in the coming years—generating billions of dollars in new revenue annually.

Cleaning House
The results of all these changes have been dramatic. The economic turnaround has pulled millions out of poverty and is creating a thriving middle class. For instance, Brazil's northeast, long the source of internal migration to more-prosperous cities down south, now outpaces the rest of the country in growth. Companies there are scrambling to train workers, many experienced only as field hands, to build cars, appliances and computer parts.

The country's promise is such that events that once rattled the faith of local and foreign investors are now taken largely in stride—be it the global financial meltdown or Mr. da Silva's bear hugs and backslaps with leaders of regimes in Havana, Tehran and Caracas.

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Reuters

Looking for a washing machine in São Paulo.
.But before Brazil can achieve its first-world ambitions, it must tackle big economic, legal and social deficiencies that have hobbled its development.

For one thing, even after sweeping reforms, the government's role in the economy remains relatively big. Government spending totals more than 20% of the country's gross domestic product, compared with about 15% in the U.S., 13% in China and 7% in Indonesia, another fast-growing emerging market, according to data compiled by Mosaico Economia Política, a Brazilian consultancy. The government trimmed as many as 150,000 jobs in the 1990s, but since then has taken on twice that number, according to research at Banco Santander, the Spanish bank that is one of Brazil's biggest foreign investors. Even with greater leeway to spend than ever before, government debt has begun to creep back up.

To help finance the growth in the size of government—and onerous pension and benefit plans—"the trend is likely to be in the direction of higher taxes, lower investments, and, thus, lower long-term growth," Santander said in the report. The spending growth comes as consumer demand is also surging, spurred on by state lending. That has caused inflation to rear its head once more—forcing the central bank to consider raising interest rates again.

"The government can't have it all," warns Eduardo Giannetti da Fonseca, an economist and professor at Insper Instituto de Ensino e Pesquisa, a business school in São Paulo. "You can't increase spending, private consumption and invest all at the same time, because something will eventually give."

Another problem is the restrictive business environment, especially strict labor laws that date back to the 1940s and were originally modeled on the statist policies of Mussolini. Because it costs so much to start companies and hire workers, many entrepreneurs and businesses stay in the black market and pay workers informally. That creates a massive underground economy that, according to a 2005 study by McKinsey & Co., accounts for up to 40% of Brazil's gross domestic product, takes about half of all urban jobs and drags overall economic growth by as much as 1.5% annually.

The problem is palpable across Brazil, where underground commerce is on open display from city sidewalks to public buses to the festive beaches of Rio de Janeiro. "I'd rather have a real job, but it's a lot easier to get hired to do something like this," says Milton, a 28-year-old vendor of pirate software and DVDs in central São Paulo, who declined to give his last name. "There's plenty of this kind of work to go around."

Bad Connections
Yet another obstacle to growth is a lack of infrastructure—from roads, railways and bridges to docks, airports and pipelines. Like most everything else in the country, infrastructure investment fluctuated with the booms and busts of the past. Projects were launched when times were flush, only to sit neglected for decades.

Not only is much of it old and in disrepair, but Brazil's existing infrastructure is too small to handle the volume of people and goods currently using it—let alone accommodate new growth. The government this week is expected to announce the second phase of an ambitious "growth acceleration program" that it launched in 2007. The original plan foresaw infrastructure investments of some $342 billion, but many projects remain mired in bureaucracy. Contas Abertas, a not-for-profit research group that studies public spending, in a study this month said that only 11% of the projects outlined in the plan have been completed, while just over half have yet to be launched.

To casual observers, things will look better as Brazil gears up for hosting soccer's World Cup in 2014 and the Summer Olympics in Rio de Janeiro in 2016. New roads and airport terminals will be christened along with modernized stadiums and scenic, well-policed promenades. But manufacturers, exporters and shippers—who regularly wait days or weeks for backlogs in ports and customs facilities to clear—know Brazil needs more than just cosmetic changes.

Progress in other areas falls short, too. Crime is still a big problem in most cities and in lawless rural areas where ruthless prospectors, loggers and landowners at times ride roughshod over their neighbors. Those charged with enforcing the law are so underpaid that police routinely look the other way in exchange for a little extra money or commit serious human-rights abuses in efforts to solve problems that overburdened courts rarely can. Using the government's own statistics, a December report by Human Rights Watch disclosed that police in Rio and São Paulo together killed more than 1,000 people annually in recent years, many of them in execution-style "extrajudicial" killings.

Brazil's politicians and legislators often run afoul of the law, as well. The country's Federal Police, its most respected law-enforcement body and the agency charged with fighting corruption, currently has nearly 30,000 active investigations related to public corruption and fraud, according to a recent report. The deposed governor of Brasília, Brazil's capital, at the moment sits in jail awaiting trial over alleged kickbacks from public construction projects.

Then there's public education. Brazil has a popular welfare program that helps needy children by paying parents to keep them in school rather than send them out to help put food on the table. But schools themselves remain underfunded and the quality of education remains poor. Outdated university statutes mean that the best colleges, which are public and free, get filled by wealthy students from private high schools, while poorer students, the products of public schools, get stuck paying for second-rate degrees at costly classrooms in strip malls and fly-by-night academies.

Mr. da Silva and his ministers, including Ms. Rousseff, admit that much still needs to be done. The work so far, they insist, has been about laying the groundwork for stability and thereby facilitating investment and growth in the future. Now that popular social programs have helped ease suffering for the critically poor—and disastrous fallout from the financial crisis was averted—the government can begin focusing on ways to ensure it builds upon more solid economic foundations.

"If the past year was about measures to stimulate consumption," Mr. da Silva said in a television address at the end of December, "now our emphasis is on reinforcing investments and thereby making the wheel of the economy roll in a healthy and sustainable way."

— Mr. Prada is a staff reporter for The Wall Street Journal in São Paulo. He can be reached at paulo.prada@wsj.com .

President Lula of Brazil announces $882 billion in investments

2010-03-29T23:52:00.002-04:00

Brazil's president Lula has announced investments of $882 billion in infrastructure and social projects from 2011 through 2014.

President Luiz Inacio Lula da Silva says the money will be spent on housing, transportation and energy projects, among others.

The investments are part of the government's Growth Acceleration Project, which was launched in 2007. It also includes money to build 2 million houses for low-income Brazilians.

The investments will be used by the next Brazilian president as Silva's second term will end this year.

Silva presidential chief of staff Dilma Rousseff said Monday the investments will produce improved "quality of life and a better future to Brazilians."

Brazil's economy adds record number of jobs in Feb

2010-03-21T16:46:00.000-04:00

Brazil adds 209,425 payroll jobs in February

* Second straight month of gains, underscores recovery (Recasts, adds details, context)

BRASILIA, March 17 (Reuters) - Brazil's economy added jobs for the second straight month in February, creating a hefty 209,425 payroll positions as companies ramped up hiring amid a strong economic recovery, the government said on Wednesday.

The number was a record for the month of February, a holiday-shortened month because of annual Carnival festivities around that country.

In January, Latin America's largest economy added 181,419 payroll positions, also a record for that month. So far this year, 390,844 payroll jobs have been created in Brazil.

Most of Brazil's workforce is not registered with the labor ministry and belongs to a vast informal economy. The government of President Luiz Inacio Lula da Silva is seeking to increase the number of payroll jobs in the country.

The government had anticipated stronger net payroll job creation in February than in January, Labor Minister Carlos Lupi said last month. [ID:nSPG002744]

Brazil became among the first countries to come out of the global financial crisis in 2009 and is expected to grow 5.45 percent this year, according to the latest weekly central bank survey. (Reporting by Isabel Versiani; Writing by Luciana Lopez; Editing by Diane Craft)

Brazil opens world's first ethanol-fired power plant

2010-01-19T17:15:00.000-05:00

* State-run Petrobras opens first ethanol power plant
Stocks
* Petrobras, GE, hoping other governments will adopt
By Denise Luna
JUIZ DE FORA, Brazil, Jan 19 (Reuters) - Brazil on Tuesday opened the world's first ethanol-fueled power plant in an effort by the South American biofuels giant to increase the global use of ethanol and boost its clean power generation.
State-run oil giant Petrobras (PETR4.SA)(PBR.N) and General Electric Co (GE.N), which helped design the plant, are betting that increased use of ethanol generation by green-conscious countries will boost demand for the product.
Brazil, the top global ethanol exporter, is already in talks with Japan to develop biofuels power generation there.
"We have great expectations to show the viability and economy of generating electricity from ... an alternative feedstock to fossil fuels," Maria das Gracas Foster, head of Petrobras' natural gas division, said.
Petrobras with the help of GE upgraded the 87-megawatt power plant to switch between running on natural gas or ethanol instantaneously. Brazil primarily relies on hydroelectric power but needs backup thermoelectric generation during the dry season.
John Ingham, Latin America Products Director for GE, said tests showed switching the plant to ethanol reduced carbon dioxide emissions without lowering energy output.
GE has around 770 turbines like those used in the Juiz de Fora plant, including many in Japan, that could be converted to run on ethanol, he said.
"A plant like that consumes a lot of ethanol, so it has to be in a place that makes sense (such as) places that have no access to gas, like Japan, some islands, or places that depend heavily on diesel like the Amazon region," he said.
Brazil is expected to produce a record 27.8 billion liters of ethanol in the 2009/2010 season. It began its biofuels program 30 years ago and now mandates a minimum 20 percent of ethanol in gasoline.
Petrobras itself is only starting to enter the ethanol market. Brazil's ethanol production comes from sugar cane milled by companies such as Cosan (CZZ.N) or commodities giants including Cargill Inc [CARG.UL], Bunge (BG.N) and ADM Co (ADM.N).
Domestic demand for ethanol is being driven by the popularity of the flex-fuel car technology that was launched in 2003 and now makes up around 90 percent of new vehicle sales. (Writing by Brian Ellsworth; Editing by Marguerita Choy)

2009-12-10T18:58:00.003-05:00

Brazil girds for massive offshore oil extraction
State-run Petrobras is poised to become a major global player

By Juan Forero
Washington Post Foreign Service
Monday, December 7, 2009

Everything about the shipyard here is colossal -- the 4,000-man workforce, the billions sunk into it in capital costs, the half-finished 10-story-high production platforms.

But then, so is the challenge facing Brazil's state-controlled energy company, Petrobras: developing a group of newly discovered deep-sea oil fields that energy analysts say will catapult this country into the ranks of the world's petro-powers. The oil pools are 200 miles out in the Atlantic and more than four miles down, under freezing seas, rock and a heavy cap of salt.

Petrobras, which until recently was little known outside oil circles, has launched a five-year, $174 billion project to provide platforms, rigs, support vessels and drilling systems to develop tens of billions of barrels of oil. Energy officials here project that Brazil -- still an oil importer five years ago -- will in the next decade have one of the world's biggest oil reserves.

"It's going to change the role of Brazil in the geopolitics of oil," Petrobras's president, José Sergio Gabrielli, said in an interview at the company's headquarters in Rio de Janeiro. "We are going to become a much bigger producer."

Petrobras estimates that production in Brazil could reach 3.9 million barrels by 2020, up from more than 2 million a day now. Proven oil reserves would rise from 14.4 billion barrels to more than 30 billion barrels, according to government estimates, putting Brazil in the same league as such major oil exporters as Qatar, Canada, Kazakhstan and Nigeria.

The new discoveries in Brazil's offshore "pre-salt" region do not mean that the country will become a major exporter of crude, according to Gabrielli. He noted that Brazil's economy, which is the world's eighth-largest and is steadily growing, is expected to consume much of Petrobras's projected production. But, he added, as the country meets its own needs, it will also develop for export refined products such as gasoline, diesel and biofuels.

In an era of drum-tight supply, the discoveries off Brazil's coast and Petrobras's growing stature are changing the world's oil balance, because few regions outside the OPEC countries are expected to generate significant growth in crude production, said Michelle Billig Patron, senior director of political risk for the New York-based Pira Energy Group.

"There is really only Canada and Brazil when you're talking about a million barrels a day more in growth over the next 10 years," Patron said.

A firm hits it big

The engine of that growth is a multinational that, for much of its 56-year history, was little more than a trading company. It pumped a few thousand barrels a day almost as a side note to its real function, overseeing oil imports. Then in 1974 -- a time when oil shocks had alarmed Brazilian officials -- came a major discovery: the offshore Campos Basin, east of Rio.

"Petrobras, before Campos, produced 180,000 barrels a day," said João Carlos de Luca, a former Petrobras executive who is president of the Brazilian Petroleum Institute, which represents foreign oil companies here. "After Campos, it was a company that searched for self-sufficiency in production."

In its drive to produce, Petrobras became a leader in offshore production. The Rio-based company is now responsible for more than a fifth of the world's deep-sea operations, more than any other company, Gabrielli said. It operates in 26 countries and drills off the African coast and in the Gulf of Mexico.

With a market capitalization of more than $220 billion, Petrobras is one of the world's 10 biggest companies. Over the past two years, it has been the most frequently traded foreign company on the New York Stock Exchange, trade data show. Among investors bullish on Petrobras is George Soros, who last year made the oil company the largest single holding in his investment fund, according to Bloomberg.

Still, the company remains firmly under the control of the state, with President Luiz Inácio Lula da Silva calling it a national icon whose fortunes are intertwined with Brazil's.

Though private investors control nearly 60 percent of Petrobras stock, the Brazilian government has 56 percent of the voting rights. Seven of its nine directors are from the government. The board's chairwoman is Dilma Rousseff, a Lula confidant who is expected to be the ruling party's candidate in next year's presidential elections.

The Lula government is now seeking passage of a law to give Petrobras control over future projects in the newly discovered fields. Foreign companies have explored for oil in Brazil since 1997, but the proposed regulations would limit their ability to make major decisions involving the new oil pools.

Gabrielli said it is logical to make Petrobras the operator, with a mandatory 30 percent stake in each project, because Brazil took the risks to drill for oil in the pre-salt. But he noted that companies such as Exxon Mobil, Britain's BG Group, Royal Dutch Shell and Spain's Repsol are investing billions to develop their share of the new projects.

Luca, the president of the association representing foreign companies, said Petrobras may overextend itself. "We could be limiting the development," he said.

Far out and deep down

The entire pre-salt region is laced with "elephant fields," pools holding at least a billion barrels of oil each. Tupi, which in 2006 was the first field found, holds up to 8 billion barrels.

Despite the optimism that Petrobras officials display for visitors, they reel off the challenges: shifting salt, 6,500 feet of it, and working fields so far from the coast that they cannot be reached by helicopter.

Much of the new infrastructure needed to develop the pre-salt is being built here at Angra, and at other shipyards dotting the coast. On a recent day, decked out in a bright-orange jumpsuit and helmet, Roberto Moro, a mechanical engineer, strolled amid giant pontoons weighing 6,000 tons each. He explained how they would be latched together, then topped with a 14,000-ton deck the size of a football field.

The final product, a platform called P-56, will cost $1 billion, he said. And Petrobras will need a fleet of them.

"Each platform we are building here, like P-56, represents 10 percent of national oil production," Moro, 46, explained. That is the equivalent of 180,000 barrels.

2009-12-10T18:22:00.002-05:00

Lula: Brazil to be world’s top five economy

Brazilian President Luiz Inacio Lula da Silva said on Friday that abundant natural resources might help the country become the world’s third largest economy in the near future.

The recently discovered pre-salt oil and gas reserves may help the country achieve this goal, Lula said.

“In 10 or 15 years, this country will be the third, or the fourth largest economy in the world, or the fifth if it does not have luck,” Lula said at the inauguration of a project in the southern state of Rio Grande do Sul.

The government has to improve the quality of education in the country, as well as the economic situation of the poor, with the pre-salt revenues, Lula said.

Brazil’s economic growth must be made by enhancing social equality, he said, adding that the country cannot allow the excessive concentration of wealth in the future.

Source: Xinhua

Brazil: Brazil takes off | The Economist

2009-11-12T23:15:00.001-05:00

Brazil: Brazil takes off The Economist:

"WHEN, back in 2003, economists at Goldman Sachs bracketed Brazil with Russia, India and China as the economies that would come to dominate the world, there was much sniping about the B in the BRIC acronym. Brazil? A country with a growth rate as skimpy as its swimsuits, prey to any financial crisis that was around, a place of chronic political instability, whose infinite capacity to squander its obvious potential was as legendary as its talent for football and carnivals, did not seem to belong with those emerging titans."

Rio to host 2016 Olympics

2009-10-03T14:52:00.003-04:00

Brazil will become the first South American country to host the Games after a historic vote by the International Olympic Committee in Copenhagen this evening.Rio de Janeiro claimed a stunning victory in the race to host the 2016 Olympics as favourites Chicago slumped to a crushing defeat.

Rio will host the summer Games just two years after Brazil host the 2014 football World Cup and the announcement led to wild celebrations among the 50,000 people at a party on the famous Copacabana beach.

IOC president Jacques Rogge, who opened the envelope containing the name of the winning city, said: "All four projects are of the highest quality - thank you for your hard work, energy and commitment. But in every competition there can only be one winner."

Chicago had been the bookies' favourites to succeed London especially after US president Barack Obama flew into Copenhagen to address the IOC this morning.

The Obama magic did not work this time as the American city was knocked out in the first round of voting, followed by Tokyo, leaving a vote between Rio and Madrid.

In the end Rio were convincing victors, beating Madrid by a wide margin, 66 votes to 32, in the final round as all the previous votes for Chicago and Tokyo swung behind them.

Chicago had been knocked out after polling just 18 votes in the first round, compared to 22 for Tokyo, 26 for Rio and 28 for Madrid.

In the second round, Rio came first with 46 votes, Madrid had 29 and Tokyo were eliminated with 20.

That left a head-to-head with Madrid and the Spanish city had confounded expectations by getting so far. But Rio's excellent campaign - masterminded by Mike Lee, who was communications director for London's bid - proved enough.

2009-09-15T22:06:00.006-04:00

Latest Petrobras drillship was recently named in Korea, now Brazilian oil major plans to buy similar units from domestic yards
September 15, 2009
Petrobras plans fleet of "built in Brazil" drillships
Shunning a global shipyard tender process, the executive board of Brazilian state-owned oil company Petrobras recently approved a plan to charter up to 28 new offshore drilling rigs that will be built in Brazil. The plan, which could start this month, calls for the rigs, which will have increased domesticl content, to be used for exploration in ultra-deep waters, including the pre-salt layer. The rigs would be delivered between 2013 and 2018, initially starting with drillships but possibly later including two semis.
BOOST TO SHIPYARDS
The Petrobras projectwould provide a massive boost to the Brazilian shipbuilding industry, as well as enhancinge local supplier networks. As many as 40,000 direct and indirect jobs will be created after all the orders are placed, according to Petrobras. In order to help shipyards and suppliers enhance their facilities and acquire the technology to build the drill rigs, the Brazilian government is expected to provide a R$4 billion (about $2.18 billion) guarantee for their construction through the Guarantee Fund for Naval Construction.
At least one South Korean shipbuilder expects to get a piece of the action. Samsung Heavy Industries, which recently christened the Petrobras 10000 drillship at its Geoje Shipyard is expecting to transfer the technology for this type of vessel to Brazil's Atlantico Sul Shipyard in which it has a 10 percent stake.
Earlier this month that yard laid the keel for a 150,000-dwt tanker, which will be built by Samsung's technical support, and which will the largest vessel to be built by a Brazilian yard. The event was attended by Brazilan President Luiz Inacio Lula da Silva--who took the opportunity to criticize mining giant Vale for building a series of giant ore carriers in China, rather than Brazil.
Atlantico Sul Shipyard will be the biggest yard in Central and South America. Scheduled to be completed at the end of this year, it will have a 400 m x 73 m building dock and a pair of 1,500-ton Goliath cranes.
NINE FOR STARTERS
In the first phase of its drill rig building plan, Petrobras would charter a minimum of 9 rigs. Seven of these would be drillships, which would be built at a single Brazilian shipyard. Contracting these seven rigs from one shipyard will allow the winning bidder to make the investments that are required in order for it to adjust its infrastructure and secure gains in scale.
The two other units, which may be either drillships or semi-submersibles, will be built separately and may use new technologies that also incorporate concepts that are still new in the market, but which will afford Petrobras great economic and operating benefits.
Under a separate simultaneous process, Petrobras will charter up to four units per company, also to be built in Brazil. Under this alternative, the charterers themselves will be responsible for soliciting rig construction from the shipyards.

Brazil Eyeing French Fighter Jets

2009-09-07T23:36:00.001-04:00

Image by Feuillu via Flickr

By REUTERS
Published: September 7, 2009

BRASILIA (Reuters) - Brazil will begin final negotiations with France's Dassault Aviation to buy 36 Rafale fighter jets but expects a "competitive" price to close the deal, top government officials said on Monday.
The announcement made during a visit by French President Nicolas Sarkozy is part of a broader strategic defence alliance both countries signed last year.
"This is not a simple commercial deal... We want to think together, create together, build together and, if possible, sell together," Brazil's President Luiz Inacio Lula da Silva said during a joint press conference.
Dassault had made a satisfactory offer to transfer technology and allow Brazil to assemble and export the Rafale, Foreign Minister Celso Amorim told reporters.
"There is a decision to begin negotiations with one supplier and not the others," Amorim said.
But he stressed that France would have to offer a competitive price, comparable to that paid by the French Air Force. Offers for financing would also influence the decision, he added.
Amorim could not say whether Dassault's competitors had been definitively eliminated from the bidding process.
"I don't know if the tender is over, I don't want to enter into legal aspects," said Amorim.
The other two finalists in the tender to supply multi-role fighter jets to Brazil's Air Force were the F/A-18E/F Super Hornet supplied by Boeing and the Gripen offered by Sweden's Saab AB .
In exchange for the Rafale deal, France would buy 10 KC-390 transport aircraft to be built by Brazil's Embraer .
Only six of the Rafale jets would be built entirely in France, after which assembly would be gradually transferred to Brazil.
"We're not afraid to share our technology because we know that in the 21st century, countries need to talk as equals," Sarkozy said.
Delivery would begin in 2013 and the total contract for the fully equipped Rafale planes was worth 4.5 to 5.0 billion euros, an aide close to Sarkozy said.
Brazil eventually expects to replace its entire fleet of ageing fighter jets, potentially bringing the order to more than 100 aircraft.
Yves Robins, a spokesman for Dassault Aviation, said there was every reason to think Brazil would buy the Rafale planes.
"We can imagine that it will be concluded definitively in 2010, if things go well," he said.
Shares in Dassault Aviation rose 0.24 percent, while Saab's shares fell 2.1 percent in Sweden. U.S. markets were closed for a holiday.
Any deal would mark a breakthrough for Sarkozy after years of fruitless efforts by his predecessor to sell the Rafale warplane.
The Rafale resulted from a decision by France to build its own warplane in the 1980s, when it pulled out of the Eurofighter project of Britain, Germany, Italy and Spain.
Critics say the Rafale's price tag makes it too expensive, but French executives stress it has low operating costs and is agile in combat.
France hopes that securing a win for the Rafale will boost its chances as the global market for fighter planes heats up.
Embraer's KC-390, expected to be put into service by the middle of the next decade, will carry some 20 tonnes of troops and equipment, which puts it in the same bracket as the Lockheed Martin C-130, while the A400M turbo-prop will carry over 30 tonnes.

Brazil's volume of credit reaches record-high in July

2009-08-26T23:01:00.000-04:00

www.chinaview.cn 2009-08-27 09:31:54

RIO DE JANEIRO, Aug. 26 (Xinhua) -- The volume of credit operations in Brazil reached an unprecedented 1.31 trillion reais (704 billion U.S. dollars) in July, up 2.6 percent from June and 20.8 percent from the same period last year, Brazil's Central Bank announced Wednesday.
The amount represents some 45 percent of Brazil's monthly gross domestic product (GDP), while the figure for June was 43.9 percent, said the bank, noting it was the 18th consecutive monthly increase in the GDP percentage.
The booming credit level was partially boosted by the loan of 25 billion reais (13.44 billion dollars) that Brazil's Development Bank granted to oil and gas giant Petrobras.
"In terms of volume of credit, we are already better than we were before the crisis," said Altamir Lopes, head of the bank's Economic Department.
He admitted, however, that the credit to small and medium-sized companies needed to be improved.
The default rate also increased along with the credit volume, reaching 5.9 percent, the highest since 2000, said the bank.

How To Profit From Brazil's Economic Rise

2009-08-22T01:23:00.003-04:00

Published on: Thursday, August 13, 2009
Written by: Jason Simpkins

After posting a contraction of GDP in the first quarter, Brazil looks to rebound back to its prior status as one of the fastest growing economies in the world. The $1.5 trillion dollar economy has seen "Chinese-like" growth in some areas of their economy while their benchmark stock index has increased by 50% this year. For more on how to profit from the rise of Brazil, see the following article from Money Morning.
Botafogo Bay in Rio de Janeiro, BrazilBrazilians used to joke that their country was the country of the future - and always would be because a new crisis seemed to crop up every time the economy came close to fulfilling its potential.But given the economy’s strong performance following the financial meltdown that crushed economies the world over, it looks like Brazil’s time is now.Brazil’s gross domestic product (GDP) contracted 0.8% year-over-year in the first quarter and 0.8% from the fourth quarter. That beat analysts’ expectations but wasn’t enough to keep the country from sliding into its first recession since 2003. However, the economy is already showing signs of recovery and many economists believe Brazil is already on the rebound and poised for a strong second half.Brazil’s GDP likely grew 2.2% in the second quarter compared with the previous quarter, according to a report by Bank of America Corp. (NYSE: BAC).Nelson Barbosa, Brazil’s economic policies minister, optimistically told the Rio de Janeiro-based O Globo newspaper that Brazil’s economy will grow by 4-5% this year.That kind of optimism in July helped Brazil’s benchmark Bovespa stock index book its best monthly gain since 1998. The index jumped 2.3% to 55,997.81 - its highest level in 11 months. It’s up about 50% this year, outpacing even the red-hot MSCI Emerging Markets Index. The Dow Jones Industrial Average and S&P 500 Index are up just 5.8% and 11% respectively.Analysts that were skeptical of Brazil’s economic growth in the heady years leading up to the financial crisis pointed to the country’s supposed reliance on high commodities prices and exports.No doubt, the country benefited a great deal from the commodities boom that drove up prices for Brazilian exports like iron ore, steel, and soybeans. But in eviscerating commodities prices and ravaging the market for exports, the financial crisis demonstrated that Brazil is more than a one-trick pony.Sublime political stewardship leading up to and during the crisis kept Brazil’s economy well intact when global economy seemed to be falling apart. Stringent financial regulation shielded Brazil from the worst of the financial crisis, while government tax cuts and a growing middle class buoyed the country’s economy as exports dried up.Back to the Future: Brazil’s Troubled Past Preserves its PresentIndeed, the very financial crises that had Brazilians believing their country would never find its place among the world’s elite economies endowed the nation’s policymakers with a streak of caution as they entered the 21st century.“We are used to dealing with challenging environments, for our institutions and our regulations,” Alexandre Tombini, director for regulation at Brazil’s central bank, told the Financial Times. “Everything we have done since the mid-1990s has tended to take a more cautious approach.”For instance, banks in Brazil are required to keep capital reserves that equate to at least 11% of their total assets. That’s high by most international standards, but many banks maintain capital ratios of 16% or more.Banks are also required to keep 30% of all deposits at the central bank. That makes borrowing more expensive, but it also made it possible for Brazil’s central bank to dole out $51.4 billion (100 billion reals) overnight to ensure banks were adequately funded. Brazil’s high interest rates are another reminder of the hyperinflation that overwhelmed the economy in the 1990s. But those rates also kept lenders from getting carried away, and now that the crisis has subsided, inflation has been crushed and rates are plunging.Brazil’s official IPCA consumer price index advanced 0.24% in July after posting a 0.36% gain in June, according to the Brazilian Census Bureau (IBGE). The rolling 12-month rate sank to 4.5%, down from 4.8% in the 12 months through June.Brazil’s central bank has lowered its primary interest rate, the Selic-base rate, six times this year, with the most recent a 0.5% cut after the bank’s July 21-22 meeting. The benchmark rate currently stands at a record low of 8.75%.With inflation subdued, most analysts believe the rate will be kept at its historically low level until at least 2010. "With inflation under control, I believe it will permit the Selic to be maintained at this low level until at least the middle of 2010."Alex Agostini, chief economist at local ratings agency Austin, told The Wall Street Journal. "I don’t seen any inflationary pressures on the radar. The inflation scenario is so well behaved that it could give the central bank room to make another rate cut at the next meeting, even though the signals coming from the central bank have indicated there will be a pause."And while U.S. regulators are only now looking into the inconsistencies and manipulations wrought by irresponsible futures trading, Brazil has long held the reins tight on such activity. Short selling - selling shares you do not own - is allowed, but naked short selling - selling shares that you don’t have - is kept under wraps by fines for traders who can’t to deliver shares they have sold within three days.Additionally, brokers in Brazil are obligated to provide information by every client. That means a Ponzi scheme like the one orchestrated by Bernie Madoff would never have worked in Brazil.Retail Remains ResilientJust as Brazil’s regulators have taken their cues from past mistakes, Brazil’s growing middle class - which now encompasses more than half the country’s population - has been hardened by tough times and proven resilient throughout the current crisis.May retail sales advanced at an annual pace of 4% and June sales are expected to have increased by 6.5% year-over-year. Furthermore, an IBGE survey showed that nine out of 10 retail sectors showed month-on-month sales increases."Brazil has had so many crises over the years, people got used to them," David Neeleman, the founder of JetBlue (Nasdaq: JBLU), who last December started a low-cost Brazilian airline called Azul told BusinessWeek. "I don’t think they’re at all fazed by this crisis-everyone seems to be focused on buying their first car, getting their first credit card."Credit card purchases have grown by 22% a year over the past decade, BusinessWeek reported.However, Brazilian consumers also got a helping hand from the government, which cut income taxes and reduced levies on a wide range of durable goods.In April, the government cut taxes on construction materials, cars, and household appliances. The end result was a 5.7% rise in spending on construction materials in May and an 8% surge in auto sales. Rejuvenated auto sales hit a record-high 300,000 in June.And increased sales led to increased production. Industrial output rose for the six straight month in June, climbing 0.2% on a monthly basis.“Brazil has proved it can govern itself and keep the economy on track in very difficult times,” Riordan Roett, a professor at Johns Hopkins University’s School of Advanced International Studies, told BusinessWeek.Buying Into BrazilBrazil has also proven that it has a strong consumer base of its own ready and able to fuel economic growth, even as exports falter. In fact, exports account for a mere 12% of Brazil’s $1.5 trillion economy.From 2001 to 2007, the poorest 10% of the population enjoyed a 49% increase in real income, Brazilian economist Marcelo Neri told the Miami Herald, describing what he called "Chinese-like growth."Roughly 27.8 million Brazilians - out of a population of nearly 200 million - joined the consumer economy from October 2003 to October 2008, according to Neri.About 8 million jobs have been created in that time, while the minimum wage has increased 45%That makes Brazil a very attractive destination for investment.In an April Buy/Sell/Hold column, Money Morning contributing editor and emerging markets specialist, Horacio Marquez, recommended Petroleo Brasileiro (NYSE ADR: PBR) for several reasons - the rising prices of oil in the next few years, the discoveries of large oil fields off Brazil’s shore, and increase local demand from the country’s growing population and income levels. Another commodity play is Vale S.A. (NYSE ADR: VALE), the world’s largest iron ore exporter and a key supplier to China’s exuberant infrastructure expansion. Vale will benefit not only from increase in demand when global economies (and trade with them) recover, but also the rebound of commodity prices across the board.Martin Hutchinson, another Money Morning contributor, recommends Companhia de Saneamento Basico, orSabesp (ADR: SBS), which operates the water-and-sewage system for Brazil’s Sao Paulo region. Sabesp currently has a P/E ratio of 6.92.“Now that’s a growth business, and one that’s not dependent on commodity prices,” he said.Finally, the iShares MSCI Brazil Index ETF (NYSE: EWZ) has been recommended by both Marquez and Hutchinson. The ETF aims to measure the performance of the Brazilian equity market. It has net assets of $8.58 billion, a Price/Earnings (P/E) ratio of 12.75, and a dividend yield of 3.66%.

IBM Bets on Brazilian Innovation

2009-08-18T00:07:00.001-04:00

Image via CrunchBase

Big Blue's new initiative to stimulate development of Brazil's nascent tech industry is the latest sign of the country's rising power

Over the last few years, China and India have emerged as the twin hot spots of emerging tech innovation. Now IBM (IBM) is betting that one of the next big technology stars will be Brazil.
In the latest sign of Brazil's rising power, Big Blue is announcing on Aug. 18 a new initiative to stimulate the development of the country's technology sector. To kick off the effort, IBM is hosting its first-ever forum for venture capitalists and entrepreneurs in São Paulo along with FINEP, the Brazilian government agency that finances technology development. The daylong event will bring together more than 100 investors and dozens of new companies looking for investment and business advice.
IBM is also launching a Portuguese version of its developerWorks Web site, which provides free programs and online teaching guides that help programmers build skills in the Java programming language, the Linux operating system, and IBM products such as Lotus. To host the event, IBM has dispatched Claudia Fan Munce, managing director of IBM Venture Capital Group, and Steve Mills, senior vice-president and group executive of IBM's $20 billion Software Group, a clear sign of the growing importance of Brazil to the IBM portfolio.
"We have been watching Brazil for a while," says Munce, who grew up in Brazil. "The time is right."
Eyeing Opportunity
In the past, Brazil has been hobbled by hyperinflation, rampant political corruption, and failed fiscal and monetary policies. But with a growing and stable economy in recent years, multinational corporations such as IBM and Hewlett-Packard (HPQ) and venture capital and private equity players now see additional opportunity for technology innovation in the sun-drenched nation. "That potential is there," says Mills. "The university systems are strong. There is a level of interest in entrepreneurship that is growing."
Investors increasingly see Brazil as an attractive destination. As of the end of 2008 nearly 150 local and foreign investment firms had committed $28 billion in venture and private equity capital to Brazilian companies, according to the Brazilian Association for Private Equity & Venture Capital. That's up from $6 billion in 2004, amounting to a hearty 50% compound annual growth rate over the last four years. Investors have financed 500 Brazilian companies to date with venture or private equity capital, and there's $12 billion left to invest over the next few years from that $28 billion kitty.
Still, the country's business challenges, including high taxes and restrictive labor laws, could hamper growth. And native businesspeople say a Silicon Valley-like ecosystem where risk and creative thinking in technology are the norm remains elusive. "We do not have an ecosystem in place," says Berthier Ribiero-Neto, head of Google's (GOOG) Latin American research and development center, which is based in Belo Horizonte, Brazil. "Most of the students go to work for the outsourcing companies. I would like to see more product development."
The IBM initiative is designed to help remedy some of those issues. The idea is to serve as a matchmaker and coach to the growing number of companies IBM works with in Brazil. In fact, IBM's Munce says that among the so-called BRIC countries (Brazil, Russia, India, and China), Brazil is seeing the highest growth in business partners that IBM works with, averaging 150% year over year.
Tapping into Brazil
To help its partners raise money, IBM will introduce them to dozens of local and foreign private investors at the forum, including Intel Capital, Draper Fisher Jurvetson, Rio Bravo, and Darby Overseas Investments. And to design, build, and market new technologies for their businesses, IBM will invite its several thousand Brazilian business partners to visit its Innovation Center in São Paulo, which opened in February. At the center, entrepreneurs can gain access to training courses, consulting services, and technical seminars. "The center will help us tap into this huge growth market," says Munce.
Humberto Matsuda, founding partner with Performa Investimentos, a new Brazilian venture capital firm, says the IBM forum is a significant event for his country. "We are very excited to see how IBM will become a player in this industry," says Matsuda, who is closing an $8 million fund, with 40% of its capital coming from FINEP. "It is a very significant event, given the size of the players."
Matsuda, who helped IBM draw up a list of companies to invite to the forum, says startups have been hobbled in the recent past by a lack of capital and experienced entrepreneurs. But he says the IBM event is important because it will help foster more investment, training, and networking in the technology community. "They will make introductions to potential clients and offer training and services," says Matsuda. "You have to use a key player like IBM to teach companies."
Ante is an associate editor for BusinessWeek.

Brazil’s June Retail Sales Rise More Than Expected

2009-08-13T23:20:00.004-04:00

By Joshua Goodman and Helder Marinho
Aug. 13 (Bloomberg) -- Brazil’s retail sales rose more than expected in June from the previous month, reinforcing analyst expectations that surging domestic demand is lifting Latin America’s largest economy from its first recession since 2003.
Retail sales rose 1.7 percent from the previous month, the national statistics agency said today, beating the forecast for a 1.2 percent increase in a Bloomberg survey of 23 economists. Sales grew 5.6 percent from a year ago, almost twice the revised 2.9 percent pace in May. Analysts had forecast a 6 percent gain, the median of a survey of 29 economists.
Policy makers, in the minutes to their July 22 meeting at which they halved the pace of interest rate cuts, said the current record low Selic rate of 8.75 percent was “consistent” with a non-inflationary economic recovery, a signal they may halt after five straight cuts this year.
“The numbers reinforce the central bank’s thesis, which is one of caution,” Roberto Padovani, chief strategist for Banco WestLB in Sao Paulo, said in a telephone interview. “A still- strong economy is being sustained by domestic demand that is compensating for the slowdown in exports and investment.”
Padovani said the central bank’s next move would be to raise the benchmark rate sometime in the middle of next year. Analysts are forecasting that the bank will raise the so-called Selic to 9.25 percent next year, according to a central bank survey of 100 economists published Aug. 10.
Rates
Still, with inflation at the 4.5 percent midpoint of the central bank’s target range, and expected to fall further next year, President Luiz Inacio Lula da Silva is pushing for another cut.
“We have the lowest level of interest rates in our history,” Lula said at a conference yesterday in Brasilia. “It’s desirable and possible to cut further”
The real strengthened as much as 1.1 percent before paring gains to trade at 1.8333 per dollar at 10:50 a.m. New York time, a 0.3 percent gain, from 1.8388 yesterday.
Former central bank President Gustavo Franco said in an interview last week that he would have cut further during the global crisis and that pressure to resume slashing rates should intensify as inflation slows.
Central bank President Henrique Meirelles has been more moderate, saying this week that policy makers have “maneuvering room” should the global crisis worsen.
Recovery
June’s retail sales grew by the fastest monthly pace since a 1.9 percent increase in February. A 15.6 percent increase in the sale of computer equipment led all categories.
A broader index, including automobile and construction materials, rose 10.2 percent from the year-ago period, the biggest gain since September, helped by government tax breaks to stimulate spending. On a monthly basis, sales rose 6.5 percent, the most since the broader index was introduced in 2007.
Claudio Felisoni, head of the management institute at the University of Sao Paulo , said in an interview with Bloomberg Television in Sao Paulo that today’s data “signal a very auspicious scenario” for the retail sector in the coming months.
Franco said six straight months of expansion in industrial output was a “sure sign” that Brazil was in a V-shaped economic recovery that may lead to positive growth this year.
Analysts expect a slower recovery, forecasting gross domestic product will shrink 0.35 percent this year before rebounding 3.6 percent in 2010, according to the central bank survey.
Unemployment fell for the third straight month in June, to 8.1 percent from 9 percent in March, while companies added jobs for the fifth month, cementing expectations that the economic recovery gained pace in the second quarter.
To contact the reporter on this story: Joshua Goodman in Rio de Janeiro at Jgoodman19@bloomberg.net; Helder Marinho in Rio de Janeiro hmarinho@bloomberg.net;

Lula says Brazil's economy turning the corner

2009-08-13T04:50:00.000-04:00

BRASILIA, Aug 12 (Reuters) - Brazil's economy is showing signs of recovering in the second semester, President Luiz Inacio Lula da Silva said on Wednesday.
Interest rates are at historic lows but it is "desirable and possible" for them to be cut further, he said. The central bank has slashed borrowing costs by 500 basis points since the beginning of the year to 8.75 percent.
"The employment and industrial activity curves signal a return to growth in the second semester, confirmed by greater confidence by the industry and the foreign investor," Lula said at an event in Brasilia.
Brazil's Bovespa stock index .BVSP> is up more than 50 percent this year and its real currency BRBY> has gained about 27 percent this year.
The strength of the economy is what continues to attract foreign capital to Brazil's financial markets, Lula said.
"It would be a mistake to imagine that the foreign capital flows into the country reflect merely ... financial speculation," Lula said.
Government officials have repeatedly said Brazil would be among the first countries to come out of the global economic crisis which pushed economies the world over into recession.
Market analysts expect Brazil's economy to contract 0.35 percent this year after 5.1 percent growth in 2008.
But among the world's major economies, only China and India are expected to grow more than Brazil this year, according to a July forecast by the International Monetary Fund. (Reporting by Ana Nicolaci da Costa and Ana Paula Paiva; editing by Carol Bishopric)

Bazil's formal jobs expected to hit 40 mln

2009-08-07T09:20:00.000-04:00

www.chinaview.cn 2009-08-07 10:39:40

RIO DE JANEIRO, Aug. 6 (Xinhua) -- The number of formal jobs in Brazil will have, despite the ongoing global economic crisis, reached 40 million by the end of this year, Labor Minister Carlos Lupi said Thursday.
At the end of 2008, Brazil had 39.4 million formal jobs, registering an increase of 1.83 million, or 4.88 percent, from that of a year earlier.
Despite the global economic crisis, 1.69 million formal jobs were created in the private sector, and another 135,900 in public administration.
"In 2009, we will hit the 40 million formal jobs mark." the minister told reporters.
The figure meant that about 20 percent of the 191 million Brazilians will have formal jobs by the end of this year.
According to the Labor Ministry, Brazilian workers were also paid better last year. The monthly average income of Brazilian workers climbed 3.52 percent from 1,443 reais (784 U.S. dollars) to 1,494 reais (812 U.S. dollars) last year.
Lupi said that was mostly due to the economic crisis which cut many low-paid positions usually filled by inexperienced workers with less education.
The number of job vacancies that required a college degree was up 7.3 percent in 2008, while job opportunities for those with only basic education fell 3.2 percent, he said.
"During an economic crisis, those with better education are always given preference," he said.

Brazil's Coming Rebound

2009-08-06T21:54:00.004-04:00

Consumers are spending and banks are sound. Is the Latin giant finally growing up?

A Whirlpool factory outside São Paulo: A tax cut on consumer goods has benefited the company Paulo Fridman
By Geri Smith

São Paulo - For years, Edilson dos Reis Rodrigues dreamed of owning a home. But the public school teacher and his wife together earn just $710 a month, so he could never set aside a down payment. Now, he's finally getting the chance.
Thanks to a new government program called My House, My Life, Rodrigues will soon own a two-bedroom apartment near São Paulo. He'll get a cash grant covering a quarter of the $52,000 price and a discounted 30-year mortgage, so he'll pay just $220 a month—half what a conventional loan would have cost. "This is an incredible opportunity," the 31-year-old says, smiling broadly as he hands in paperwork to seal the deal.
My House, My Life is just one of the stimulus measures that Brasilia has implemented to keep Latin America's biggest economy from stalling. As a result, Brazil will likely be one of the first countries to emerge from the slump: The economy may grow slightly this year and by as much as 4.5% in 2010, helping lift millions of Brazilians out of poverty. "Brazil is emerging from the crisis, and next year we are going to have surprising growth," President Luiz Inácio Lula da Silva said proudly in a July 28 speech.
Lula has reason to be proud. The former union activist, who never finished elementary school, has been a surprisingly careful steward of Brazil's economy. In a country long plagued by hyperinflation, devaluations, and defaults, Lula last year won investment-grade status for Brazil's sovereign debt. And he did it while expanding social programs that have dramatically reduced poverty rates and spurred expansion of the middle class.
Veteran Brazil watchers say the country's resilience is due to a combination of abundant natural resources, an embrace of globalization after decades of looking inward, and resilient businesspeople and policymakers who have learned to survive difficult times. So as soon as the economy started to contract last year, Brasilia trimmed income taxes and cut levies on key consumer goods, helping manufacturers boost sales and avoid layoffs. "Brazil has proved it can govern itself and keep the economy on track in very difficult times," says Riordan Roett, a professor at Johns Hopkins University's School of Advanced International Studies.
Although the economy fell into recession in the first quarter, consumer confidence and spending quickly rebounded owing to the stimulus and sound domestic finances. A comfortable $212 billion cushion of foreign reserves and a decade of budget surpluses have allowed the central bank to slash interest rates to a record low of 8.75% from 13.75% in seven months while pouring liquidity into the market to keep credit flowing. And private banks are well regulated and have healthy balance sheets. "Brazil's fundamentals are very strong—we don't have any of the problems that created the bubble in the U.S.," says central bank President Henrique Meirelles.
Just as important, though, is Brazil's huge domestic market. While outsiders focus on the country's shipments of iron ore, steel, and soy to China, exports are just 12% of Brazil's $1.5 trillion economy. It's the 190 million people and the fast-growing middle class—now more than half the population—that drive growth. In the past seven years a government program called Bolsa Família has helped nudge 24 million Brazilians above the poverty line. And 8 million jobs have been created since 2003, while the minimum wage has increased 45%.
That's not to say Brazil isn't still a tough place to do business. Its highways, railroads, ports, and electric grid are outdated and congested. The government collects 36% of gross domestic product in taxes, similar to Europe, but delivers Third World services. Political corruption and a nightmarish bureaucracy can hobble growth. And government spending is starting to rise in the runup to next year's elections, which will mark the end of Lula's eight-year presidency.
But there's mounting evidence that Brazil is really changing.

Brazilians have long joked that theirs was the country of the future—and always would be because they invariably seemed to mess things up. Now they're imbued with a newfound optimism that they might finally have gotten things right.
State oil company Petrobras is a case in point. Last year the company discovered vast deepwater reserves that it is developing with a five-year, $174 billion investment program. The goal is to double Brazil's production, to 3.5 million barrels a day, by 2012, making the country a top oil exporter. "Our deepwater discoveries didn't just fall from the sky. They're the product of a very long-term development program going back 30 years," says Petrobras CEO José Sergio Gabrielli de Azevedo. "It's the Brazilian equivalent of sending a man to the moon."
The country's improving prospects create huge opportunities for entrepreneurs small and large. "Brazil has had so many crises over the years, people got used to them," says David Neeleman, the founder of JetBlue (JBLU), who last December started a low-cost Brazilian airline called Azul (Portuguese for "blue"). "I don't think they're at all fazed by this crisis—everyone seems to be focused on buying their first car, getting their first credit card."
A beauty salon in Rio de Janeiro highlights the new middle-class buying power. Despite its location in the posh Ipanema neighborhood, the clientele is mostly housemaids, hospital clerks, and other women from relatively modest circumstances. The salon is the creation of Heloisa Assis, known as Zica. One of 13 children, she grew up in a slum supported by her laundress mother. Like many Brazilians of African descent, she had brittle, kinky hair that she says hobbled her chances of getting a decent job. Zica tested homemade potions to tame her unruly Afro and finally came up with a formula that created flowing ringlets. She patented her discovery and in 1993 opened a salon, calling it Beleza Natural, or "Natural Beauty." She soon had customers lining up at 5 a.m.
Today, Zica has 1,080 employees, 10 salons, and plans to open 30 more shops in five years. Falling interest rates have allowed her to get bank loans to finance growth. Two years ago she brought in professional CEO Anthony Talbot, a veteran of Dunkin' Donuts and Young & Rubicam, who says sales hit $26 million in 2008 and should reach $45 million this year. The hair treatments aren't cheap: Most clients spend $60 a month—10% to 20% of their income—on salon visits and products. But, Zica says, "People nowadays have a little more money to buy the basics they need, with some left over."
"THE NEW NECESSITIES"
Brazilians are also buying more food, clothing, and household goods. That's fueling sales at companies such as Grupo Pão de Açúcar, a chain of 597 supermarkets with $8.9 billion in revenues last year. To cash in on booming sales of fridges, washers, and the like, the company in June paid $422 million for Ponto Frio, an appliance retailer with 458 outlets. "Over the next five years, we'll see a doubling of sales of durable goods in Brazil," says José Roberto Tambasco, vice-president for operations at Pão de Açúcar.
In April the government reduced hefty taxes on construction materials, cars, and household appliances to stimulate consumption. That revived auto sales, which in June hit 300,000 vehicles—an all-time high. Even hapless General Motors is enjoying fat times in Brazil, where it's investing $1 billion through 2012 to develop a new small car. Whirlpool (WHR), which has a 40% share of Brazil's appliance market, has benefited, too. Sales jumped 20% in May and June compared with a year earlier. Even when the tax cut ends in October, sales should remain strong, says José A. Drummond Jr., president of Whirlpool Latin America.

In wealthier cities, 55% of households have a washing machine, but in the poorer Northeast, less than a quarter do. "Think how many washers we can sell in this country," Drummond enthuses. "Washers and microwaves are the new necessities."
Many of those goods will be bought with credit cards. Purchases with plastic have been growing 22% a year during the past decade, and since fewer than half of Brazilians have cards, there's immense potential. Credit to the private sector is just 44% of GDP—up from 36% a year ago—but still well below the U.S. level. That explains why VisaNet, a Brazilian card processor affiliated with the global Visa (V) card network, on June 25 was able to raise $4.3 billion in Brazil's largest-ever initial public offering. More than half the shares were snapped up by international investors, who are starting to flock back to Brazil.
Many of them find their way to GP Investimentos. The São Paulo private equity shop manages more than $1.1 billion, much of that from foreigners. Oxford-educated co-CEO Antonio Bonchristiano worked in the City of London and on Wall Street before returning to his native Brazil in the early 1990s at the height of hyperinflation—not a time for the faint of heart, but he has no regrets. "People now realize that too much capital flowed to India and China" in recent years, he says. "Brazil is on much firmer footing now, and it makes sense to put funds here."
GP has invested in a dozen ventures, from barbecue restaurants to oil rigs to an outfit called BR Malls. When GP bought the shopping center manager in 2006, it was a family-run business with six malls valued at $287 million. Today, it has 34 malls, 1 billion square feet of retail space, and a market cap of $1.8 billion—growth fueled largely by the middle class. Those middle-class shoppers are often looking for furnishings for new apartments. Brasilia aims to get at least 1 million homes built by 2011 due to initiatives such as My House, My Life, launched in April. That plan "is going to completely transform the housing construction industry in Brazil," says Leonardo Guimarães Corrêa, chief financial officer of MRV, Brazil's largest low-income homebuilder. MRV saw $231 million in home sales in the first quarter and doubled that in the second quarter. It has 200 construction sites nationwide, and its stock price has quadrupled this year.
Does Brazil run the risk of a real estate bubble? During the long years of high inflation, mortgages were nonexistent, and today they represent just 2.5% of GDP, vs. 80% in the U.S. So few see much risk of the market overheating anytime soon. "There's so much pent-up demand," Corrêa says. "It's not like the U.S., where people got up to their ears in debt. We're talking about simple, affordable apartments."

Brazil's growing middle class powers rebound

2009-08-04T23:05:00.000-04:00

Brazil's growing middle class powers rebound
By TYLER BRIDGES
McClatchy Newspapers
RIO DE JANEIRO -- Brazil is beginning to pull out of an economic dive triggered by the global financial crisis, but it's not the country's vaunted soybean, meat and iron ore exports that are powering the turnaround of the world's ninth-largest economy.
Instead, more than 20 million Brazilians who have joined the consumer economy in recent years and now have money to spend are playing a key role in Brazil's recovery.
"Investments and exports are down, but consumer spending is still growing, although slower than before," said Juan Pablo Fuentes, who tracks Latin American economies at Moody's Economy.com in West Chester, Pa. "People are still willing to buy durable goods like electronics and cars. It shows optimism, which is important."
Brazilians who formerly eked out a living are leading the way.
From 2001 to 2007, the poorest 10 percent of the population enjoyed a 49 percent increase in real income, said Brazilian economist Marcelo Neri, or what he called "Chinese-like growth."
Some 27.8 million Brazilians - out of a population of nearly 200 million - joined the consumer economy from October 2003 to October 2008, said Neri, who is based at the Getulio Vargas Foundation in Rio. "They could now buy durable goods like computers, maybe even a car, and get access to credit," Neri said.
Spurred in part by a federal sales tax break, Brazil's auto industry sold more cars in a single month in June than ever - 300,157. This topped the previous monthly record in July 2008 by 12,047 vehicles.
Neri credited the expansion of the consumer class to an activist government that has increased direct payments to the poor and raised the minimum wage, which is also indexed to benefit retired public workers.
After growing for five years, however, Brazil's economy contracted by 1.8 percent during the first quarter, and Neri estimated the tough economic times have caused about 2.8 million Brazilians to fall back into poverty.
"It's not a big loss," Neri said, amounting to about only 10 percent of those who joined the consumer society during the boom years. "The average Brazilian today still has money in his pocket."
Moody's Economy.com is projecting Brazil's economy to grow by 0.5 percent in 2009 thanks to a second-half rebound that's expected to offset a difficult first six months. The firm expects Brazil's economy to grow by 4.2 percent in 2010 and lead Latin America out of recession.
"The worst is over," said Paulo Levy, an economist at the Rio-based Institute for Applied Research, adding Brazil is in better shape to weather the global economic mess than it was a decade ago.
Successive governments have tamed inflation, boosted foreign currency reserves, cut foreign debt, turned budget deficits into surpluses and "sent signals to investors that they could rely on Brazil," Levy said.
Tapping into the country's currency reserves has permitted the government to boost spending on new roads and ports and direct more money to the poor.
Still, even a fortified Brazil was no match for the economic disaster that hit in October when bank loans disappeared and demand for its export products withered.
Investors pulled back, with the electronics, construction and aircraft manufacturing sectors taking a beating. Foreign investment dropped by 20 percent during the first five months of 2009, and imports plummeted by 28.9 percent during the first six months of 2009, compared with the first six months of 2008. Exports dropped by 22.2 percent.
The only bright spot for Brazil's trade: China's continuing thirst for Brazilian soybeans, iron ore and oil.
China accounted for 8.2 percent of Brazil's exports in the first six months of 2008 but 14.9 percent in 2009 - becoming a bigger market than the U.S.
"I don't know where we'd be without China," said Jose Augusto de Castro, a vice president of the Rio-based Brazilian Foreign Trade Association.

Brazil Petrobras CEO: Ready To Operate Subsalt Blocks

2009-08-01T00:11:00.001-04:00

Brazil Petrobras CEO: Ready To Operate Subsalt Blocks-Estado

RIO DE JANEIRO -(Dow Jones)- Brazilian state-run energy giant Petrobras (PBR) is capable of being the lone operator of government-owned offshore oil concessions, the company's CEO told the local Estado news agency Friday. "We're more than capable, yes. There isn't another company like Petrobras. Nobody has the same characteristics as we do," Jose Sergio Gabrielli said in Brasilia. According to local press reports, Brazil's government is considering making the company the lead operator for all unlicensed exploration blocks in the promising subsalt region. The concession blocks currently remain under control of the government. A government panel formed by President Luiz Inacio Lula da Silva last year is studying possible changes to Brazil's oil laws that would give the government a greater stake in offshore oil deposits. Lula wants to use the newfound oil wealth to ease Brazil's crushing poverty and improve the country's education system. The panel is expected to submit its proposed changes to Lula in the next few weeks. It is expected that any changes will then be put up for Congressional debate when lawmakers return from vacation in August. The so-called subsalt oil discoveries were made under a thick layer of salt in the Santos Basin off the coast of Sao Paulo and Rio de Janeiro states. The oil lies under more than 2,000 meters of water and a further 5,000 meters under sand, rock and a shifting layer of salt. In November 2007, Petrobras estimated recoverable reserves at the Tupi field were between 5 billion and 8 billion barrels of oil equivalent, or BOE. That was the largest discovery in the Americas in more than 30 years. -By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; jeff.fick@dowjones.com

Housing Boom Finds 190 Million New Customers

2009-07-30T22:51:00.002-04:00

Image by thinkpanama via Flickr

Housing Boom Finds 190 Million New Customers: Alexandre Marinis
Commentary by Alexandre Marinis

July 30 (Bloomberg) -- The world’s next great housing boom may be taking shape in Brazil. The missing ingredients are a full-fledged mortgage market -- one that steers clear of the pitfalls the U.S. encountered -- and sound government policy.
Construction sites dot the landscape throughout the vast country of 190 million. In fact, Caixa Economica Federal, Brazil’s second largest federally controlled bank, is hiring a satellite-imaging company to monitor work on thousands of buildings financed with Brazilian government money.
The key drivers of the activity are both economic and political. There’s no doubt Latin America’s biggest economy is coming out of a recession as the nation’s benchmark interest rate was cut to a record 8.75 percent last week. Credit is flowing more freely as bank lending expands at the fastest rate this year.
Mostly, though, the hot real estate market is fueled by political forces rather than economics. In March, the Brazilian government adopted “Minha Casa, Minha Vida” -- “My Home, My Life” -- a 34 billion reais ($18 billion) program to build 1 million homes for low-income families.
Under the new program, families earning as much as 4,200 reais a month will be able to buy a home at a near-zero interest rate, refinance it over 36 months in case of unemployment and be fully bailed out by the government in case of death. Meanwhile, a mortgage for a middle-class Brazilian can carry an effective interest rate of more than 13 percent with no comparable breaks.
This housing plan, along with tax cuts for selected building materials, originally was part of a broad policy to counter the impact of the global financial crisis on Brazil’s economy.
Election-Year Handouts
With the economy already rebounding, the subsidy’s main impact will be its role in next year’s presidential campaign. President Luiz Inacio Lula da Silva hopes the plan will attract votes for his Workers Party candidate, Dilma Rousseff. Lula used another government subsidy -- Bolsa Familia, a cash transfer program to the poor -- to help his re-election in 2006.
The four-month old “Minha Casa, Minha Vida” program is just getting off the ground. Yet, the government’s support for it is already encouraging real estate development, creating thousands of construction jobs and boosting the local stock market.
The nation’s civil construction businesses employed 27 percent of all workers formally hired in the first half of the year, according to the labor ministry. Meanwhile, the country’s manufacturing industry lost 144,000 jobs.
Homebuilders Rally
While the Bovespa Index is up 43 percent this year, the two largest Brazilian homebuilders, Cyrela Brazil Realty SA and Gafisa SA, have more than doubled. Shares of Construtora Tenda SA, which serves the lower end of the market, have quadrupled this year; Gafisa purchased a controlling stake in the company last year.
But the potential for Brazil’s real estate market beyond the government program is stunning. Mortgage lending represents only 2.5 percent of the country’s gross domestic product, according to the central bank. The comparable figure is 11 percent in Mexico, 20 percent in Chile, 45 percent in Germany or Spain and 68 percent in the U.S.
In the last 12 months, the worst period of the worldwide credit crunch, mortgage lending in Brazil rose 41 percent, twice as fast as consumer credit.
So Brazil’s real estate market has nothing but rosy days ahead, right? Not quite.
The Brazilian banking system is healthier and less leveraged than in the U.S. The problem is that mortgage financing is dominated by public banks. Government institutions control 73 percent of outstanding mortgage loans, while private banks, foreign and local, split the rest of the market.
Too Risky
Private-sector bankers aren’t writing many mortgage loans because they view other types of credit as more profitable and returns on mortgage transactions still aren’t commensurate with the risks of late payments and default. Brazilian consumers pay interest rates that average 45.6 percent on most financed purchases, more than triple the rate on mortgages.
Politicians, on the other hand, don’t seem to care much whether the financing for the government-backed housing plan generates about bad loans. They figure the Treasury will bail them out if needed.
Meddling Hands
If Lula and Rousseff put political interests first, they probably will demand construction of more houses than Caixa and other federal banks can safely finance.
Lula has already shown a fondness for meddling in the affairs of the public-sector banks by replacing directors with Workers’ Party loyalists. Earlier this year Lula fired the head of publicly traded Banco do Brasil for refusing to cut the bank’s interest rates to aid the economy and, in turn, Rousseff’s election prospects.
Brazilian authorities have come a long way toward developing the mortgage market. Still, a lot remains to be done. One key change: encourage private banks to participate by allowing them to negotiate loan terms and interest rates with home buyers. Currently, government legislation stipulates the characteristics of 80 percent of the contracts.
Without getting the private sector on board, the risk of taxpayer money being used to bail out federal banks will mount, risking a repeat of Brazil’s 1980s subprime debacle. Back then, government subsidies created a mortgage liability equal to 150 billion reais, which Brazilians will be paying for until 2027.
It might take more than advanced imaging satellites to keep this boom from going bust.
(Alexandre Marinis, political economist and founding partner of Mosaico Economia Politica, is a Bloomberg News columnist. The opinions expressed are his own.)

Brazil Central Bank May Pause After Slashing Rate to Record Low

2009-07-23T00:22:00.001-04:00

Brazil Central Bank May Pause After Slashing Rate to Record Low
By Andre Soliani and Iuri Dantas

July 23 (Bloomberg) -- Brazil’s central bank, after slashing the benchmark interest rate at a fifth straight meeting this year, signaled it’s ready to pause as evidence mounts that economic growth will return.
Policy makers lowered the key rate by half-point to a record 8.75 percent yesterday, as expected by 49 of 50 analysts surveyed by Bloomberg. Central bank President Henrique Meirelles and his seven board members had cut the rate by at least a full point in all four previous policy meetings of 2009.
Latin America’s biggest economy will expand 4 percent next year, powered by domestic demand, the Organization for Economic Cooperation and Development said in a July 14 report. Meanwhile, economists surveyed by the central bank pushed up their forecast for 2009 inflation in the past three weeks to 4.53 percent, above the government’s 4.5 percent annual target.
“The central bank said that the current rate, as of now, allows Brazil to achieve a growth rate of about 4 percent and at the same time meet the inflation target,” Roberto Padovani, chief strategist at Banco WestLB in Sao Paulo, said in a telephone interview. “The bank communicated emphatically that the easing cycle came to an end.”
Latin America’s biggest economy is rebounding from its first recession in five years, benefiting from domestic demand, which is being supported by record-low borrowing costs, lower taxes and increased government spending.
Annual inflation, as measured by Brazil’s IPCA index, slowed to 4.8 percent in June, down from 5.2 percent in May and the lowest since March 2008. Policy makers last month reaffirmed that they seek to slow inflation to 4.5 percent by year-end.
Inflation Outlook
“This level of the benchmark rate is consistent with a benign inflationary outlook, helping ensure the conversion of inflation toward the target, in a meaningful horizon, as well as a non-inflationary recovery of economic activity,” policy makers said in a statement accompanying their decision.
After contracting 0.8 percent in the first quarter of 2009 from the previous three months and a record 3.6 percent in the last quarter of 2008, gross domestic product will expand 1.4 percent in the second quarter from the previous three months, Alexandre Lintz, chief strategist with BNP Paribas in Sao Paulo, wrote in a July 17 report.
“There is enough evidence that the economy is turning around, therefore the bank doesn’t want to cut rates too much and be forced to hike them in 2010,” Italo Lombardi, an economist at Roubini Global Economics LLC, said in a phone interview.
Delayed Effect
Policy makers will assess the delayed effect of this year’s rate cuts on inflation before deciding their next move, Padovani said.
Meirelles has slashed the benchmark interest rate from a two-year high of 13.75 percent in December and injected about $100 billion into money and currency markets to boost loans to companies and consumers amid the global credit crunch.
Brazil’s total bank lending swelled to 1.26 trillion reais ($662 billion) in May, a 20.5 percent increase over the same period a year ago.
“Credit expansion has resumed and is helping sustain domestic demand,” Alex Agostini, chief economist with Sao Paulo-based Austin Rating, said in a telephone interview.
Retail sales rose more than analysts expected in May, adding to evidence consumer demand has remained resilient amid the first global recession since World War II. Sales increased 4 percent in May from a year earlier, the national statistics agency said July 14.
Traders See Increase
Traders in the futures market anticipate Meirelles will be forced to raise the rate to 10.5 percent by July 2010 to keep inflation under check, according to data compiled by Bloomberg.
Meirelles may carry out “a kind of pre-emptive hike” in the first quarter of next year, said Paulo Vieira da Cunha, a former central bank director who helps oversee $160 million in emerging-market assets at Tandem Global Partners.
A plunge in investments and exports after the collapse of Lehman Brothers Holdings Inc. in September pushed Brazil into its first recession since 2003.
The central bank expects 2009 economic growth of 0.8 percent.
“The central bank will have to raise rates again next year, probably in the second half,” Adauto Lima, chief economist at Western Asset Legg Mason, said in an interview from Sao Paulo. “This level of interest rate is too low.”
To contact the reporter on this story: Andre Soliani in Brasilia at at soliani@bloomberg.net Last Updated: July 22, 2009 23:01 EDT

Brazil Growth Forecast to 4 pct or More

2009-07-19T11:52:00.003-04:00

Brazil Growth Forecast to 4 pct or More this Year

By John Santos

July 19 (Marshfield, MA) -- Nelson Barbosa, the economic policy secretary, sharply raised its forecast for Brazil's growth this year. He told O Globo newspaper, Brazil will grow 1 percent to 1.5 percent in the second quarter compared with the previous quarter and he expects Brazil’s economy to expand between 4 and 5 percent by year end as lower interest rates bolster growth.

Latin American Herald Tribune - Brazil Created 299,506 Jobs in First Half of 2009

2009-07-17T20:47:00.001-04:00

Latin American Herald Tribune - Brazil Created 299,506 Jobs in First Half of 2009

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Brazil proves developing countries can use generic medicines to fight HIV/AIDS epidemic

2009-07-14T09:47:00.001-04:00

Brazil proves developing countries can use generic medicines to fight HIV/AIDS epidemic

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Brazil’s First Network of Electric Charging Stations Will Be Solar-Powered

2009-07-09T16:49:00.002-04:00

Brazil’s First Network of Electric Charging Stations Will Be Solar-Powered
Written by Bryan Nelson
Published on July 7th, 2009

Posted in About Transportation, In The Americas

The first of many roadside electric charging stations in Brazil is set to be installed in the Barra de Tijuca neighborhood in Rio de Janeiro, and it’ll be solar-powered.
The neighborhood was chosen because it has the highest number of electric motorcycles certainly in circulation. The battery charging point will serve a mainly symbolic purpose at first, “awakening environmental awareness by showing people that it is possible to use energy without harming the environment,” said spokesperson Edimar Machado.

Brazil has been a worldwide leader in reducing the impact of the transportation sector on the environment, with 90% of new cars sold in the country being flex-fuel– capable of running on ethanol or gasoline in any proportion. Now the hope is that they can also lead the world in infrastructure for electric vehicles. Once they become more financially viable, Machado hopes to have an electric charging station positioned every 30km across the country.
That could soon allow every electric motorcyclist the capability to travel the entire length of Brazil’s major roadways if they wanted, even if their battery length is only around 40km, like most of the bikes currently in circulation there. Machado also suggested that used batteries could be exchanged for already-charged ones at the stations for the same price as a full charge, in case roadsters can’t wait around for the standard 4 hours it takes to charge the batteries. That would make the time it takes to “fill up” your electric vehicle no longer than it would take to fill up a gas tank.
Even better, the charging stations will generate their electricity from solar energy. The charging point captures solar energy by means of an array of 28 photovoltaic panels that generate 184 volts of direct current, which is transformed into triphasic alternating current. Output is at 110 or 220 volts. And on days when there isn’t much sunlight, or at night, the stations could still derive electricity from the grid system.
The Brazilian Electric Vehicle Association says the market for electric vehicles is already growing by about 50 percent a year, and with new charging stations located conveniently around town that number is expected to increase dramatically. They also project that electric vehicles will consume barely three to five percent of the country’s total energy in 2030, meaning as the system expands it shouldn’t be a significant strain on the country’s electricity. Meanwhile, car fuel consumption will be reduced by 10 percent.
Although that nationwide system of stations is still far from practical, the implementation of this first station is symbolic of what can be envisioned with the right political will and incentive.
Source: IPS News

Dancing through the economic crisis

2009-07-06T23:49:00.002-04:00

Special Report: Brazil

Financial Times published today a special report about Brazil. It is a very interesting report, showing Brazil as a mature democracy and also a rising power in food and industrial commodities, a big future exporter of oil and home to the world’s fourth biggest derivatives and equities exchange.

http://www.ft.com/reports/brazil-2009

Brazil Mastered Fuel Cells Technology

2009-07-02T09:27:00.002-04:00

Brazil launched what they say is Latin America's first passenger bus with an electric engine powered by hydrogen fuel cells.

'Brazil is one of five countries in the world that have mastered this technology and that has developed a hydrogen-powered bus,' Mr Serra, governor of Sao Paulo, said at Wednesday's launching ceremony.

In a fuel cell, hydrogen reacts with oxygen to produce electricity and water.

China Development Bank Plans to Open Branch in Brazil

2009-07-01T17:49:00.001-04:00

China Development Bank Plans to Open Branch in Brazil
By Jeb Blount and Veronica Espinosa

June 30 (Bloomberg) -- China Development Bank Corp., the government-run bank for public works projects, plans to open an office in Brazil next year to invest in ports, steel mills and energy, Rio de Janeiro state Governor Sergio Cabral said.
The bank expects to locate the branch in the city of Rio, home to the nation’s state-controlled oil company Petroleo Brasileiro SA, and Vale SA, the world’s largest iron-ore producer, by the middle of 2010, Cabral said in a statement. The Beijing-based bank agreed in May to lend $10 billion to Petrobras, as the oil company is known, and extended loans in June to Russia’s development bank.
“China is building up ties with natural resource rich nations,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange, in a phone interview from London. “The United States is going to get increasingly isolated in terms of where the new and upcoming powers decide to invest.”
China, the world’s third-biggest economy, became Brazil’s leading trade partner this year after the global recession choked sales to the U.S. The two countries’ central banks are studying a proposal to use their own currencies -- the real and the yuan -- in bilateral trade instead of the U.S. dollar.
The development bank’s decision “could be a way for China to gain access to the real so it can purchase natural resources,” Gallo said.
A press officer at the Chinese Embassy in Brasilia declined to comment.
BRIC Nations
Leaders of Brazil, Russia, India and China -- the so-called BRIC nations -- called for a “more diversified” monetary system to reduce dependency on the U.S. dollar at a June 16 meeting in the Russian city of Yekaterinburg. China’s central bank last week renewed its call for a new global currency.
“Brazil is a real source for raw materials and intermediate products for China to import,” said Donald Straszheim, a former Merrill Lynch & Co. chief economist who runs Los Angeles-based Straszheim Global Advisors, a consulting firm for investors in China. “It’s very natural that CDB would want to do this.”
China Development Bank’s profit tumbled 28 percent last year on higher loan losses as the nation’s economic growth slowed. The bank, which had 3.8 trillion yuan ($556.3 billion) of assets at the end of 2008, received a $20 billion capital injection from the government in December 2007 and is seeking to become a commercial lender. The Ministry of Finance owns 51.3 percent of the bank and Central Huijing Investment Co., a unit of China’s $200 billion sovereign wealth fund, holds the rest.
Russia Loans
The development bank’s loans span the globe. It agreed to lend $1.3 billion to Vnesheconombank, Russia’s state development bank, the Moscow-based lender said June 14. The two banks signed another contract on a $310 million loan to fund a cement plant in the St. Petersburg region, according to a separate statement.
The China-Africa Development Fund, which has helped finance a cotton planting and processing facility in Malawi and power station in Ghana, was set up in June 2007 with an initial $1 billion from China Development Bank.
The Chinese bank has agreed to lend $800 million to Brazil’s state development bank, known as BNDES, according to the Rio-based lender. Petrobras Chief Financial Officer Almir Barbassa said this week the Chinese lender is offering more loans if the oil company agrees to buy Chinese goods.
In Brazil, the Chinese bank also has expressed interest in investing in projects related to the 2014 World Cup soccer tournament and Rio de Janeiro’s bid for the 2016 Olympics, Cabral, who is visiting China, said in the statement.
“This is spectacular news, because the arrival of representation by the bank, one of the largest in the world, will be a platform for Chinese investments in Rio de Janeiro and Brazil,” Cabral said.
To contact the reporter on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net

Article - WSJ.com

2009-06-30T11:41:00.000-04:00

Article - WSJ.com
Wall Street Journal - ‎Jun 29, 2009‎
SAO PAULO (Dow Jones)--Brazil's foreign trade surplus will likely widen in June, with exports gaining ground on a recovery in commodities prices...

Brazil and China Working on a Currency Deal

2009-06-30T11:25:00.003-04:00

Brazil and China are working to bypass the US dollar in their bilateral trade, according to their respective central banks.

"We have reached an initial understanding and we will begin working on the issue" to use the real and the yuan in bilateral trade said a spokesperson for the Brazilian Central Bank.

Zhou said a further step was for Brazilian President Luiz Inacio Lula da Silva and Chinese President Hu Jintao to discuss the arrangement, which he said would not necessarily involve a currency swap like those China has in place with other countries.

Brazil, Russia and China calls for a new reserve currency to reduce the US dollar’s effect on the world economy.

Brazil Booms as Commodity Resources Pay Off Bigtime

2009-06-29T23:59:00.007-04:00

Author: Gerald Greene

Brazil is a huge country with plenty to offer in the fields of commodities, commerce, and vacations, no matter a persons individual preferences. In fact, there are so many things to do in Brazil, many tourists will return for a second or third visit and businessmen want to camp out there.

Brazil is to commodities what China is to manufactured goods. A large share of the world's beef, orange juice, soybeans and iron ore comes from the great green giant. With the recent discovery of two huge oil fields off the coast of Brazil, the most important oil field finds in the world in decades, Brazil is set to advance fast in an energy short world. The Brazilian oil firm, Petrobras, is an expert in developing deep water fields as these fields are.

While the deep water development costs will be tremendous at current prices for crude oil Brazil will reap huge financial benefits as the fields start producing oil, probably by 2015. The United States will be eagerly seeking to import oil from Brazil as the Canteral major field of the number two exporter of oil to the US, Mexico, is already in a serious state of decline. The US will soon need to find a replacement for oil it is now importing from Mexico.

Brazil is quite truly huge and has fantastic resources. Its vast tropical landscapes encompass the Amazon Jungle, the desert dunes of the Maranhenses, and the largest wetlands in the world, the Pantanal, not to mention more than 7,000 kilometers of coastline. There are national parks where you can practice mountain climbing, rappelling, white-water rafting, and waterfall cascading.

Brazil is a tropical country that extends well into the temperate zone. The coastal area ranges from tropical in the north to temperate in the south. Brazil is so large that it borders all other South American countries except for Chile and Ecuador. This tropical land is not only known for its size but its ecological treasures with a large Atlantic coast, a mountain range, and the Amazon river basin and rain forest.

Brazil is the giant of South America with nearly half of the continent's area and people; worldwide it ranks fifth in both area and population, which is as diverse as it is large. More than 45 percent (80 million) are black or of mixed-race, a legacy of the African slave trade.

Brazil is a multiparty federal republic. The president is both the chief of state and the head of the government. Brazil is the largest country in South America. During colonial times, it was invaded and conquered by both the French and the Dutch, and the Portuguese/Bahians took it back of course, each time. The African element in the Bahia region and in Salvador's culture is very pronounced.

Brazil is the world's 8th largest pharmaceutical market in terms of sales and the 6th largest in terms of production volume. The majority of international pharmaceutical companies such as Novartis, Roche and GSK have a regional platform with production in Brazil, from where they deliver to the rest of Latin America.

Brazil is not yet a rich country but is on its way to becoming one. Brazil is a very complex country with a multiplicity of cultures, races, folk legends, songs, etc. There is the rich industrial city of Sal Paulo on one side and on the other the Indians who barely know fire in the Amazon Jungle. Brazil is governed by the 1988 constitution as amended. The president, who is elected by popular vote for a four-year term (and may serve two terms), is both head of state and head of government.

Brazil is planning to commission later this year a uranium enrichment plant that, if configured to do so, could fuel several nuclear weapons annually. As a member of the Nuclear Nonproliferation Treaty (NPT), Brazil has promised not to make such weapons and is obliged to allow the International Atomic Energy Agency (IAEA) to ensure this is the case.

Brazil is becoming a major player in the telecommunication industry and will grow dramatically in the foreseeable future. Not only do the number of Internet and mobile users increase daily, but the many initiatives that are taking place to penetrate this market are incredible.

Inflation fell to 4.5% in 2007, compared with triple digits in the 1990s, according to Business Week. Predictions for the remainder of the year are a marked improvement. Inflation-adjusted GDP in both countries remains well below late-'90s peaks, while Brazil's GDP is now at a new high.

However well all of Brazil's considerable resources bode well for Brazil's future it is the discovery of vast oil fields at a time of soaring world demand and declining oil production around the world that will drive a powerhouse Brazil in the near future. Brazil will join the likes of Canada, Russia, Saudi Arabia, and Iran as cash magnets in a world starved for oil.

Countries that have a surplus of oil to export will do extremely well in the 21st century. Countries that continue to import large amounts of oil, like the United States and many European nations, will probably suffer a marked reduction in their standards of living and power and influence in the world as oil prices continue to increase.

Young men with lots of ambition and who are capable of learning Portuguese might consider making their fortune in Brazil. In the 21st century Brazil is a nation of great promise. Especially if you have an interest and expertise in commodities.

Even if moving to Brazil isn't to your liking the long term investor should do well by getting involved with Brazilian companies with commodity interests.

About the Author:

Gerald "Taipan" Greene is a retired forex trader and portfolio manager who worked in Asia for over 20 years. He now writes for a number of financial, political, and Internet business related blogs. One of them is at Learn to Trade Commodities

Article Source: ArticlesBase.com - Brazil Booms as Commodity Resources Pay Off Bigtime

The Miraculous Economic Transformation of Brazil

2009-06-27T13:03:00.003-04:00

The Economic Transformation of Brazil by John Santos

Brazilians always spoke fondly of their country as the Land of the Future. They felt God endowed them with endless resources that one day would make them a prosperous and powerful nation.

Image via Wikipedia

Brazil is a giant of South America. Its population of 190 million people is the fifth largest in the world. In area, Brazil is also the fifth largest in world.

So, for decades, God’s endowed country of the future never materialized.

During the 80’s and 90’s, Brazil had earning the dismal distinction of being the Third World's largest debtor nation. The country was unable to generate enough funds just to pay the interest charges on its debt load, and was borrowing heavily just to stay afloat.

In 2002, amid a great financial turbulence caused by the Argentinean meltdown, Brazil went to the polls. The International Financial community was nervous about the possibility that a Lula victory would result in a default of the country’s foreign debt. And his opponents warned his lack of education and English language skills would be ruinous for Brazil's diplomatic stature.

By 2006, Brazil paid off its International Monetary Fund loans. In 2007, it won coveted investment grade ratings. In 2008, it became a net foreign creditor for the first time and, in 2009, it pledged to lend the IMF $10 billion dollars.

It is a magical transformation that have occurred in Brazil over the last 6 years when the country was on the edge of debt default. Today, Brazil is the preferred destination for international investors. In 2008, productive foreign investment rose to a record of US$ 45.1 billion, second only to China among developing countries.

Brazil – Emerging Economic Superpower

As the old joke goes, Brazil is the country of the future — and always will be. Now, in the middle of the worst global downturn for decades, Brazil is now a country of the moment. Despite a little downturn in the last two quarters, the Brazilian economy is giving big signals of recovery, as can be seen from public investment, foreign capital inflows and even domestic demand.
Brazil is now the tenth largest economy in the world. Its economy rests
on strong fundamentals: inflation at 5% annually, sustainable and fiscal stability, with a primary federal budget surplus of 4.1% of GDP in 2008.

According to Lula, Brazil will be one of the six biggest economies in the world within 10 years.

Brazil’s positive trade balance and the flow of productive investment have contributed to building foreign currency reserves, which reached US$ 206.8 billion at the end of 2008.

In 2007, Brazil launched the Growth Acceleration Program (PAC). There are 2,198 infrastructure projects planned in the areas of transportation, energy, sanitation, housing, health and water resources. This program will continue to bolster the Brazilian economy during the world economic crisis.

Sam Zell, chief executive of Chicago Tribune and chairman and president of Equity Group Investments LLC, said Brazil's large population of 180 million people, highly-trained work force, and array of crops and natural resources has made it largely self-sufficient.

The World's Fifth Largest Automobile Market

New car sales in Brazil have risen four out of the past five months, making the world's fifth largest automobile market, even as makers elsewhere face plunging demand.

Many Brazilians auto manufacturers’ officials said they expect to move forward with planned investments over the next four years, including new plants, new auto lines and renovations.

The World's Fourth Largest Manufacturer of Aircraft

Renowned for its technological capacity and creativity, the Brazilian aerospace industry today is the largest in the Southern Hemisphere and competes in various segments of the world market. Embraer, one of the largest aircraft manufacturers in the world, for example, is the leader in regional aircraft with up to 120 seats, in addition to producing aircraft parts.

Brazil Becomes The Breadbasket of the World

It's no exaggeration to say that Brazil is becoming the world's agriculture superpower. With modern, efficient and competitive, Brazilian agribusiness is prosperous,
safe and profitable. One of the few countries self sufficient in food and one of the world largest food exporters.

With 12% of all fresh water in the world, regular rainfall, abundant sunshine and more arable land than any other country, Brazil has the potential to practically triple its current grain production.

For decades the only major export from this country was coffee. Today, Brazil is the number one exporter of beef, poultry, soybeans, sugar, tropical fruits, coffee and orange juice. It's also one of the world's top producers of corn, cotton, cocoa, tobacco, and forest products.
79% of Brazilian food production is consumed domestically and 21% is shipped to over
212 foreign markets.

The world's largest agricultural firms all have operations in Brazil.

Brazil Becomes An Ethanol Superpower

In the 70’s, Brazil introduced the Alcohol Program The 100-percent-ethanol-powered engines was crucial for the development of the domestic ethanol market, the world's largest for decades. Today, one-fifth of the Brazilian fleet runs purely on ethanol, and Brazil is the sole frontrunner in the races for oil-independence and the green alternative to oil. The country is now the world’s second largest producer, and largest exporter of ethanol and also a world reference in developing renewable energy sources.

Ethanol has 90 percent less greenhouse gas emissions than gasoline -- partly because cane absorbs the carbon dioxide while it grows in the fields

The demand for ethanol in Brazil is set to increase by 37%: 27 billion liters in 2008 and 37 billion liters in 2015

Brazil is a pioneer in the development of “flex fuel” technology, launched in 2003, which allows cars to run on gas and ethanol in any proportion. Brazilian excellence in the production of ethanol has made large companies comfortable in developing technology that uses biofuel. Currently, ten multinational carmakers produce more than 100 different models of flex fuel cars in Brazil, which has given the country the distinction of having the largest fleet of flex fuel cars in the world.

The Third Largest Biodiesel Market in the World

Brazil is also the third largest producer and consumer of biodiesel in the world. The National Program for the Production and Use of Biodiesel (PNPB), established in 2004, provides for a mandatory and gradual addition of alternative fuels to diesel. The dynamism of this market in Brazil allowed the initial substitution of 2%, in force since January 2008, which was later increased to 3% in July, requiring the production of 1.1 billion liters. The law stipulates a 5% mixture by 2013, which will stimulate new investments in production and an increase in productivity.

Brazil Becomes An Oil Superpower

They say “God is a Brazilian." Brazil’s long awaited divine intervention just happened last year with major oil discovered located in sedimentary basins, around 6,000 meters beneath the surface of the ocean.
Brazil will now be among the biggest producers of oil and gas in the world.
The country is at the technological vanguard of deep water production and exploration of petroleum and natural gas reserves.
Petrobras will invest US$ 174.4 billion in the next four years, in the exploration of petroleum and natural gas and the construction of new refineries, among other projects.

This will be a huge boon to Brazil. Oil is one of the most valuable resources the world has to offer, and combined with all the other resources possessed by Brazil, the country is well positioned to become one of the world's next superpowers.

Lula, The Man Behind Brazil’s Miraculous Transformation.

"His charisma and his ability to mobilize the poor have been remarkable," said Kenneth Maxwell, director of the Brazil Studies Program at the Centre for Latin American Studies at Harvard University.

"That's my man right here," President Obama said at the G-20 summit as Brazil President Luiz Inacio Lula de Silva approached him. "Love this guy. He's the most popular politican on earth. It's because of his good looks."

"The banks love Lula, and business gets along with him quite well," says David Fleischer, a political analyst and professor emeritus at the University of Brasilia.

Luiz Inácio Lula da Silva, nickname Lula, is the 35th and current President of Brazil.
Having run for President three times unsuccessfully since 1989 election, Lula achieved victory in 2002, and was inaugurated as President on January 1st, 2003. He was elected again in 2006, extenting his term as President until January 1st 2011.
His administration respected Fernando Henrique Cardoso, his predecessor, achievements that turned Brazil one of emerging economies and part of the BRIC group.
Lula put social programs at the top of his agenda. Lula's leading program since very early on has been a campaign to eradicate hunger, following the lead of projects already put into practice by the Fernando Henrique administration, but expanded as Fome Zero (Zero Hunger).
The largest program is called Bolsa Família, adapted from Fernando Henrique Cardoso administration, are credited with helping millions eat and keep a roof over their heads. The subsidies require that children attend school and receive their vaccinations.
Extreme poverty has been cut in half, and 20 million have advanced to the middle class.
During his second term, Lula has approval ratings of over 70%, earning him praise from US President Barack Obama as "the most popular politician in the world.

John Santos - john.santos@live.com

Information SourcesThe information has been taken from government agencies, trade associations, newspapers, monitoring industry news and private databases.

Brazil Unemployment Rate Stable at 8.8 Percent

2009-06-25T09:34:00.000-04:00

May's Unemployment Rate in Brazil Stable at 8.8 Percent
by John Santos

RIO: Brazil's jobless rate in May at 8.8 percent. The government statistics agency (IBGE) says unemployment rate was 8.9 percent in April. Compared to May of last year, It is a jump, when the jobless rate was 7.9 percent. The agency said the total number of people seeking work is now 2.0 million. Brazil’s unemployment rate is now stable as the country emerges faster and quicker than other nations from the downturn in global markets. In the first quarter of 2009, Brazil’s economy shrank 0.8 percent but, it should post growth of around 1 percent and gain steam in the coming years.

Brazil Registers $2,8 Billion Trade Surplus With China

2009-06-24T09:55:00.000-04:00

Image via Wikipedia

Brazil Registers $2,8 Bln Trade Surplus With China

In the beginning of 2008, Brazil posted a defict of US$ deficit 1,5 billion with China. The global crisis inverted the trend of the commerce between Brazil and China and transformed the deficit into surplus. Brazil accumulated a robust balance of US$ 2,8 billion from January until the second week of June.
The favorable results were attributed to an ever increasing China's appetide for the brazilian commondities like soy and iron ore, and the decrease of industrial production in Brazil that knocked down the imports of components and machines from China.

Brazil is Studying Increase its Currency Reserves To $300 Billion

2009-06-23T09:33:00.000-04:00

Image by add1sun via Flickr

Brazil is Studying Increase its Currency Reserves To $300 Billion
by John Santos

Folha de Sao Paulo reported today that the Brazilian government is planning to increase its foreign currency reserves to $300 billion before the next goverment takes seat.

Since May 8th the Central Bank of Brazil started holding daily auctions to buy dollars and they have already purchased $4.1 billion since the first week of May until June 9th. If they keep the current pace, they will achieve their goal before the next President is elected.

Today, the Brazilian currency reserves stands at $206 billion.

Brazil Posts 131,557 New Jobs in May

2009-06-22T12:53:00.000-04:00

Image by Panoptico via Flickr

Brazil Posts 131,557 New Jobs in May
by John Santos

What a great performance for the brazilian job market.
It is the fourth consecutive month of job gains in Brazil. All sectors of the economy saw gains in formal employment in May. The farming sector saw the largest gain with a surplus of 52.927 new jobs. After that, the service sector saw gains of 44,029 new job posts. The construction sector gained 17,407 new jobs and the retail sector registered a surplus of 14.606 formal jobs.

According to Brazil's IBGE statistics institute, the country's overall unemployment rate fell to 8.9% in April from 9.0% in March.

This is great news considered we are in the middle of one the greatest financial crisis of the last 60 years.

This country rocks!!!

Lula will launch a second (PAC) Growth Acceleration Program in 2010

2009-06-20T10:49:00.000-04:00

Image via Wikipedia

Lula will launch a second (PAC) Growth Acceleration Program in 2010

President Luiz Inácio Lula da Silva confirmed that the federal government is working in putting together the second Growth Acceleration Program (PAC) aim to improve the country’s infrastructure.

According to Lula, the new version of the program will have to be fulfilled by his successor. In order for this to happen, it needs to be in the 2011 budget.

The current PAC foresees investments of R$ 646 billion ($323 bln), of which about R$ 220 billion ($110 bln) in sanitation and habitation projects, that need partnerships with States and cities. The remaining of the investments will be used in infrastructure projects like energy, highways, railroads, ports and airports.
So far, the government reported, 77% of its nearly 2500 infrastructure projects are on schedule and 14% have been concluded. According to the report, 7% of the projects require attention and 2% present problems. The report indicated that through the end of April, 335 projects had been completed, representing investments of 62.9 billion reals ($32 bln).

Santander foresees Brazil bond boom

2009-06-17T22:01:00.000-04:00

Santander is expecting a boom on the financing of infrastructure projects.
Santander foresees Brazil bond, loans boom in 2009 Industries Financial Services & Real Estate

Article - WSJ.com

2009-06-17T09:19:00.000-04:00

Article - WSJ.com

The good news from Brazil just keep coming. Brazil is rising little by little to be a world power economy.

New BRIC on the Block

2009-06-16T19:51:00.000-04:00

New BRIC on the Block

The BRIC has arrived not to overcome but to balance the global economic financial arena.
This the first summit of heads of state of Brazil, Russia, India and China, the so-called BRIC countries.

The term BRIC was coined by Goldman Sachs economist Jim O'Neill in 2001 to describe the growing power of emerging market economies.

Eight years later, the BRIC bloc today make up 40% of the world’s population and 15% of global GDP.
Their first summit ended today with a declaration calling for a “multipolar world order”. They did not mention anything about substituting the dollar as the world reserve currency. That’s because China holds almost $2 trillion in dollar reserves and also holds a large portion of US debt.

Next year Brazil is scheduled to hold the next BRIC summit.

History of Brazil

2009-06-16T18:40:00.000-04:00

Brazil (Portuguese: Brasil), officially the Federative Republic of Brazil (Portuguese: República Federativa do Brasil). It is the fifth largest country by geographical area, occupying nearly half of South America, the fifth most populous country, and the fourth most populous democracy in the world. It borders every nation on South America except Chile and Ecuador.

Brazil was a colony of Portugal. It was discovered by Pedro Álvares Cabral in 1500. It became independent in 1822. The country has been a republic since 1889, although the bicameral legislature, now called Congress, dates back to 1824, when the first constitution was ratified. Its current Constitution defines Brazil as a Federal Republic.

Brazil is now the world's seventh largest economy at market exchange rates and the sixth largest by purchasing power parity. Economic reforms have given the country new international projection. A predominantly Roman Catholic, Portuguese-speaking, and multiethnic society, Brazil is also home to a diversity of wildlife, natural environments, and extensive natural resources in a variety of protected habitats.

The nation’s natural beauty is reflected in a wide variety of geographic locations, from the distinctive dome shape of Sugar Loaf Mountain in the city of Rio de Janeiro, to the magnificent Iguaçu Falls in the far south, to the strange limestone formations in the state of Minas Gerais in the Southeast region

Brazil sustains a diverse agriculture, producing tropical crops such as sugar, coffee, and newly developed tropical varieties of soybeans. In recent years environmentalists have become increasingly concerned over the future of the Amazon region, where human encroachment has threatened the world’s largest intact rain forest.

Brazil’s population is a mixture of Native American, European, and African peoples. These groups have intermingled over the years to create a society with considerable ethnic complexity. The Native American population has been in Brazil the longest, but is now the smallest group. The Portuguese began arriving in 1500, and other European groups came after 1850.

The largest city in Brazil is São Paulo, the main industrial center of the nation. São Paulo is also the largest city in South America, with an estimated population in 2007 of 10.9 million. The former capital, Rio de Janeiro, ranks second. It is an important port and commercial center. Other important cities include Salvador, the regional capital of the Northeast; Belo Horizonte, a major industrial and commercial city in Minas Gerais; and Brasília, the capital of Brazil.

Welcome to my Blog!

2009-06-16T18:05:00.000-04:00

I'm John Santos, director of operations of Santos Group Inc for the last 8 years.
Over the last 7 years, I have documented the evolution of a great country and its impact on social, global economy and cultural history. This blog gives me an opportunity to share some of those stories with you.

This is my first brazilian blog – but definitely not my last. I am starting with the country's rich history. I'll talk about the people that built this great nation. You can comment on what I say and send me questions – and I hope you do!

So please talk to me and let me know what's on your mind. Thanks!