March 11, 2010
Brazil's economy continued its robust recovery in the fourth quarter as the country's services and industrial sectors reacted to heated domestic demand.
Brazil's gross domestic product expanded 4.3% in the fourth quarter compared with the fourth quarter a year ago, the Brazilian Census Bureau, or IBGE, said Thursday. That was below the median forecast of 4.64% made by 18 economists polled by Dow Jones Newswires.
A series of moves last year by the government and the Brazilian Central Bank continued to pay dividends in the fourth quarter, stoking domestic demand. The central bank cut interest rates, while the government boosted spending and cut taxes on consumer goods.
"For us, [the GDP figure] was well in line with expectations," said Silvio Campos Neto, chief economist at Banco Schahin. "The strong fourth-quarter recovery was largely because of an intense rebound in the industrial sector and increased investments."
Brazil's industrial GDP jumped 4.0% year-on-year in the fourth quarter, while service sector GDP surged 4.6%. Brazil's massive agriculture industry, which struggled with poor weather and lower commodity prices, registered a 4.6% decline in fourth quarter GDP versus the same period of 2008.
The fourth-quarter performance of Latin America's largest economy continued the recovery that started earlier this year, when quick action by Brazil's government to fight the global financial crisis and economic slowdown set the course for the emerging-market powerhouse to pull out of its first recession since 2003.
The country registered two consecutive quarters of shrinking GDP--the technical definition of recession--in the fourth quarter of 2008 and first quarter of 2009.
The Brazilian Central Bank slashed 500 basis points off the benchmark Selic base interest rate, starting in January 2009. The monetary easing left the reference rate at its lowest-ever level of 8.75%. The bank's Copom rate-setting panel has maintained the Selic at 8.75% since last year, although a recent rise in inflation has increased expectations for a rate hike--perhaps as early as next week's meeting.
The government also granted tax breaks for car sales and big-ticket appliances such as refrigerators and washing machines in order to stoke domestic demand. The tax breaks are only now starting to expire.
The stimulus measures had the desired effect, increasing consumer access to credit and fueling domestic sales--including record auto sales of 3.1 million vehicles in 2009.
The strong rebound, however, was not enough to ward off a decline for the full year. Brazil's economy shrank 0.2% in 2009 compared with 5.1% growth in 2008. That was the first full-year decrease in GDP since a 0.5% decline in 1992, the IBGE said.
In market value, Brazil's GDP was 3.14 trillion Brazilian reals ($1.78 trillion) in 2009, up from BRL3.0 trillion in 2008. The economic slowdown also sapped investments, with the country's investment rate falling to 16.7% of GDP in 2009 compared with 18.7% of GDP in 2008.
Family consumption, meanwhile, increased 8.8% in 2009 to BRL1.97 trillion compared with BRL1.81 trillion in 2008, the IBGE said. Government spending rose 11% to BRL654 billion, up from BRL588 billion in 2008.
The IBGE also revised GDP figures from past quarters, showing that Brazil's emergence from the recession earlier this year was stronger than previously thought.
In the third quarter, GDP was revised upward to growth of 1.7% from previously reported growth of 1.3%. Second-quarter GDP was revised upward to growth of 1.4% from the previously reported 1.1% gain.
Meanwhile, the decline in first-quarter GDP was stronger than previously reported, shrinking 3.5% from the fourth quarter compared with a 2.9% decline previously reported.
By: Jeff Fick
Source: The Wall Street Journal
Brazil's Foreign Reserves Increase By $466 Million In February
March 03, 2010
Brazil's foreign-currency reserves increased by $466 million in February from the previous month, as the central bank continued purchasing dollars in the foreign exchange market, according to figures published on the bank's Web site Tuesday.
Foreign reserves totaled $241.28 billion, up from $240.82 billion at the end of January.
The reserves grew sharply from 2005 after the central bank started purchasing dollars from the spot market in October 2005. The reserves totaled $53.779 billion at the end of 2005.
The level declined beginning in October 2008 as the central bank loaned dollars to Brazilian businesses in the face of the global credit crunch. The central bank also sold dollars from the reserves to the foreign-exchange market via spot auctions.
In mid-2009, however, the government reversed course, buying dollars from the market at spot auctions.
By: Rogerio Jelmayer
Source: The Wall Street Journal
Brazil’s Real Heads for Biggest Advance in World This Month
February 26, 2010
Brazil’s real is set for the biggest gain in the world this month as economic growth accelerates and the central bank prepares to raise benchmark borrowing costs to curb inflation.
The real rose 4.3 percent this month to 1.8170 per dollar as of 10:02 a.m. New York time, from 1.8950 on Jan. 29. The advance, which reverses much of last month’s 7.9 percent plunge, is the largest among all currencies tracked by Bloomberg. The real will rise to 1.81 by June and 1.72 by year-end, according to the median forecast of analysts surveyed by Bloomberg.
“Brazil is still a solid story, and the real is an attractive currency,” said Vitali Meschoulam, an emerging- market strategist at Morgan Stanley in New York, who forecasts the real will rise to stronger than 1.7 this year. “The economy is the fastest growing in Latin America. It is among the first to raise interest rates and the strong foreign direct investment dynamics hasn’t changed.”
The real advanced as traders raise their bets that policy makers will boost the key borrowing costs from a record low of 8.75 percent as soon as next month to curb inflation. The central bank this week required lenders to deposit an additional 71 billion reais ($39 billion) to withdraw economic stimulus as a broader measure of inflation that includes wholesale prices quickened to the fastest in 19 months.
Yields on interest rate future contracts due January 2011, the most traded on Sao Paulo’s BM&F exchange, held today at 10.41, up from 10.27 percent on Feb. 19. That rate suggests traders anticipate the central bank will push the benchmark rate to above 12 percent by year-end.
Foreign Investment
The real’s gain this month pares its losses this year to 4 percent. The currency tumbled 8 percent in January in its biggest slump since October 2008 as China, the biggest buyer of Brazilian exports, curbed bank lending to slow the economy.
Goldman Sachs Group Inc. and Bank of America Corp. recommended clients this month buy the real, saying that growth in Latin America’s biggest economy will lure foreign investment.
The $1.6 trillion economy will expand 5.5 percent this year, up from 0.5 percent growth last year, according to a central bank survey of about 100 economists published Feb. 22.
Foreign direct investment will jump 73 percent to $45 billion, matching the record in 2008, as the country builds houses, roads and stadiums for the 2014 World Cup soccer games and 2016 Olympics, according to the central bank.
Growth indicators suggest “the current account deficit will be easily financed through foreign investment,” Jose Francisco de Lima Goncalves, chief economist at Banco Fator SA, said in a telephone interview from Sao Paulo.
Brazil’s credit rating may be reviewed for an increase by Moody’s Investors Service next year if President Luiz Inacio Lula da Silva’s successor continues to improve the country’s debt indicators, the ratings company said yesterday.
Moody’s raised Brazil’s long-term debt rating to Baa3, the lowest investment grade, from Ba1 in September, following similar moves by Standard & Poor’s and Fitch Ratings a year earlier. Moody’s has a positive outlook on the rating.
By: Camila Fontana and Ye Xie
Source: BusinessWeek
Brazil's gross domestic product expanded 4.3% in the fourth quarter compared with the fourth quarter a year ago, the Brazilian Census Bureau, or IBGE, said Thursday. That was below the median forecast of 4.64% made by 18 economists polled by Dow Jones Newswires.
A series of moves last year by the government and the Brazilian Central Bank continued to pay dividends in the fourth quarter, stoking domestic demand. The central bank cut interest rates, while the government boosted spending and cut taxes on consumer goods.
"For us, [the GDP figure] was well in line with expectations," said Silvio Campos Neto, chief economist at Banco Schahin. "The strong fourth-quarter recovery was largely because of an intense rebound in the industrial sector and increased investments."
Brazil's industrial GDP jumped 4.0% year-on-year in the fourth quarter, while service sector GDP surged 4.6%. Brazil's massive agriculture industry, which struggled with poor weather and lower commodity prices, registered a 4.6% decline in fourth quarter GDP versus the same period of 2008.
The fourth-quarter performance of Latin America's largest economy continued the recovery that started earlier this year, when quick action by Brazil's government to fight the global financial crisis and economic slowdown set the course for the emerging-market powerhouse to pull out of its first recession since 2003.
The country registered two consecutive quarters of shrinking GDP--the technical definition of recession--in the fourth quarter of 2008 and first quarter of 2009.
The Brazilian Central Bank slashed 500 basis points off the benchmark Selic base interest rate, starting in January 2009. The monetary easing left the reference rate at its lowest-ever level of 8.75%. The bank's Copom rate-setting panel has maintained the Selic at 8.75% since last year, although a recent rise in inflation has increased expectations for a rate hike--perhaps as early as next week's meeting.
The government also granted tax breaks for car sales and big-ticket appliances such as refrigerators and washing machines in order to stoke domestic demand. The tax breaks are only now starting to expire.
The stimulus measures had the desired effect, increasing consumer access to credit and fueling domestic sales--including record auto sales of 3.1 million vehicles in 2009.
The strong rebound, however, was not enough to ward off a decline for the full year. Brazil's economy shrank 0.2% in 2009 compared with 5.1% growth in 2008. That was the first full-year decrease in GDP since a 0.5% decline in 1992, the IBGE said.
In market value, Brazil's GDP was 3.14 trillion Brazilian reals ($1.78 trillion) in 2009, up from BRL3.0 trillion in 2008. The economic slowdown also sapped investments, with the country's investment rate falling to 16.7% of GDP in 2009 compared with 18.7% of GDP in 2008.
Family consumption, meanwhile, increased 8.8% in 2009 to BRL1.97 trillion compared with BRL1.81 trillion in 2008, the IBGE said. Government spending rose 11% to BRL654 billion, up from BRL588 billion in 2008.
The IBGE also revised GDP figures from past quarters, showing that Brazil's emergence from the recession earlier this year was stronger than previously thought.
In the third quarter, GDP was revised upward to growth of 1.7% from previously reported growth of 1.3%. Second-quarter GDP was revised upward to growth of 1.4% from the previously reported 1.1% gain.
Meanwhile, the decline in first-quarter GDP was stronger than previously reported, shrinking 3.5% from the fourth quarter compared with a 2.9% decline previously reported.
By: Jeff Fick
Source: The Wall Street Journal
Brazil's Foreign Reserves Increase By $466 Million In February
March 03, 2010
Brazil's foreign-currency reserves increased by $466 million in February from the previous month, as the central bank continued purchasing dollars in the foreign exchange market, according to figures published on the bank's Web site Tuesday.
Foreign reserves totaled $241.28 billion, up from $240.82 billion at the end of January.
The reserves grew sharply from 2005 after the central bank started purchasing dollars from the spot market in October 2005. The reserves totaled $53.779 billion at the end of 2005.
The level declined beginning in October 2008 as the central bank loaned dollars to Brazilian businesses in the face of the global credit crunch. The central bank also sold dollars from the reserves to the foreign-exchange market via spot auctions.
In mid-2009, however, the government reversed course, buying dollars from the market at spot auctions.
By: Rogerio Jelmayer
Source: The Wall Street Journal
Brazil’s Real Heads for Biggest Advance in World This Month
February 26, 2010
Brazil’s real is set for the biggest gain in the world this month as economic growth accelerates and the central bank prepares to raise benchmark borrowing costs to curb inflation.
The real rose 4.3 percent this month to 1.8170 per dollar as of 10:02 a.m. New York time, from 1.8950 on Jan. 29. The advance, which reverses much of last month’s 7.9 percent plunge, is the largest among all currencies tracked by Bloomberg. The real will rise to 1.81 by June and 1.72 by year-end, according to the median forecast of analysts surveyed by Bloomberg.
“Brazil is still a solid story, and the real is an attractive currency,” said Vitali Meschoulam, an emerging- market strategist at Morgan Stanley in New York, who forecasts the real will rise to stronger than 1.7 this year. “The economy is the fastest growing in Latin America. It is among the first to raise interest rates and the strong foreign direct investment dynamics hasn’t changed.”
The real advanced as traders raise their bets that policy makers will boost the key borrowing costs from a record low of 8.75 percent as soon as next month to curb inflation. The central bank this week required lenders to deposit an additional 71 billion reais ($39 billion) to withdraw economic stimulus as a broader measure of inflation that includes wholesale prices quickened to the fastest in 19 months.
Yields on interest rate future contracts due January 2011, the most traded on Sao Paulo’s BM&F exchange, held today at 10.41, up from 10.27 percent on Feb. 19. That rate suggests traders anticipate the central bank will push the benchmark rate to above 12 percent by year-end.
Foreign Investment
The real’s gain this month pares its losses this year to 4 percent. The currency tumbled 8 percent in January in its biggest slump since October 2008 as China, the biggest buyer of Brazilian exports, curbed bank lending to slow the economy.
Goldman Sachs Group Inc. and Bank of America Corp. recommended clients this month buy the real, saying that growth in Latin America’s biggest economy will lure foreign investment.
The $1.6 trillion economy will expand 5.5 percent this year, up from 0.5 percent growth last year, according to a central bank survey of about 100 economists published Feb. 22.
Foreign direct investment will jump 73 percent to $45 billion, matching the record in 2008, as the country builds houses, roads and stadiums for the 2014 World Cup soccer games and 2016 Olympics, according to the central bank.
Growth indicators suggest “the current account deficit will be easily financed through foreign investment,” Jose Francisco de Lima Goncalves, chief economist at Banco Fator SA, said in a telephone interview from Sao Paulo.
Brazil’s credit rating may be reviewed for an increase by Moody’s Investors Service next year if President Luiz Inacio Lula da Silva’s successor continues to improve the country’s debt indicators, the ratings company said yesterday.
Moody’s raised Brazil’s long-term debt rating to Baa3, the lowest investment grade, from Ba1 in September, following similar moves by Standard & Poor’s and Fitch Ratings a year earlier. Moody’s has a positive outlook on the rating.
By: Camila Fontana and Ye Xie
Source: BusinessWeek
