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Brazil macroeconomic profile

Page history last edited by Brian D Butler 1 year, 5 months ago

 

Economy size:  $1.3 trillion economy

 

Forecast 2009:

 

The $1.3 trillion economy shed a record 654,946 jobs last month as industry back output, consumer demand declined and commodity prices plunged.

Gross domestic product will grow 2 percent in 2009, according to the central bank’s Jan. 23 survey of economists published Jan. 26. That pace would be the slowest pace since 2003.

 

 

For more...see central bank survey of 100 institutions published Jan. 19, and  http://www4.bcb.gov.br/pec/GCI/PORT/readout/R20090116.pdf

 

 

 

Table of Contents:

  1. Forecast 2009:
  2. Budget Deficits:
  3. Leading indicator of economic activity:
  4. currency value tied to commodities:
  5. Brazil achieved "investment grade" status in 2008....but will it last?
  6. Capital flows reverse directions in 2008
    1. Currency Swap lines with US help to halt crisis:
    2. Debt / GDP manageable (for now)
  7. Unemployment rising:
  8. Consumer demand:
  9. Commodities index
  10. Data:
  11. Brazil Macro economic data:  click here
    1. Brazil interest rates :
    2. Target Central Bank rates
    3. Commercial lending Rates
    4. Increased Lending in 2008:
    5. Mortgage loans:
    6. Increased Defaults expected
    7. Real Interest Rates:
    8. Interest Rate Futures:
      1. How to invest if you think rates will fall?
      2. Where to find rates
  12. Copom: 
  13. Key Data
  14. Interest Rates:
  15. Government Spending:
    1. Pro-cyclical spending:
    2. Effect of government spending on inflation:
    3. Important Laws
  16. Resistance to external shocks:
  17. Recent boom years 2002-2008
  18. Inflation:
    1. How Brazil measures Inflation:
    2. Central Banker running for President?  Watch out for inflation!
  19. Current account deficits
    1. Brazilian Exports:
  20. Foreign Direct Investments:
  21. Portfolio Investment from abroad
  22. Sovereign Wealth Fund:
  23. Currency appreciation (from agri-business) harms the industrial sector.
    1. Mercosul - common import tariff
  24. Inflation & Interest rates
  25. Other indicators
  26. Brazil Macro Profile:
    1. Background:
    2. Political structure:
    3. Policy issues:
    4. Taxation:
    5. Foreign trade:
    6. Crime Problem / Safety issue
    7. International disputes
  27. Where to find Data:
    1. Historical Data & Charts:
    2. External Links
      1. Brazil stock exchanges:
      2. Brazil bonds:
      3. Exchange rates:
      4. More Data:
      5. government links:
    3. more interesting external links:
      1. More links:

 

 

 

Budget Deficits:

 

Brazil’s budget deficit widened to a record in December after the government created a 14.2 billion reais sovereign wealth fund, the central bank said yesterday. Including federal and local governments and state companies, the budget gap widened to 33.6 billion reais in December from 8.9 billion reais in November and 24 billion reais in the same month a year ago.

 

Brazil’s budget deficit also is growing. The government should cut back its spending because slowing economic growth will curtail tax collection, Regina Nunes, head of S&P in Brazil, said today.

 

 

Leading indicator of economic activity:

Cardboard sales, a key measure of economic activity, fell 4.5 percent in December from a year earlier, the Brazilian Corrugated Paper Association said this week.  For more leading indicators, see our discussion on economic indicators

 

currency value tied to commodities:

 

"Brazil’s real fell as prices of raw materials, which account for two-thirds of the country’s exports, declined"  source:  bloomberg.com

 

Brazil achieved "investment grade" status in 2008....but will it last?

 

Brazil’s government, with a much bigger public debt, needs to preserve its primary fiscal surplus (ie, before interest payments) to retain the confidence of bondholders.

 

see investment grade (nations)

 

 

Capital flows reverse directions in 2008

 

External capital flow to Brazil surpassed US$983mil the capital inflow in 2008 for the first time since 2002. From Jan - Sep the external capital flow was positive US$17.2bi, and over Oct - Dec net outflow was US$18.2bil. The trade balance did not make up for the capital flowing out. Brazilian hard currency reserves ended the year with US$193.7bil, after to have peaked US$208.7bil on Sep

 

Currency Swap lines with US help to halt crisis:

 

The swap lines will be in place through April 30.

 

even though they havent been used (yet)..."Meirelles wouldn’t comment on the factors that may influence monetary policy in the future. He said the central bank hasn’t used the $30 billion in swap lines the U.S. Federal Reserve agreed to provide Brazil on Oct. 30.  “If there’s no use, there’s no interest payment paid,” Meirelles said. “It’s good to have the line but we didn’t think it was necessary to use it so far.”

 

Debt / GDP manageable (for now)

 

In November, the ration debt/GDP was of 34.9% declining by 1.4% in comparison to October. In great part it was not the dynamics of the fiscal results of the consolidated public sector which contributed to such reduction, but the changes observed in the foreign exchange rate, due to the international crisis. In this sense, it was not the additional fiscal effort, through a reduction of expenditures, which allowed for such result, but the financial gains of the devaluation of the currency .  In other words, there is no structural change, but a change in the scenario. In this scenario, the ratio debt /GDP should reach 36.8% until the end of this year, and with the return of the foreign exchange to R$ 2/US$ at the end of 2009 the ratio of debt should be of 38.6%.

 

 

Unemployment rising:

 

The $1.3 trillion economy shed a record 654,946 jobs last month as industry back output, consumer demand declined and commodity prices plunged.

 

Brazil un-employment data : BZJCGTOT:IND    http://www.bloomberg.com/apps/quote?ticker=BZJCGTOT%3AIND

 

 

 

Consumer demand:

BZRTRETM:IND

Brazil IBGE Retail Sales Re   http://www.bloomberg.com/apps/quote?ticker=BZRTRETM%3AIND

 

 

Also see: Retail sales, including vehicles and construction materials:  http://www.ibge.gov.br/home/presidencia/noticias/noticia_visualiza.php?id_noticia=1304&id_pagina=1

 

Commodities index

 

see  commodity

 

 

 

 

 

 

 

Data:

Brazil Macro economic data:  click here

 

Brazil interest rates :

 

 

see Banks in Brazil

 

 

Target Central Bank rates

 

forecast:  Analysts estimate that the Selic rate by year-end will fall to the record low of 11.25 percent in place in September 2007, according to the median forecast in the most recent weekly central bank survey.  http://www4.bcb.gov.br/pec/GCI/PORT/readout/R20090116.pdf

 

 

Commercial lending Rates

the average annual interest rate banks charge customers increased to 43.2 percent in December from 33.8 percent a year earlier.

 

 

Increased Lending in 2008:

 

  • Total lending climbed 31.1 percent in 2008, the biggest increase since 1995, a year after the Brazilian real currency was introduced.
  • Total loans represented 41.3 percent of the GDP country’s gross domestic product in December, compared with 40.4 percent in November and 34.2 percent in the same month last year.

 

Mortgage loans:

Total mortgages outstanding rose 2.4 percent last month to 63.3 billion reais, the central bank said. Housing loans grew 38 percent in December from the year-earlier period.

 

Increased Defaults expected

as rates rise in 2009, defaults are expected....

 

Individuals:  The default rate on personal loans in Brazil increased to 8.1 percent in December from 7.8 percent in November, the central bank said.

Companies:  Default rates of companies increased to 1.8 percent from 1.7 percent in November, the central bank said.

 

Brazilian companies have more than $24 billion of debt coming due this year, according to data compiled by Commerzbank AG....Brazil’s central bank President Henrique Meirelles unveiled plans Jan. 14 to provide more than $20 billion to help 4,000 or more companies meet international debt payments this year. Companies in Chile and Mexico are receiving financing help from state-owned banks because of similar pressures, Joydeep Mukherji, a sovereign risk analyst at S&P in New York, said the same day.

 

read more here:  Company defaults to rise

 

 

Real Interest Rates:

 

.BZRAT:IND

REAL BRAZIL INTEREST RATE  http://www.bloomberg.com/apps/cbuilder?ticker1=.BZRAT%3AIND

 

Brazil’s real interest rates, which take inflation into account, fell to 6.85 percent, still the highest among 54 countries tracked by Bloomberg.

 

 

Interest Rate Futures:

 

The yield on the interest-rate future contract for January 2010 delivery, the most actively traded on Sao Paulo’s BM&F commodities and futures exchange, closed at 11.15 percent yesterday, the lowest since August 2007.

 

 

How to invest if you think rates will fall?

 

Note:  Brazil’s local-currency bond yields dropped to the lowest since October 2007 after the central bank unexpectedly cut its benchmark interest rate by the most in five years to boost economic growth.

 

see our forum discussion:  

 

Yields on Brazil’s local-currency bonds and rate-futures contracts fell on increased bets the central bank may cut the benchmark rate by 75 basis points next week to boost economic growth.

 

Run from Banks:  “Most large cap banks in Brazil have asset-sensitive balance sheets; thus, falling interest rates normally result in margin compression...Profit margins fall with interest rates because short- term investments tied to the benchmark Selic rate represent “the bulk” of their assets, according to Morgan Stanley. ”

 

Buy retailers with consumer credit:  "Lojas Renner led gains for retailers, rising 4.4 percent to 16.23 reais, on the prospect that lower rates would spur consumer spending."

 

 

 

Where to find rates

 

Target Rate (Selic Rate), COPOM   GDP nominal   CPI and PPI  
Money Supply   Balance of Payments - Monthly   IP  
International Reserves (total of   Balance of payments - Quarterly   Population  
GDP real index   Unemployment   Brazil Government Debt  

 

 

 

 

BM&F - Brazil Mercantile & Futures Exchange, (Bolsa de Mercadorias & Futuros)

Agricultural Products / Commodities
  BG2 .. Live cattle . 14582 BGI .. Live cattle . 25966 CN2 .. Corn . 7468 CNI .. Corn . 11892 IC2 .. Arabica Coffee . 7274
ICF .. Arabica Coffee . 11972 IS2 .. Crystal Sugar . 3566 ISU .. Crystal Sugar . 7336 SO2 .. Soybean . 9048 SOJ .. Soybean . 12228
AL2 .. Anhydrous Alcohol . 4478 ALA .. Anhydrous Fuel Alcohol . 9336 BZ2 .. Feeder cattle . 2642 BZE .. Feeder cattle . 5140 CO2 .. Cotton . 4336
COT .. Cotton . 5568 WBG .. Live cattle futures . 598 WCF .. Arabica coffee futures . 92    
Metals (gold)
  OZ1 .. Gold 250g. . 2136 OZ2 .. Odd-lot gold spot . 0      
Sovereign Debt Instruments
  B34 .. Global 2034 . 1208 B40 .. Global 2040 . 2346 T10 .. US T-Note 10 anos . 774 A18 .. A-Bond 2018 . 410 B09 .. Global 2009 . 252
B10 .. Global 2010 . 22 B11 .. Global 2011 . 82 B12 .. Global 2012 . 20 B13 .. Global 2013 . 104 B14 .. Global 2014 . 96
B15 .. Global 2015 . 256 B19 .. Global 2019 . 1234 B20 .. Global 2020 . 20 B24 .. Global 2024 . 20 B25 .. Global 2025 . 20
B27 .. Global 2027 . 220 B30 .. Global 2030 . 20 B37 .. Global 2037 . 140 BCB .. C-Bond . 920 VID .. IDI INDEX . 0
Interest Rates
  DAP .. D x IPCA spread . 2380 DDI .. ID x U.S. Dollar spread . 62222 DI1 .. 1-Day ID . 56360 FRC .. FRA on the ID x U.S. Dollar spread . 59682 DDM .. ID x IGP-M spread . 2110
DI2 .. 1-Day ID . 52 SCC .. ID x US Dollar Swap with reset . 0 VF1 .. VF1 Volatility . 0 VF3 .. VF3 Volatility . 0  
Indices
  IAP .. IPCA . 2347 IND .. Ibovespa . 10234 WIN .. Ibovespa . 1910 BRI .. IBrX-50 . 1982 IDI .. IDI Index . 0
Foreign Exchange / Currency
  DOL .. Commercial U.S. Dollar . 39370 EUR .. Euro . 5164 WDL .. Mini U.S. Dollar . 2258 FRP .. Forward Points on US Dollar Futures . 0 USD .. Spot US Dollar . 0
VTC .. U.S. Dollar Volatility . 0        
Swaps
  D11 .. 1day Interbank Deposits - type 1 series . 0 D12 .. 1dy Intrbnk Depsts type 2 . 0 D13 .. 1dy Intrbnk Depsts type 3 . 0 D14 .. 1dy Intrbnk Depsts type 4 . 0 SC3 .. Mini ID x US Dollar Swap with reset . 0
unsorted
  BC5 .. CDS BRAZIL 5 YEARS . 54 EN2 .. Ethanol . 3528 ETN .. Ethanol . 3530 IGM .. IGP-M . 554 Mini U.S. Dollar . 1098
Mini Ibovespa . 686 Soybean . 886 Conillon coffee . 168 FRA on ID X IGP-M spread . 128 EI-Bond . 8

 

 

 

Copom: 

Comitê de Política Monetária:   Committee at Brazilian central bank dealing with monetary policy.

see: http://www.bcb.gov.br/?COPOM

 

Key Data

 

 

 IMF data on Brazil:  http://imf.org/external/np/sta/ir/bra/eng/curbra.htm#I

 

 

 

Interest Rates:

 

12/2008:  recent increase in the basic interest rate which now is at 13.75% p.y. in comparison to 11.25% in the beginning of the year

 

 

Government Spending:

 

In 2008, we see high rates of growth in government spending in Brazil.  Growth in consumption in federal, state and municipal spending grew at 5.3% in the second quarter of 2008...much higher than 2-3% common before.  This increase can partly be explained by upcoming elections.

 

Pro-cyclical spending:

This trend emphasizes one cocern about Brazil:  that the government is not engaged in contra-cyclical spending, but instead has increased spending along with increased revenues.   So, instead of saving in the good times to spend in the bad times...Brazil has just increased spending in the good.  Will there be money left when the good times turn to bad?  Time will tell...

 

Effect of government spending on inflation:

Brazil's central bank would have a much easier time battling inflation if the government spending were to be more controlled.

 

Important Laws

Lei de Responsabilidade Fiscal (LRF) : This law was passed after the economic meltdown, and changed the system so that the Federal government no longer would be resonsible for the deficits of the states, or local governments.   This ended an unsustainable system where local governments could spend, borrow, and not be responsible for their own deficits.  This is one stark difference from Argentina, which did not pass a similar law after the meltdown in 2002.

 

 

 

Resistance to external shocks:

 

12/2008:  Brazil is more resistant to external shocks than in previous times.  Largely due to the reversal of the net external debt position.  In recent years, Brazil has gone from a debtor nation (of foreign currency) to a creditor.    "In this sense, external shocks that previously depreciated the currency and increased public debt, worsening risk perception and feeding the Brazilian Real devaluation, nowadays result in Public Debt reduction as a percentage of GDP, thus becoming a stabilizing factor for the Brazilian economy."

 

Recent boom years 2002-2008

 

increases in the credit availability, taken together with higher GDP growth have stimulated consumption, and driven the Brazilian economy

 

 

image001_512_17.gif

 

 

 

Inflation:

 

Inflation target central bank:  central bank’s target  http://www.bcb.gov.br/Pec/metas/TabelaMetaseResultados.pdf

 

latest chart:  http://www.bloomberg.com/apps/quote?ticker=BZPIIPCY%3AIND

 

BZPIIPCY:IND

Brazil Inflation Indices IP

Add Security to your Watch List

 

 

 

Might be higher than the official numbers suggest.  see article here: http://www1.folha.uol.com.br/folha/dinheiro/ult91u418109.shtml  (portuguese)

 

How Brazil measures Inflation:

 

In Brazil there are many different measures of inflation that are often reported.  For a summary (in Portuguese), see link here:  http://www1.folha.uol.com.br/folha/dinheiro/ult91u102745.shtml 

 

Briefly, the inflation indicies are:

 

  • IGP Índice Geral de Preços
  • IGP-DI; O Índice Geral de Preços - Disponibilidade Interna
  • IGP-M; Índice Geral de Preços do Mercado
  • IGP-10; Índice Geral de Preços 10
  • IPC-RJ; Considera a variação dos preços na cidade do Rio de Janeiro
  • IPC-Fipe;  Índice de Preços ao Consumidor da Fundação Instituto de Pesquisas Econômicas
  • ICV-Dieese;  Índice do Custo de Vida do Departamento Intersindical de Estatística e Estudos Socioeconômicos
  • INPC; Índice Nacional de Preços ao Consumidor
  • IPCA; Índice de Preços ao Consumidor Amplo
  • INCC; Índice Nacional do Custo da Construção
  • CUB;  Custo Unitário Básico

 

 

 

Central Banker running for President?  Watch out for inflation!

 

I recently read an article in newspaper "Folha de S. Paulo" from 5/16/08 where the Central Bank of Brazil decided to increase its inflation target (IPCA) from 4.5% (as its been since 2005) up to 5%.  The reasons given by the central banker, Meirelles, was due to a global inflationary situation that was out of Brazil's control.  On the surface of it, this seems like a reasonable conclusion, and you nod your head "yes, thats right", and accept this reasoning.  

 

But, I think there is something else to explain the change in policy.  In a recent article from the magazine "Istoe e Dinheiro", there was the Central Banker on the cover, smiling, with a headline that told us that Meirelles is considering running for the Presidency of Brazil.  

 

Put these two headlines together, and you may sense a feeling of inflation worry setting in.  Remember...it is very important that the central Bank be independent from the politicians.  Why is this important?  Because to have an independent central bank is key to removing political pressures off of the central banker.  Why?  Because any time the Central Bank raises interest rates to fight off inflation, it is unpopular

 

No politician (especially one facing re-election) will ever want interest rates raised (which would slow growth, kill off jobs, and put the economy into a recession).  For this reason, most economists now agree that it is essential that the role of the Central Banker be 100% free from political pressure.  Having an independent central bank is seen as reassurance that inflation will be fought with rigor, and there will be no compromise in order for politicians to get elected.  This was true in Brazil.  Until now. 

 

You see...if the Central Banker is running for the presidency, then its clear that the independence of the Central Bank has been compromised.  No longer can you assume that the bank will fight inflation 100% of the time (not as long as the Central Banker is trying to run for president in 2 years).  Any effort to raise interest rates would make him extremely unpopular in the business community, and could make him a scape-goat if job losses were to follow. 

 

For this reason, I am now suspect of the raising of the target from 4.5% to 5%.  I believe that there may be political reasons mixed with economic ones, and that makes me uncomfortable  Expect inflation to rise.

 

Current account deficits

 

current account deficit, which in 2008 should already equal 2% of GDP.  Expectations for 2009 are for lower intake of foreign currency from exports, but with a depreciated currency, perhaps lower imports as well.  What will be the impact on the current account?  further deficits in 2009?

 

Forces to consider:

  1. Brazilian exports such as steel and soy will face both falling demand + falling prices
  2. But, Brazilian imports such as wheat, fertilizers, and chemicals will also fall in price, reducing the importing bill
  3. A fall in oil prices globally could help Brazil, but might make ethanol exports less attractive.
  4. Falling transport costs will help Brazil save money on trucking (a massive cost in Brazil)
  5. Weaker currency could mean more tourists to Brazil, but for the fact that all foreigners are suddenly poorer

 

Brazilian Exports:

The value of goods sold abroad in 2009 may tumble to $158 billion from $197.7 billion in 2008

 

 

see more from GloboTrends:   Brazil import export

 

Foreign Direct Investments:

Foreign Direct Investment (FDI) was about US$ 40 billion in 2008 , and expected to drop to a figure of US$ 25 billion in 2009.

 

Portfolio Investment from abroad

US$ 16 billion that came in over the course of 2008.  Expectations for 2009 are lower

 

 

Sovereign Wealth Fund:

 

Brazil’s budget deficit widened to a record in December after the government created a 14.2 billion reais sovereign wealth fund, the central bank said yesterday. Including federal and local governments and state companies, the budget gap widened to 33.6 billion reais in December from 8.9 billion reais in November and 24 billion reais in the same month a year ago.

 

read more:  Brazil sovereign wealth fund

 

 

 

Currency appreciation (from agri-business) harms the industrial sector.

 

the phenomenon is called the "dutch disease", and is what happens when there is a boom in agriculture or natural resources which causes the currency to appreciate, which harms the countries industrial sector.

 

 

 

Mercosul - common import tariff

 

The Camex (Câmara de Comércio Exterior - Exterior Chamber of Commerce) inside announced the reduction of the tax of importation for 328 machines and equipment and of four good of computer science and telecommunications of the rule of former-tariff. The former-tariff one is a norm that allows the reduction of costs for purchase of some products that are not produced in Brazil. In the case of the machines, the average reduction of the TEC (Tarifa Externa Comum do MercosulCommon External Tariff of the Mercosul) is of 14% for 2%. For the other goods, it is of 20% for 2%.

 

 

 

 

Inflation & Interest rates

 

 

 

image002_40

 

see our discussion on real interest rate

 

 

 

Other indicators

 

From the Economist Intelligence Unit

Source: Country ViewsWire

 

Key indicators 2007 2008 2009 2010 2011 2012
Real GDP growth (%) 4.7 4.5 4.1 3.9 3.9 3.9
Consumer price inflation (av; %) 3.7 4.1 4.0 3.8 3.7 3.7
Total public-sector budget balance -1.8 -2.4 -2.4 -2.4 -2.4 -2.4
Current-account balance (% of GDP) 0.7 0.2 0.3 0.3 0.6 0.8
SELIC overnight rate (av; %) 12.0 10.1 9.8 9.5(.) 9.3 9.3
Exchange rate R:US$ (av) 2.00 2.13 2.32 2.38 2.44 2.50

 

 

  2003(a) 2004(a) 2005(a) 2006(a) 2007(a)
GDP at market prices R bn 1,699.9 1,941.5 2,147.9 2,322.8 2,516.8
GDP US$ bn 552.2 663.6 882.0 1,067.4 1,261.5
Real GDP growth (%) 1.2 5.7 2.9 3.7 4.7
Consumer price inflation (av; %) 14.7 6.6 6.9 4.2 3.6
Population (m) 179.0 181.6 184.2 186.8 189.3
Exports of goods fob (US$ m) 73,084 96,475 118,309 137,808 161,164
Imports of goods fob (US$ m) -48,290 -62,835 -73,606 -91,349 -116,463
Current-account balance (US$ m) 4,177 11,679 13,985 13,622 8,540
Foreign-exchange reserves excl gold (US$ m) 49,111 52,740 53,574 85,561 173,296
Total external debt (US$ bn) 236.6 220.4 188.0 191.2 207.9(b)
Debt-service ratio, paid (%) 65.9 46.2 55.5 26.0 19.8(b)
Exchange rate (av) R:US$ 3.08 2.93 2.44 2.18 2.00
(a) Actual. (b) Economist Intelligence Unit estimates.

More economic data

 

 

Origins of gross domestic product 2006 % of total Components of gross domestic product 2006 % of total
Agriculture 5.1 Final consumption 80.3
Industry 30.9 Fixed investment 16.8
Services 64.0 Trade balance (goods&services) 2.9
       
Principal exports 2006 US$ m Principal imports 2006 US$ m
Transport equipment&parts 20,098 Machinery&electrical equipment 23,560
Metallurgical products 15,068 Oil&derivatives 15,201
Soybeans, meal&oils 10,481 Chemical products 14,414
Chemical products 3,936 Transport equipment&parts 10,301
       
Main destinations of exports 2006 % of total Main origins of imports 2006 % of total
US 17.9 US 16.3
Argentina 8.5 Argentina 8.8
China 6.1 China 8.7
Germany 4.1 Netherlands 0.9

More economic data

 

 

 

 

 

Brazil Macro Profile:

 

Background:

More than 20 years of military rule ended in 1985 and a new constitution was ratified in 1988. The government of Fernando Henrique Cardoso (1995-2002) ended hyperinflation and advanced reforms to liberalise the economy, but public-debt indicators deteriorated amid low economic growth. The current government, under the president, Luiz Inacio Lula da Silva, has been successful in consolidating macroeconomic stability, while stepping up social spending. However, the political environment is obstructing the implementation of deeper reforms needed to accelerate growth.

 

 

Political structure:

The president executes policy approved by the 513-seat Chamber of Deputies (the lower house) and the 81-seat Senate (the upper house). Constitutional review is by an independent judiciary. Although the president can resort to temporary decrees to push through legislation, the 1988 constitution gives Congress ample capacity to frustrate the executive. A total of 21 political parties are represented in the lower house and party discipline has traditionally been weak.

 

 

Policy issues:

The da Silva government has stuck to fiscal and monetary conservatism and improved the public-debt ratios, while stepping up poverty-alleviation programmes. But fiscal problems persist, preventing a steeper decline in interest rates. The public debt remains high at around 44% of GDP and social security expenditure is on an unsustainable path. The success of Mr da Silva’s plan to push annual average real GDP growth to 5% (mainly through higher infrastructure investment) will depend on progress in pending microeconomic reforms. These include streamlining the complex tax system, strengthening the regulatory framework, improving the quality of social spending and tackling labour informality.

 

 

Taxation:

Brazil has a poorly structured revenue system characterised by heavy tax burdens, a narrow taxable base, complicated levies and widespread tax evasion. Companies, both foreign and domestic, employ tax professionals and devote considerable resources to managing their tax affairs. The corporate and indirect taxation systems are particularly complex, porous and unwieldy; the income tax system is considered to be relatively efficient, with a top rate of 27.5%.

 

 

 

Foreign trade:

Compared to other countries, Brazil can be considered a relatively closed economy, with a trade to GDP ratio of around 22% in 2007

 

Strong external demand and a more active export policy have contributed to booming export earnings since 2003, leading the trade surplus to swell and transforming the current account from a deficit of 4.6% of GDP in 2001 to a surplus of 1.3% of GDP in 2006. Despite import value growth outpacing that of export earnings in 2007, the erosion of the trade surplus will be limited, owing to a favourable export/import ratio.

 

 

 

Crime Problem / Safety issue

 

The influx of cocaine and other narcotics is blamed for many of the 370,000 deaths by violence in Brazil over the past ten years. Washington argues that Brazil is now the second largest single-country market for cocaine in the world. Drugs have financed arms purchases and intensified turf wars between gangs in Rio do Janeiro and other cities.

 

 

International disputes

 

The country has a long-standing disagreement with Argentina over the use of waterways for power generation but keeps its objections muted because both countries are members of Mercosur.

 

 

 

Where to find Data:

 

1.  IBGE (Instituto Brasileiro de Geografia e Estatística = Brazilian Institute of Geography and Statistics).

2.  stock market:  Bovespa (Bolsa de Valores de São Paulo)

3.  Ministério do Desenvolvimento, Indústria e Comércio Exterior.

4.  inflation:  Dieese (Departamento Intersindical de Estatística e Estudos Socioeconômicos)

 

 

Historical Data & Charts:

 

image002_512_26.gif

 

 

image003_512_18.gif

 

 

image004_512_15.gif

 

image006_512_10.gif

 

 

image007_512_03.gif

 

 

 

 

image009_512_01.gif

 

 

 

image011_512.gif

*  left scale = credit as % of GDP

*  right scale = default rate...

So, clearly there has been an increase in credit up till Sept '08...but, what does that mean going forward?  maybe default rates will jump, and available credit will fall !!

 

 

 

image012_512_02.gif

 

As a result of credit...retail sales jumped.  But, what will happen going forward?

 

 

 

image013_512.gif

 

 

Increasing GDP + investment led to more jobs...

Plus,  As people saw benefits of credit available...they chose to become "formal" employees...

 

image014_512_01.gif

 

 

FDI levels

 

image015_512.gif

 

This expectation for 2009 seems way out of line, and not based on the new reality

 

 

Purchasing managers confidence....

image016_512_01.gif

 

 

Consumers confidence...

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Foreign Reserves....

 

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External Links

 

Brazil stock exchanges:

 

 

Brazil bonds:

 

 

Exchange rates:

 

 

More Data:

 

 

 

government links:

 

 

 

more interesting external links:

 

Brazil: Instituto Brasileiro de Geografia e Estatistica
The Brazilian Statistics Agency provides a wealth of information and statistical data including an annual survey of trade and monthly reports on the Brazilian economy. Available in English, Portuguese and Spanish.
Brazil: Brazilink
A very complete source of information about different topics in Brazil. In addition to an online forum and newsletter, the web site has a number of sections including politics, finance, environment and education. Economic and social indicators are available as well.

 

More links:

 

 

 

 

 

Brazil: Lula Learns the Lesson of Not Planning Ahead

 

By John Fitzpatrick

January 15, 2008

Towards the end of 2007 one of President Luiz Inacio Lula da Silva´s senior advisers said the government had no Plan B to fall back on should Congress fail to prolong the CPMF tax on financial transactions. This was an understandable position to take since very few people at that time thought that would happen. However, it became gradually clearer as the deadline approached that the government was in danger but since it had no Plan B it was swept away by the vote. The result is that Lula now finds himself facing more problems than he could have imagined only a couple of months ago when life looked rosy thanks to a dynamic economy.

Now he has to contend with running the country with R$40 billion (around US$18 billion) less than he budgeted for. To do so, he said the government would have to cut expenditure to the bone by R$20 billion and raise taxes in other areas. Not surprisingly this message has not been well received by the politicians and employees in the public sector nor by individuals and companies in the private sector.

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