Category: Brazil

Brazil’s rate of inflation hit a seven-year low when it fell to 4.89% for the year through to mid-April from 5.3% as at the end of March. Monthly inflation was down to 0.17% as at mid-April, down from 0.43% at end-March. A slight strengthening in the real helped to bring down the cost of imports, in turn slowing inflation, as measured by the IPCA consumer price index. The continuing benign inflationary environment is good news for the Central Bank as it looks forward to further interest rate cuts.

Bank lending in Brazil rose by 1.4% in March to $294 billion, driven by mortgage loans, according to figures published by Brazil’s Central Bank. Average lending rates fell back in March to 45.7% from 46.2% in February as the government continues to promote home ownership and new home construction.

Bolivia has said that Brazilian company EBX, which it ordered to leave the country last week, will no longer be able to bid for mining rights to develop the El Mutun field in the southeast of Bolivia. Last week, the government said that EBX had set up an illegal pig iron operation on the border with Brazil; this has now led to the decision to disqualify the company from participating in the $1 billion El Mutun iron ore project. The remaining four bidders include a joint venture between Argentina’s Siderar SAIC and Techint Argentina.

Speaking at the same Brazilian-American Chamber of Commerce conference yesterday, Monday, in New York, new treasury secretary Carlos Kawall conceded that domestic debt management remains a challenge for Brazil. Improving the internal debt profile and lengthening the domestic yield curve were priorities for the government, he said, while building on the recent opening up of the market to foreign investors. Increased transparency and the development of financial products were necessary to encourage foreign interest, he commented, and domestic pension funds had to be persuaded to change their culture and “go longer in the curve”.

Guido Mantega, Brazil’s new finance minister, has said that Brazil is now “immune to political turbulence”. Speaking at a Summit in New York, organized by the Brazilian-American Chamber of Commerce, Mantega said that never before has Brazil experienced such a favorable combination of economic conditions as now: falling inflation, continuous growth, low levels of external debt and falling interest rates. Predicting growth of around 5% for the next five to eight years, Mantega added that even a change of government in the country’s election this year was unlikely to have much impact on the country’s economic outlook, which would continue to be positive, building on the foundations of sustainable growth, he says have been laid by the current administration. “We leave a legacy for the future,” he concluded.

Following last week’s decision by Brazilian regulators to allow foreign investors to hold up to 12.5% of Banco do Brasil shares (from the previous 5.6%), the Bank has announced that it will make an offering of common shares both at home and in the US. BNDES, Brazil’s state-owned development bank, may also sell some of its Banco do Brasil shares. The offering will be arranged by local banks BB Banco de Investimento and Banco Pactual.

Bank of America may be about to sell its BankBoston operation in Brazil. It has been reported that local bank Banco Itau, Brazil’s second-largest private bank, and Spanish bank Santander are interested buyers. A price tag of $2 billion is being discussed. Bank of America sold its BankBoston operations in Argentina last December to a consortium led by South Africa’s Standard Bank in a deal worth around $170 million It has also sold off its BankBoston stakes in Peru, Panama and Colombia. Bank of America bought BankBoston’s mother company – Fleet Boston Financial – for $48 billion in 2004.

Brazil’s civil aviation authority, Anac, has denied reports that it is blocking the sale of VarigLog to Volo Brasil. It said that the sale has not yet been approved due to incomplete documentation. The former cargo subsidiary of national carrier Varig was sold in March to Volo for $46 million. The delay of the sale approval may have repercussions on the recent offer made by VarigLog for the crisis-hit carrier for $400 million.

Petroleo Brasileiro (Petrobras), Brazil’s state-owned oil company, is one of five international oil companies to bid for the first offshore oil exploration rights to come up for auction in East Timor. Other bidders included Italy’s Eni, Malaysia’s Petroliam Nasional, India’s Reliance Industries and Portugal’s Galp Energia. East Timor broke away from Indonesia, south-east Asia’s largest oil producer, in May 2002.