Category: Brazil

Brazil sold $600 million of bonds due in 2015, completing its financing plan for the year. The bonds were priced to yield 7.732 percent, 363 basis points more than comparable US Treasuries. Citigroup and HSBC managed the offering. The bonds are rated B1 by Moody’s and BB- by Standard & Poor’s, four and three levels below investment grade, respectively.

Brazil’s Labor Party plans to leave the ruling coalition amid allegations by Roberto Jefferson, the party’s president, that President Luiz Inacio Lula da Silva’s Workers’ Party bribed lawmakers. Labor Party members will be free to vote for or against legislation proposed by Lula’s ruling coalition, a party spokesman said. The withdrawal of the Labor Party, with its 48 seats, leaves Lula with a much narrower majority in Brazil’s lower house. Lula’s coalition is in the minority in the Senate.

Brazil’s Central Bank decided to not to raise interest rate at its regular policy held Wednesday. Slowing demand has cut inflation, allowing the Bank to keep rates at 19.75 percent. The annual inflation rate fell to 8.05 percent in May, still far from the year-end inflation target of 5.1%. Independent economists forecast a year-end rate of 6.21 percent.

Brazil’s retail sales slowed for the third month in four in April, fueling speculation that the Central Bank will hold interest rates steady at a meeting today. Interest rates are at an 18-month high. Retail, supermarket and grocery store sales rose 3.4 percent year-on-year in April, compared with an 8.6 percent increase in March. Annual retail sales for the 12 months through April slowed to 8.2 percent from 8.8 percent in March.

TAM, Brazil’s second-biggest airline, raised $156 million through an equity offering in Brazil and the US to finance expansion of its fleet. TAM plans to buy more planes as the economy grows and competitors Varig and Vasp cut service to avert bankruptcy. TAM will use most of the proceeds from the share sale to lease or buy 20 Airbus A320s.

JC Penney, the second-biggest US department-store chain, plans to sell Brazilian retailer Lojas Renner for as much as $255 million as it focuses on the US market. The company will put on sale its 98 percent stake in Lojas Renner next month at a price between $15 and $17.50 a share. Since August JC Penney has been using proceeds from asset sales to open new Renner stores and upgrade existing ones.

Brazil’s lower house ethics committee opens misconduct hearings today against the head of the Labor Party, Roberto Jefferson, who alleges that Brazilian President Luiz Inacio Lula da Silva’s Workers’ Party bribed deputies for votes. The committee also plans to call former Communication Minister Miro Teixeira and the Labor Party’s lower house leader, Jose Mucio, to testify. Lula denies the allegations and says they are designed to damage him ahead of next year’s presidential election.

Economists have lowered their expectations for Brazil’s GDP growth this year from 3.27 to 3.12 percent, according to a central bank survey. Brazil’s economy grew only 0.3% in the first quarter compared with the previous quarter, and rose at a weaker-than-expected annual rate of 2.9 percent. The central bank has raised its benchmark interest rate continuously over the last nine months in an effort to rein in inflation. For 2006, GDP growth forecasts remain at 3.50 percent.

Brazil’s inflation rate rose to .49 percent in May, down from .87 percent in April as utility prices and fuel costs declined. The lower figure increases the likelihood the central bank, after nine months of interest rate increases, will maintain its benchmark rate at 19.75 percent when it meets next week. Inflation in the 12 months through May slowed to 8.05 percent from 8.07 percent in April.

Brazilian President Luiz Inacio Lula da Silva said he will keep central bank President Henrique Meirelles in his post, denying reports he was planning to replace him. Speculation mounted last week that Lula would fire Meirelles to show he’s taking steps to root out corruption amid accusations that members of Lula’s ruling coalition paid lawmakers for votes and ran a bribery scheme at state-run companies. In May, Brazil’s Supreme Court approved an investigation by federal prosecutors into allegations that Meirelles made illegal money transfers and underreported assets.