Category: Brazil

Brazil’s central bank cut its 2005 growth forecast to 3.4 percent, down from 4 percent, and said nine months of interest rate increases will help ease inflation next year to 3.7 percent, compared with a previous forecast of 3.8 percent. The bank increased its 2005 inflation forecast to 5.8 percent from 5.5 percent, citing short termfactors such as rising utility rates.

Brazil’s President Luiz Inacio Lula da Silva ordered an investigation into allegations of corruption at Furnas Centrais Eletricas, a unit of Eletrobras, the country’s biggest power generator. Roberto Jefferson, former Lula ally and federal deputy, says Lula’s Workers’ Party got money from Furnas to bribe legislators for support. The Workers’ Party denies the accusations.

More than 20,000 Brazilian farmers marched in the capital Brasilia, parking tractors outside the presidential palace as they seek government aid to cope with drought damage, mounting debt and declining incomes. Farm industry leaders and four governors, including Blairo Maggi, the governor of Mato Grosso state and the world’s biggest soy grower, are pushing for renegotiation of $7.2 billion in debt and increased spending on disease control. Farmers in Brazil, the world’s biggest sugar, coffee and orange juice producer and the second largest grower of soybeans, lost 13 percent of their expected crop in the first half of this year as a drought struck the country’s south.

Brazil’s currency rose to 2.36 reais per US dollar Wednesday as the highest domestic interest rates since 2003 attract increased investment in the country’s local debt markets. The real has gained 13 percent against the dollar this year. Investors are increasing their holdings of Brazilian sovereign bonds, which pay as much as 16 percentage points more than comparable US debt. The strengthened real, however, is crimping exports and slowing economic growth.

Brazil government labor inspectors have released more than 9,000 farm workers held against their will since 2003, according to the labor Ministry. Most of the workers were held as virtual slaves at farms in remote regions of the country. The government says over 15,000 farm workers have been released in the last ten years.

The Brazilian government says the public sector posted a R$6.31 billion ($2.58 billion) primary surplus in May, raising its January-May primary surplus to $19.53 billion. The primary surplus – before interest payments – in the first five months of the year was equivalent to 6.6% of GDP. The primary surplus was 5.02% of GDP in the twelve months to May. Brazil has committed to a primary surplus of 4.25% of GDP. Economists at UBS say the government usually builds up a cushion of savings at the beginning of the year, when public spending is seasonally lower.

Brazil’s public sector net debt-to-GDP ratio, which includes Central Bank reserves, remained almost unchanged at 50.3% in May, compared with 50.4% in April. Economists at CSFB say the decline was mainly due to a 5.1% rise in the local currency.

Brazilian economists lowered their inflation forecast this year to 6.05 percent as the country’s slowing economy discourages companies from raising prices, according to a central bank survey. Inflation through mid June was up 7.7 percent year-on-year. A stronger real has hurt exports and consumer demand is waning after central bankers raised their benchmark interest rate to a 20-month high of 19.75 percent. Economists also cut their median economic growth forecast for the year to 3 percent, down from 3.5 percent at the end of May.

Bolivia’s President Eduardo Rodriguez promised that his country would honor its natural gas contracts with Brazil and Argentina, but also pledged to raise taxes on foreign oil companies and to increase government intervention in the oil and gas sector. Carlos Mesa, Bolivia’s last president, resigned earlier this month in the face of mass protests and roadblocks that choked off Bolivia’s main cities. The protesters, led by leftist congressman Evo Morales, demanded a nationalization of Bolivia’s oil and gas industry and more political power for the country’s poor indigenous majority. Rodriguez has promised to call new elections within six months.

Brazilian bank lending rose 0.5 percent in May, the slowest pace in 16 months after the central bank raised interest rates nine straight months to discourage borrowing and stem inflation. President Luiz Inacio Lula da Silva has made increasing poor Brazilians’ access to credit one of the central economic goals of his presidency. Inflation was 8.05 percent in the 12 months through May, fueling speculation the central bank will hold its benchmark lending rate at a 20-month high of 19.75 percent.