Category: Brazil

Opposition leaders called on Brazilian President Luiz Inacio Lula da Silva to let a congressional investigation into allegations of government corruption proceed. The scandal began last month when a Brazilian magazine uncovered what it claimed was a kickback scheme in the national post office involving key Lula allies. Lula asserts the allegations are politically motivated and designed to block passage of his legislation ahead of next year’s presidential election. Brazil’s Bovespa stock market index fell 809 points yesterday, or just over 3 percent.

Mercosur invited Panama to become an associate member of the trade bloc, joining Chile, Peru, Ecuador and Colombia, which are also associate members. Brazil, Argentina, Uruguay and Paraguay are founding members of the group. Talks to form a free trade agreement between Panama and Mercosur are expected to get underway soon.

Brazil’s real rose 1.7 percent Thursday to 2.416 to the dollar after Finance Minister Antonio Palocci indicated the government would not try to weaken the currency. Palocci’s comment late Wednesday that “the floating exchange rate is the best solution” dampened speculation that the central bank would sell reais for dollars. Traders had driven down the real Tuesday and Wednesday after central bank monetary policy director Rodrigo Azevedo said the bank “will be back in the market” to sell reais for foreign currency.

Rodrigo Azevado, the monetary policy director of Brazil’s central bank, said the bank may resume selling reais for dollars. The comments boosted speculation the government will act to brake the real’s 32 percent, 12-month rally as economic growth falters and exporters complain their goods are becoming less competitive in international markets.

Brazil’s economy grew 2.9 percent in the first quarter, the slowest pace in five quarters as higher interest rates discouraged consumer spending and a stronger currency slowed exports. The figure suggests the economy will slump more than the government and economists expected after the central bank raised the benchmark lending rate every month since September to fight inflation.

Brazilian economists cut their year-end inflation forecast for a second straight week on the prospect of slower economic growth. Inflation this year will fall to 6.35 percent, down from 8 percent predicted in April, according to economists surveyed by the central bank. The central bank lifted the overnight lending rate for a ninth straight month in May to 19.75 percent.

Brazil’s real gained for a fourth day in five on expectations that increased bond sales abroad and rising export revenue will boost inflows into South America’s largest economy. The real rose to 2.37 per dollar, its highest level in more than three years after the government and Brazilian companies last week sold almost $1 billion in bonds, tapping into a two-month rally in emerging-market debt that cut borrowing costs.

Japan’s Prime Minister Junichiro Koizumi and Brazil’s President Luiz Inácio Lula da Silva confirmed their mutual support for permanent membership of the United Nations Security Council. Brazil, Japan, Germany and India are all seeking permanent seats on the security council and on May 16 proposed six new permanent members — two from Africa, two from Asia, one from Latin America and one from Western Europe.

Brazil’s Senate confirmed the nomination of Alexandre Tombini to the board of the Central Bank. Tombini, one of the developers of the Inflation Target System in 1999, is a career official at the Central Bank and has served at the Brazilian Executive Office at the IMF for the last few years. The quick and broad-based confirmation of Tombini´s nomination was welcomed by many foreign observers as well as political and economic leaders in Brazil.