Brazil’s Booming Economy Is Creating 19 ‘Millionaires’ Every Day

Brazil has been adding 19 ‘millionaires’ per day since 2007 — and that statistic will likely be repeated over the next three years as Latin America’s economic super-power continues to deliver stellar GDP growth and consumption rates, according to bankers. Note that these are millionaires in Brazilian currency terms. Someone worth 1 million Reais has a net worth of roughly $540,000.

Speaking on the fringes of the Private Banking Latin America 2011 conference last week, Guilhermo Morales, head of Latin American private banking for Portuguese lender Millennium BCP, said Brazilian consumption continues to grow very strongly, boosting the fortunes of retailers, banks and a plethora of industries that are clamoring for size. As these businesses grow, so does their owners’ wealth.

“There are many emerging companies growing very fast, especially in retail, but also in healthcare, real-estate, construction and other basic industries,” Morales pointed out. He said M&A activity is also gaining traction as many industries look to consolidate or large players (both locally and abroad)  snap up smaller ones. A case in point is Schneider Electric’s recent purchase of small Brazilian electrical supplier Steck Group for some $350 million.

Added Morales: “There are many undercover deals like this going on right now, involving several  industries and big payouts for the acquired company owners.”

Another factor accounting for the rising tide of millionaires are high executive and banker salaries, which Morales said often beat those paid in the US. He noted it’s common for Brazilian investment bankers to make a $539,000 ($1m reais) annual bonus these days while CEOs can make an average of $75,000 a year.

According to other bankers, Brazil’s booming real-estate industry has also generated huge wealth as property values have doubled in recent years and are poised to increase further, especially in Rio de Janerio, as the city girds up to host the 2014 World Cup and the 2016 Olympics.

Individuals with a net worth ranging from $539,000 – $2.7 million ($1m-$5m reais) make up the bulk of the new millionaires, Morales said, adding that most private banks tend to individuals whose net worth falls below $5.4 million ($10m reais).

“I think that this trend will continue for the next three years but I don’t see it lasting forever. After all, there is a limit to everything,” Morales noted.

Brazil’s economy has been growing at an annual average of 5% in recent years and is predicted to maintain that pace in the medium term. However, some economists have warned that the country’s economy could overheat as inflation rises to unsustainable levels.

The 19-millionaires-a-day statistic was measured by taking all of an individual’s wealth into account, including investments, property, savings and other assets in addition to cash. Some in the private banking conference said the statistic seemed a bit overhyped but Emerson Pieri, Head of Wealth Management, Latin America, at Haliwell Bank (which unveiled the millionaire statistics as part of a Brazilian wealth management study) insisted they are reliable.

He added Brazil currently has 137,000 millionaires and (according to Forbes’ 2011 World Billionaires’ list)  some 30 billionaires, with 70% of the country’s wealth concentrated in Sao Paulo and Rio de Janerio. Pieri said Brazil represents an enormous opportunity for private banks to meet the needs of its growing millionaire community as well an emerging class of ultra-high networth individuals.

Source: Forbes


Brazil’s Coffee Crop May Be 52.5 Million Bags, Terra Forte Says

Brazil’s coffee crop, the world’s largest, may be 52.5 million bags for 2012-13, down 5.1 percent from two years earlier, according to Terra Forte Exportacao e Importacao de Café Ltda.

Crop losses were caused by a “long dry spell from May to September” and three cold snaps, São João da Boa Vista-based Terra Forte said in an e-mailed statement today, providing its first estimate for next year. Brazil’s coffee crop is on a two- year cycle, with the next big crop set for 2012-13 after this year’s smaller harvest of 46.6 million bags, Terra Forte said.

Speculation that next year’s coffee crop in Brazil will be a record helped to send New York coffee futures down 23 percent from a 14-year high in May. Terra Forte was Brazil’s second- biggest exporter of coffee this year through October, according to figures from Flavour Coffee, a Rio de Janeiro-based broker.

Production was 55.38 million bags in 2010-11, Terra Forte said in the statement. A large flowering this year should have indicated a bigger crop, according to Terra Forte. Some of the seeds known as pinheads that develop into coffee cherries and contain the beans fell, reducing the crop potential, it said.  

Output of arabica beans will be 37.2 million bags in 2012- 13, compared with 41.95 million bags two years earlier, and the robusta crop will be 15.33 million bags, up from 13.43 million bags in 2010-11, the company said in the statement.

Arabica is grown mainly in Latin America and favored by coffee shops such as Starbucks Corp. Robusta, used in instant coffee and espresso, is harvested mostly in Asia and parts of Africa.

Brazil’s arabica output was 32.32 million bags for 2011-12 and robusta production was 14.328 million bags, according to the company. A bag weighs 60 kilograms (132 pounds).

Source: Bloomberg

Brazil Rate Future Yields Plunge as Rousseff Signals More Cuts

Yields on most Brazilian interest- rate futures contracts plunged after President Dilma Rousseff said the country has room to use monetary policy to shore up economic growth amid the global economic slowdown.

Yields on the futures contract due in January 2013, the most actively-traded today in Sao Paulo, fell five basis points, or 0.05 percentage point, at 9:29 a.m. to 9.85 percent, the lowest since May 22, 2007.

Traders stepped up bets that policy makers will accelerate the pace of rate cuts after Rousseff said at an event in Brasilia yesterday that Latin America’s biggest country can “use monetary policy” to combat the effects of Europe’s debt crisis. Brazil’s economy expanded at the slowest pace in 10 quarters in the three months through September, the Finance Ministry said yesterday.

“The market read these comments as the government will take advantage of the external crisis as an opportunity to push rates down,” Mauricio Junqueira, who helps oversee about $300 million at Squanto Investimentos in Sao Paulo, said in a telephone interview. The central bank’s thesis that “the external crisis could help slow the Brazilian economy is coming to pass,” he said.

Source: Bloomberg

Brazil May Increase Minimum Wage to 622.73 Reais in 2012

Brazil’s government raised its minimum wage forecast for next year to 622.73 reais ($344) a month from 619.21 reais, according to complementary information on the 2012 budget plan sent yesterday to congress.

The increase will raise the country’s average wage by 3 percent, Carlos Hamilton, the central bank director for economic policy, said inBelo Horizontetoday.

The minimum wage is adjusted by a formula agreed to by unions and President Dilma Rousseff’s predecessor, Luiz Inacio Lula da Silva, depending on inflation and economic growth.

The increase “shouldn’t be a problem regarding inflation, which will remain above the center of the central bank’s target,” said Andre Perfeito, chief economist at Gradual Investimentos. The bank targets an annual inflation rate of 4.5 percent plus or minus two percentage points.

The minimum wage is currently 545 reais.

The real was little changed at 1.8078 per dollar at 10:13 a.m.New Yorktime from 1.8069 yesterday.

Source: Bloomberg

Fresh Look for Author, and for Land He Lauded

PETRÓPOLIS,Brazil— When the Viennese-born writer Stefan Zweig moved in 1941 to this city of imperial palaces nestled in the mountains nearRio de Janeiro, he was one of world’s most translated authors, renowned for his taut novellas exploring passion, obsession and despair.

But after Mr. Zweig, despondent over the advances of the Nazis, took his own life here a few months later at age 60 in a suicide pact with his young wife, Lotte, he became known in his adopted country for creating one of most hackneyed phrases ever associated with Brazil: “Country of the Future.”

With Brazil’s prospects now notably improved, Brazilians are reassessing Mr. Zweig and his legacy as the book’s title gains new currency yet again, with everyone from advertising executives to visiting European diplomats and even President Obama, who visited Brazil in March, using it in a speech to suggest that perhaps Brazil’s “future” has finally arrived.

“Brazilisn’t the country of the future anymore,” said Romero Rodrigues, a Brazilian Internet entrepreneur, in one typical new repackaging of the term. “It’s the country of the present.”

The house where Mr. Zweig took his own life here by swallowing poison is set to reopen soon as a museum. Meanwhile, Brazilian writers and historians have been reflecting on the significance of “Land of the Future,” and some of the political intrigue surrounding its publication 70 years ago.

In a recent televised discussion of Mr. Zweig, Alcino Leite Neto, editor of the publishing house Publifolha, compared his importance inBrazilto that in the United States of Alexis de Tocqueville, the French political thinker who wrote about American concepts of liberty and equality in “Democracy inAmerica.”

“We had Stefan Zweig,” said Mr. Leite Neto, “who left us this book advocating tolerance, comprehension between people, an indictment in favor of peace, written right during World War II.”

A broader appreciation of his work is also under way, with two Brazilian feature films in production adapted from his writing, one from “The Invisible Collection,” aboutGermany’s experience with inflation, and another from “Leporella,” about a housemaid who becomes infatuated with her employer.

But it is “Land of the Future” itself (published here since the 1940s in various editions as “Country of the Future”), and Mr. Zweig’s wanderings inBrazilbefore his death, which have recently ignited the most interest.

Cultural officials in Petrópolis this year organized a multimedia exhibit called “Stefan Zweig Lives!”, and some Brazilians have begun joining the Europeans and Americans who occasionally appear in the city to see his house onGonçalves Dias Street, or even the cemetery where he and Lotte are buried side by side.

“It’s a little strange taking someone to the places of such tragedy, but we’re happy to receive every kind of visitor,” said Walter Raposo, 80, a horse-carriage driver in Petrópolis who has guided several Zweig aficionados to these spots; they find Mr. Raposo and his carriage in front of the Brazilian emperor’s former summer palace, now a museum.

Alberto Dines, a television host and eminence among Brazil’s journalists who met Mr. Zweig as a child when the writer visited his school in Rio de Janeiro, has been a driving force behind the renewed attention in Petrópolis and beyond.

His research and his own book on Mr. Zweig, “Death in Paradise,” explore in detail the complicated origins of the book’s title, which Mr. Dines explains was not Mr. Zweig’s creation but a suggestion from James Stern, who translated his book into English from the German.

In a touch of irony, Mr. Zweig, born in Vienna’s golden age to affluent Jewish parents, alluded in the book’s epigraph to a line in French, “une terre d’avenir,” from correspondence received by Arthur de Gobineau, a 19th-century French aristocrat, diplomat and theorist of European racial superiority who detested Brazil.

“It’s a curious thing, because Gobineau was the father of modern racism,” said Mr. Dines, who at age 79 is overseeing the completion of Casa Stefan Zweig, the museum created at the house where Mr. Zweig lived. “Coming from racist Europe, Zweig was amazed seeing the different races mixing so freely in Brazil.”

Of course, some contend Mr. Zweig’s largely optimistic observations on race relations at the time belied circumstances that were considerably more complex — and continue to be as affirmative action programs spreading across Brazil seek to reverse centuries of exclusion.

Still, Mr. Zweig’s optimism was not dimmed by the obvious challenges in Brazil in the early 1940s, like an average life expectancy of 43 years and a population that was 56 percent illiterate. Some of his sanguine assessments continue to impress today.

He claimed, for instance, that Portugal had been farsighted by colonizing Brazil partly by emptying Portuguese prisons of undesired elements and sending them across the Atlantic. “As usual, it is not altogether clean manure which is the earth’s best preparation for future harvests,” Mr. Zweig wrote.

Mr. Zweig’s reappraisal here coincides with renewed crisis in Europe — and with a new wave of Portuguese emigration to Brazil, but this time of unemployed professionals, not convicts. Some of those seeking opportunity in Brazil may even know that Mr. Zweig remains highly esteemed in parts of Europe, especially France, where his books are still widely available.

Strangely, Mr. Zweig’s book on Brazil was fiercely criticized in Brazil shortly after its publication. Critics laid waste to the Austrian writer with vehemence, opening him to insinuation that he was paid by the authoritarian regime of Getúlio Vargas to write the book.

Mr. Dines said the scathing reviews had been a way for reviewers to indirectly get back at Mr. Vargas’s censors, since the critics equated praising Brazil with praising its dictatorship. Either way, the author of numerous best sellers had little need for Brazil’s financial support.

But Mr. Zweig did need something else at the time: a haven from the Nazis. Mr. Dines, based on his own research of Mr. Zweig’s path to Brazil, argues that the writer had an implicit deal with Brazilian authorities to produce his book in exchange for the residence permits hastily granted in Buenos Aires to him and his wife.

After all that, some mystery persists as to why he would kill himself soon after arriving in Brazil. He had acknowledged that a lifetime might be insufficient to properly understand Brazil. But in the suicide note he left describing himself as “one without a country,” he still had only praise for the “marvelous” Brazil that received him.

“After I saw the country of my own language fall, and my spiritual land —Europe— destroying itself,” he concluded, “it would require immense strength to reconstruct my life.”

Source: NY Times

Emerging Stocks at 35% Discount Luring Goldman as Rates Drop

Emerging-market stocks are trading at levels 35 percent cheaper than their 15-year average as rising profits and falling interest rates from Brazil to Indonesia buoy investor confidence.

While the MSCI Emerging Markets Index’s 9.7 percent gain from this year’s low on Oct. 4 lifted its price-earnings ratio to 10.3 from 9.7, the gauge is still trading below its mean since 1996, according to data compiled by Bloomberg. The measure jumped an average 35 percent after developing-nation policy makers began cutting interest rates in 2003, 2005 and 2008.

Investors pulled $26 billion from emerging-market mutual funds in the first nine months and the stock indexes sank about twice as much as advanced nations after Indonesia, Poland and Brazil raised interest rates. Now borrowing costs are coming down as policy makers seek to spur expansions at a time when export growth and inflation are slowing. The MSCI index may rise 30 percent in a year as record earnings outweigh Europe’s debt crisis, more than 17,000 forecasts compiled by Bloomberg show.