The recent struggle with the Argentine economy will have profound impacts on Brazil. Brazil and Argentina make up the biggest players in the Mercosul trade block, so without Argentina, Mercosul is basically just Brazil. Forbes reports that on January 22 the already weak Argentina peso, went from 6 to one to the dollar to over 7 to one the next day. It’s now 8.01 to the dollar as foreign reserves dwindle. Argentina could be in trouble should it ever need to service its debts or import oil. The country’s foreign cash reserve has declined by 20% and now stands at around $34 billion. Brazil on the other hand holds a foreign cash revers of well over $300 billion. Because trade relations between the two countries are so close, when one country is doing poorly, so does the other one. This is apparent especially since the depreciation of the Argentine peso. Since its value has decreased, the Brazilian Real has become one of the worst performing currencies in the BRIC’s. Only the Russian ruble is doing worse than other currencies. Read the whole story here.
This Tuesday, Brazil announced its first spending plans for the 2016 Olympic Games. Reuters reports that the government has approved $US 2.3 billion so far for 24 approved projects. The figure is set to increase as more projects gain approval. About 28 more projects are still pending. The estimate also excludes projects such as airports and pollution control which need investments even without the olympics. In 2009, the Rio 2016 Organizing Committee estimated that the total cost of the 2016 event would be 28.8 billion reals. ($1 = 2.41 Brazilian reals)
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“Brazil believes and is betting on the human and economic potential of Cuba,” said Brazilian President Dilma Rousseff on Monday at the inauguration of the Brazilian-led modernization project of the port of Mariel. The development zone in Mariel (28 miles from Havana) is part of Cuba’s initiative to modernize its economic model. Both Brazil’s construction giant Odebrecht and Brazil’s state development bank have helped fund the project. The finished port will include a 6,550-foot dock capable of accommodating deep-draft vessels and a terminal with the capacity to receive 3 million containers a year. The terminal will be approximately 2,300 feet long and equipped with four super post-Panamax cranes and 1,140 electrical outlets for refrigerated containers. At least 400 Brazilian firms have taken part in the project hoping to be the first in line to benefit from Cuba’s economic overhaul. Read here.
The Wall Street Journal reported today that the Brazilian Central Bank’s new monetary policy is indeed helping inflation after an unpleasant rise in consumer prices last year. The central bank has raised the benchmark Selic (special clearance and escrow system) rate by half a point to 10.50%. The Selic rate is the bank’s overnight lending rate.
In an early sign that inflation might be slowing, Brazil’s statistics agency recently reported that consumer prices rose 0.67% in the month through Jan. 15. This is less than expected, compared with the 0.75% climb in the period through mid-December.
The central bank president Alexandre Tombini still says that Brazil needs to focus on growth, especially the investment in infrastructure projects. The government has already began a $113 million dollar investment program to improve its infrastructure. This, along with an increase in domestic consumption and record grains output should help the economy grow more than last year, says Marcio Holland, the finance ministry’s secretary of economic policy.
Safety experts worldwide are applauding Brazil. The nation announced in early January that it will begin construction on Latin America’s first government run auto crash test laboratory. As David Ward, director general of the London-based FIA Foundation for auto safety says, “no nation serious about auto manufacturing and safety has made advances without one.” According to the Brazilian Health Ministry, when comparing deaths to the size of each nation’s automobile fleet Brazilian passenger car occupants die at rates 4 times higher than Americans. The Brazilian branch of Spanish safety firm Applus IDIADA will design the $77 million crash test center in Rio de Janeiro. The construction is set to begin within 6 months. Read the story from the Washington Post here.
Brazil’s retailers are seeking federal support after waves of youth protests have occurred in the nation’s malls. The protests, called “rolezinhos,” are organized largely though social media and are a way for youth to express their discontent with inequality and racism in the country. Not only are retailers concerned with the children, pregnant women and elderly who panic when the large crowds come in, but they are also losing revenue. Last week in São Paulo, the JK Iguatemi mall had to close its doors 10 hours early. Retailers reported total losses around US$17,000. Read the story here.