In 2011 Brazil would move ahead of Italy

According to The Economist Intelligence Unit, in 2011 Brazil would move ahead of Italy into seventh place in the ranking of the largest world economies with a GDP of US$2 billion.

The list of the world’s largest economies is expected to have a major reorganization in 2011. According to estimates by the Economist Intelligence Unit (EIU), China would retain the second spot that took from Japan, while the second quarter of 2011 will see the rise of other emerging markets: Brazil, Russia and India.
The research unit of The Economist is predicting that Brazil, the eighth largest economy of the world in 2009, with a nominal GDP of $1.5 billion, followed by Spain, Canada, India and Russia, would continue in the same position during 2010.

However it is expected that in 2011 the largest Latin American economy will climb up to stand in seventh place in the ranking with a nominal Gross Domestic Product of just over US $ 2 billion. Thus, Brazil would regain the position it occupied in 1994 displacing Italy which it is not expected to reach $1.8 billion in nominal output. Another European Economy that will surrender position among the largest economies in the world is Spain, being relegated to the 12th post because of the significant advance of Russia and India.

The International Monetary Fund (IMF), however, in estimates released last April does not predict such an advance for the Brazilian economy until 2013. This may change, however, when the IMF revise its estimate in October.

Among the reasons for the changes in the ranking of the largest economies in the near future are the advance of the emerging economies that were not drastically affected by the 2008 crisis which left Europe and the USA with modest growth which is expected to continue in Europe until at least 2012 according with Negocios (in Portuguese).
However, during the past years since the crisis, Brazil successfully committed itself to fiscal stability and responsible policies that encouraged investment and a large domestic demand. Additionally, the Brazilian economy is benefiting from the strong demand for commodities and raw materials from China. Another important factor strengthening the situation of Brazil and other emerging economies has been the currency appreciation against the euro and the dollar.

The situation of China as the second largest economy is expected to remain stable due to a growth forecast of 9.9 percent in 2010 and 8.3 percent in 2011. However, this assumes that the Chinese government is successful in its efforts to control the current massive increase in medium to high risk bank lending and large increases in house and land prices.

Chinese companies have shown interest in several sectors

Chinese companies are preparing to invest in agri-business in Brazil, according to a report published Wednesday in Brazilian daily newspaper Estado de Sao Paulo.

The daily said that in April the China National Agricultural Development Group Corporation said it intended to buy land to produce soy and maize. In their initial contacts, the company’s negotiators showed interest in land in Central-West Brazil, particularly in the state of Goiás.

At the same time, representatives of the Chongqing Grain Group announced they planned to apply US$300 million in the acquisition of 100,000 hectares of land in the west of the state of Bahia, to produce soy for the Brazilian and Chinese markets.

A month later, Grupo Pallas International, made up of private investors as well as being part state-owned, revealed plans to buy between 200,000 and 250,000 hectares in the west of Bahia and possibly in the bush areas of Maranhão, Piauí and Tocantins, jointly known as Mapito.

Chinese companies have shown interest in several sectors, such as steel production, oil exploration, power distribution, mining and construction of the bullet train between Campinas, Sao Paulo and Rio de Janeiro.

Official estimates point to China investing up to US$12 billion in Brazil this year making it the biggest foreign direct investor in the country.

This influx of investment denotes a radical change in the way Chinese companies are approaching the Brazilian market as last year they invested just US$82 million and US$213 million between 2001 and 2009, according to figures from Brazil’s central bank.

With the economic recovery, Brazil has come out of the crisis stronger

Latin American stocks rose on Wednesday, boosted by solid earnings in Brazil, but a downbeat reading of the U.S. economy by the Federal Reserve cut into gains and spurred losses in Mexico and Chile.In Brazil the strong rates of economic growth have spurred optimism on second-quarter earnings, which are just getting under way.

“With the economic recovery, Brazil has come out of the crisis stronger. Brazilian companies are going to start showing those results now,” said Alvaro Bandeira, director with Agora brokerage in Sao Paulo.Brazil’s Bovespa index .BVSP gained 0.2 percent, led by a 4.51 percent jump in shares of bank Bradesco after its profits beat estimates, helped by growing credit demand and reduced delinquencies.

“We believe that Bradesco, given its extensive presence, is well positioned to benefit from the growth outlook we expect for the sector as a whole in 2010,” said Laura Schuch, a bank analyst at the Ativa brokerage in Rio de Janeiro.

Shares of mining giant Vale (VALE5.SA), the world’s largest producer of iron ore, added 1.31 percent before its earnings report on Thursday where net income at the company likely soared nearly five-fold.

Wireless operator Vivo (VIVO4.SA) jumped 3.95 percent after Portugal Telecom’s board approved the sale of its stake in the Brazilian company to Telefonica (TEF.MC). Vivo also posted better-than-expected second-quarter net income.
(Reuters)

In the meantime, the analysts’ average forecast for the benchmark Selic interest rate at the end of this year was reduced to 11.75% from 12%. Currently, the Selic is at 10.75%. For 2011, analysts maintained the Selic rate view at 11.75%.

Forecasts for the country’s 2010 gross domestic product growth were maintained at 7.2%. Estimates for 2011 were steady at 4.5%. Brazil’s GDP fell 0.2% last year. The average expectation for the debt/GDP ratio at the end of this year was increased slightly to 41% from 40.9%.

The forecast for the 2010 foreign-trade surplus was decreased to $15.41 billion from $16 billion. Analysts expect the current account deficit to rise to $48 billion from $47.4 billion by the end of this year.

Brazil’s real is expected to end this year at BRL1.80 to the U.S. dollar. On Friday, the real closed at BRL1.759.

by Rogerio Jelmayer, Dow Jones Newswires

"Things are going very quickly", said Lula

Brazilian President Luiz Inacio Lula da Silva signed on Monday a decree raising the level of indebtedness for host cities to ensure the completion of infrastructure works for 2014 World Cup and Rio de Janeiro 2016 Olympic Games.

During the ceremony to launch the decree, the president announced that 3.545 billion will be allocated to upgrade airports and ports in the twelve cities hosting the soccer tournament in 2014.

“Things are going very quickly,” said Lula, countering criticism of his government for delays in works, which he attributed to the “folly” of people who have no patience with the ritual required to put projects into practice.
Lula stressed that the project development stage is completed, as well as laws and measures necessary to enable state and local governments to raise funds for the completion of works.

Moreover, the president claimed that authorities in Sao Paulo, the richest state in Brazil, which is behind the work schedule, to accelerate the necessary measures.

“I honestly cannot imagine a World Cup in Brazil without counting on Sao Paulo as one of the corners where the athletes are going to play football. I am willing to participate in that conversation, I think the governor should have already called all involved to talk and find a solution, because the time is pressing, ” he said.

After the president’s speech, the Sports Minister Orlando Silva said that the government of Sao Paulo will meet on Thursday with representatives of Brazilian Football Confederation (CBF) and Sao Paulo Football Club (SPFC) to discuss a solution to the controversy over the stadium for the Cup in the state capital.

SPFC’s stadium was vetoed by the International Federation of Association Football (FIFA) and the alternative could be to build a new complex in the neighborhood of Pirituba.

"We will invest in the country what was not invested in 30 years"

Brazil’s President Luiz Inacio Lula da Silva said on the weekend that the country’s airports will be ready to answer the demand of the 2014 FIFA World Cup.

The Brazilian president, who met with South Africa’s President Jacob Zuma in Pretoria, said that any worries about Brazil’s infrastructure for the 2014 World Cup are unwarranted.”I think it is inopportune to be worried about the Brazilian infrastructure for the 2014 Cup,” he said. “Thanks to the Growth Acceleration Project (PAC), Brazil will invest some 624 million U. S. dollars. We will invest in the country what was not invested in 30 years.”

President Lula admitted that the transports infrastructure in Brazil needs improving, but assured that everything will be ready by the beginning of the tournament. According to him, the Cup will make people see Brazil with better eyes.

Farmers from Kenya have been increasing the amount of land they dedicate to plants known to be good sources of biofuel.

The Seattle Times has published a very interesting article saying that Brazil, the world’s leading ethanol exporter, will help Kenya produce biodiesel and improve its agriculture sector. According to the article, Kenya is an investment hub that Brazilian companies and entrepreneurs can use to seek business opportunities in the wider East African Community, a five-nation economic bloc of more than 125 million people, Brazil’s President Luis Inacio Lula da Silva said at a news conference with Kenyan President Mwai Kibaki.

Silva’s visit is the first by a Brazilian president to the East African nation. Silva and Kibaki did not give more details about how Brazil will help Kenya develop biodiesel or improve its agriculture. For several years, however, a growing number of Kenyan farmers have been increasing the amount of land they dedicate to plants known to be good sources of biofuel. The production of such fuel remains small scale in Kenya.

“Kenya is especially keen on exploiting Brazilian advances in the area of biodiesel technology. Brazil is a world leader in this field and Kenya stands to gain as we seek ways of becoming more efficient in our management of the energy sector,” Kibaki said.

Later at a luncheon in his honor, Silva said trade between Kenya and Brazil has increased six-fold between 2002 and 2009.

“Now is the time for the challenge to diversify exports from Kenya to Brazil and to stimulate Brazilian investments in Kenya. So that is why I came, followed by a Brazilian business delegation that are interested in establishing partnerships and identifying business opportunities,” Silva said.

He said Brazilian construction companies would like to bid to build roads, ports and hydro-electric power plants in Kenya. In recent years Kenya has invested in rehabilitating its dilapidated roads network and expanding it.

Earlier in the day, Kenyan Foreign Minister Moses Wetangula and his Brazilian counterpart, Celso Amorim, signed five agreements to act as a framework for future investments and assistance. The agreements include one that will allow Kenyan students join a university the Brazilian government will build in its northeastern state of Ceara to train 5,000 African and 5,000 Brazilian students in various fields.

Silva and a delegation of Brazilian Cabinet ministers, officials and businesspeople arrived in Kenya on Monday. They go to neighboring Tanzania later Tuesday and then to Zambia before ending their six-nation African tour in South Africa.

The Brazilian leader began his tour last week in Cape Verde, where he attended a meeting with the 15-nation Economic Community of West African States. He then visited Equatorial Guinea before arriving in Kenya.

By TOM MALITI

Associated Press Writer

Dilma Rousseff and Jose Serra

According to an article published in The Economist, Dilma Rousseff is cruising towards victory on the coat-tails of a popular president. But there is more at stake in October’s election than meets the eye

On July 6th the campaign for October’s general election formally kicks off. It will be the first presidential election since democracy was restored in the 1980s in which the name of Luiz Inácio Lula da Silva does not appear on the ballot. But Lula, Brazil’s president since 2003, is nevertheless the dominant figure in the campaign.

For the past 18 months he has put all his efforts into trying to get Dilma Rousseff, his former chief of staff, elected as his successor. She is not an obvious presidential candidate: an efficient though notoriously bad-tempered administrator, she only joined Lula’s Workers’ Party (PT) in 2001. She has never before stood for elected office. But several more senior figures in the PT were forced out of politics by a corruption scandal during Lula’s first term, and others have proved electoral flops.

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Fitch added that it does not expect any major changes in the country's economic policy after the presidential elections

World-renowned credit rating agency Fitch Ratings announced on Monday the confirmation of Brazil’s investment grade.

Fitch stated that Brazil’s Issuer Default Rating will be maintained at the BBB- level, the lowest investment grade granted by the agency. The country ceiling will remain at the BBB level, and the credit outlook was revised from stable to positive.

The outlook was reviewed due to Brazil’s economic performance and resilience in the face of the recession, which exceeded expectations, Fitch stated.

According to the agency, those aspects, together with Brazil’s “relatively prudent economic policies,” can help improve the country’s per capita income level and fiscal solvency ratio.

Fitch added that it does not expect any major changes in the country’s economic policy after the presidential elections, which are to take place in early October.

The agency expects the Brazilian economy to register a growth of 7percent this year, roughly the same projection made by the Brazilian financial institutions on Monday.

Fitch was the second of the world’s three main credit rating agencies to grant Brazil an investment grade, in May 2008, months before the escalation of the international financial crisis. Standard and Poor’s granted Brazil an investment grade in April 2008 and Moody’s, in September 2009.

Petrobras is working feverishly to develop the presalt region

Shareholders of Brazilian state-run energy giant Petroleo Brasileiro SA (PBR, PETR4.BR), or Petrobras, approved a capital increase Tuesday, clearing the way for what’s expected to be one of the world’s largest-ever share offers.

Shareholders granted the company’s request to increase capital by up to 150 billion Brazilian reals ($84.8 billion) via the sale of up to 3.2 billion common shares and 2.4 billion preferred shares.

Petrobras needs the cash raised from the share sale, which analysts have estimated could be valued at between $50 billion and $60 billion, to pay for the company’s investment plans and rights to produce 5 billion barrels of crude oil from government-held areas in the offshore presalt region.
Chief Executive Jose Sergio Gabrielli downplayed vocal minority shareholder opposition to the capital increase at the shareholders’ meeting, as well as the likelihood of possible lawsuits to block the proposed share sale, according to local news agency Estado.

“It’s par for the course that whomever can’t take part will be feeling slighted. But this process is absolutely transparent and within the rules,” Gabrielli was quoted by Estado as saying.

The planned share offer was expected to be completed by the end of July, but Petrobras officials were guarded about that possibility in conference calls with analysts on Tuesday. Petrobras’s Gabrielli said that the company would now wait for the country’s National Petroleum Agency to receive a certification of the government-held oil reserves before moving forward.

Petrobras has aimed to complete the share offer before summer vacations in the Northern Hemisphere affect market activity in the U.S. and Europe.

The shareholders’ approval followed the release Monday of Petrobras’s investment plans for 2010-14, which called for investments of $224 billion over the next five years.

Petrobras is working feverishly to develop the presalt region, where oil was discovered under a thick layer of salt off the coast of Sao Paulo and Rio de Janeiro states. The oil lies under more than 2,000 meters of water and a further 5,000 meters of sand, rock and a shifting layer of salt.

The federal oil company faces a stiff financial challenge to develop the ultra-deepwater fields. Petrobras needs to raise $58 billion from the proposed share offer and new debt issues to finance the investment plan, as well as an additional $38 billion to cover amortization expenses on current debt, Petrobras officials said.

Petrobras’s net debt-to-market capitalization was 32% at the end of the first quarter, dangerously close to the self-imposed 35% limit needed to comfortably maintain the company’s investment-grade credit rating.

After the share offer, Petrobras expects the company’s leverage to slide toward the lower end of the company’s 25%-to-35% target range–once again opening up global capital markets to the fresh bond issues.

The share offer was first announced last year as part of an overhaul of Brazil’s oil legislation proposed by President Luiz Inacio Lula da Silva. One of the proposals includes a complicated capitalization plan for Petrobras.

Under the plan, Petrobras was to receive the rights to explore and produce up to 5 billion barrels of crude oil from government-held areas. Petrobras would pay for the rights with new shares, with minority shareholders also accompanying the offer. The offer to minority shareholders was expected to generate at least $25 billion in fresh cash.
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By Jeff Fick, Dow Jones Newswires