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)

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"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.

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"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.

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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

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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.

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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

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More than one million jobs were created in Brazil last year

According to an article published on Herald staff journal, Brazil is one of the big boys now and its self-dependent economy is a powerhouse, not only regionally but globally, there’s no disputing that. Ever since former president Fernando Henrique Cardoso privatised companies such as Telebras between 1995 and 2002, he was laying valuable groundwork for current left-wing President Luiz Inácio da Silva who picked up where Cardoso left off so that Brazil could continue to develop its infrastructure and economy.

Deceptively self-reliant, just 10 percent of Brazil’s GDP comes from exports, and not just from commodities. More than one million jobs were created in Brazil last year, although a mere 0.2 percent of those were in the mining sector which is the country’s largest commodity-export sector.

And confidence is contagious. Speaking from Johannesburg on Wednesday, Brazil’s Tourism Minister Luiz Barretto Filho said: “We are on our way to being the world’s fifth-largest economy,” adding that the country is expecting around 500 million foreign tourists in 2014 when it hosts the World Cup.

“We hope to get between four percent and 4.5 percent of GDP (by 2014),” said Barretto Filho, referring to the World Cup. Ambitious? Perhaps, but what’s wrong with aiming high when your stock exchange is Latin America’s most important and the world’s third-largest, plus your national football side was 5/1 on to bring back the World Cup for a sixth time yesterday? (Incidentally, Argentina is 7/1 on, according to UK online gambling website Betfair, which provided both odds.)

In fact, Brazil, which saw 17.4 percent year-on-year industrial production growth in April 2010, has been in the economic limelight for some time. Nine years ago, the investment bank Goldman Sachs suggested Brazil’s economy, combined with those of Russia, India and China, could outperform the world’s current richest nations by 2050. This 2001 report referred to these four developing nations as BRICs, and although this informal group has never got so far as proposing free trade agreements as per Mercosur or the European Union, there is a definite feeling of a private members’ club between the four, which led to their first official summit in 2009 in Yekaterinburg, Russia.

Just this month, Goldman Sachs, which coined the BRICs acronym, released an updated report which confirmed not only BRICs’ importance in the global economy but also Brazil’s. “The last decade saw the BRICs make their mark on the global economic landscape. Over the past 10 years they have contributed over a third of world GDP growth, 36.3 percent, and grown from one-sixth of the world economy to almost a quarter (in purchasing power parity — PPP — terms). Looking forward to the coming decade, we expect this trend to continue and become even more pronounced,” said the bank. It added: “Brazil’s economy will be larger than Italy’s by 2020.”

So what exactly is Brazil’s position, which is the only one of these four nations that doesn’t have nuclear weapons, according to political-scientist Professor Luiz Alberto de Vianna Moniz Bandeira, within this tiny gang of powerful developing nations? In a Herald interview with the global investment research department at Goldman Sachs in Sao Paulo, the bank said the main issue contributing to the BRICs’ continued strength is the growth of the middle class as salaries increase.

“Russia started out advanced after the fall of communism but a continued harsh political framework has hindered its growth, as has its dependency on European commodities,” said the global investment research department in Sao Paulo.

“Although China has seen the most growth (within BRICs) in the past few years, with regards to incomes there, they are lower than in Latin America. Regardless, China’s story is still intact.”

And looking at Brazil, whose BN&FBovespa Stock Exchange saw equity outperformance of 294 percent from January 1, 2001 up to May 20 this year, its long-term outlook up to 2050 is just as positive as China’s, given Brazil’s performance when the global crisis hit.

“Although the late-2008 global credit freezes paralysed Brazilian credit spontaneously for a few months, when it became clear that the real Brazil/global linkages were weak, Brazilian banks and companies resumed business almost as if nothing had happened. When Brazil’s economy stabilised for the first time, that proved it was robust. With regards to the recent economic crisis, the feeling in Brazil is that if we can get through this, then we can get through anything.”

“Despite the high tax burden that Lula has imposed for a developing country which doesn’t invest much in itself, Brazil’s public accounts are in order, consumer and business confidence is at a record high and it is now a creditor rather than a debtor,” added the research department.

The latest Goldman Sachs report reiterated the view on the rise of the middle class. “In the coming decade, the more striking story will be the rise of the new BRICs middle class. In the last decade alone, the number of people with incomes greater than US$6,000 and less than US$30,000 has grown by hundreds of millions, and this number is set to rise even further in the next 10 years. Growth in the middle class will be led by China, where we expect the number of people entering the middle class to peak during this next decade. These trends imply an acceleration in demand potential that will affect the types of products the BRICs import: the import share of low value-added goods is likely to fall and imports of high value- added goods, such as cars, office equipment and technology, will rise.”

And Brazil may even take middle-class growth up an extra notch, according to Goldman Sachs. “The other BRICs (besides China and India and other emerging markets) will also see a rising middle class in the next decade, and should also see a rising “upper class” (incomes higher than US$30,000).”

Although a presidential election takes place this October, foreign investors are unlikely to be put off by either centre-left candidate, the ruling party’s Dilma Rousseff or PSDB’s José Serra, according to the bank. And with consumer and business confidence at a record high, who knows where the biggest boy of Latin America may end up. Watch this pace…

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Vale acquired for US$ 3.0 billion the direct and indirect stake of 58.6% in the equity capital of Fosfertil, which corresponds to 72.6% of the common shares and 51.4% of the preferred shares, from Bunge Fertilizantes S.A., Bunge Brasil Holdings B.V., Yara Brasil Fertilizantes S.A. (Yara), Fertilizantes Heringer S.A. (Heringer) and Fertilizantes do Paraná Ltda. (Fertipar) – equivalent to a price per share of US$12.0185. The remaining US$ 1.7 billion is attributable to the acquisition of a portfolio of Brazilian fertilizer assets owned by BPI, which includes phosphate rock mines and phosphates producing units and does not include retail/distribution operations.

Pursuant to Brazilian corporate law and capital markets regulations, Vale will launch a mandatory offer – to be filed with CVM, the Brazilian Securities Commission, in the short-term – to buy the 0.19% of the common shares held by the minority shareholders of Fosfertil for US$ 12.0185 per share, the same price paid to the other common shareholders of Fosfertil, as previously disclosed.

As announced on February 10, 2010, as part of the acquisition of Fosfertil, Vale holds an option contract with The Mosaic Company (Mosaic), which gives us the option to acquire Mosaic´s direct and indirect stakes in Fosfertil, corresponding to 27.27% of the common shares and 16.65% of the preferred shares and to 20.27% of the equity capital of Fosfertil, for US$ 1,029,811,129.77, at a price per share of US$ 12.0185. This transaction is expected to be concluded in the near future

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  that the Brazil the lowest unemployment rate in Brazil for the month of March since 1998, when it was 15.1%, even although unemployment in March rose to 13.7%, from 13% in February. The numbers are from a survey by the labor-union-linked Department of Socio-Economical Statistics and Studies (“DIEESE”), which took place in six metropolitan regions (São Paulo, Salvador, Belo Horizonte, Distrito Federal, Porto Alegre and Recife ).

The total number of jobless there is slightly over 2,760,000. DIEESE estimates the number of people holding jobs in those metropolitan regions at over 17,400,000. Between February and March, the DIEESE survey found that there was little variation in average take-home wages. Strong Output After a timid rise at the beginning of the year, the Brazilian industrial sector now shows strong growth.

According to a survey by the National Industrial Confederation (CNI), its production index rose from 49.2 in January and 50.8 in February to 62.9 in March. When the index is above 50 it indicates growth. Thus, the average production index for the first quarter was 55.5, the best since the third quarter of 2004.

A spokesperson for CNI says the numbers show that for all effects Brazil has come out of the Great Recession with flying colors. The percentage of installed capacity being used is now running at 74%. Just before the crisis, during the first quarter of 2008, it reached 75%. Confidence in the Brazilian industrial sector has remained steady (and high) during all of the first quarter. The CNI confidence index was 66.1 in March, compared to 66.2 in January.

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