Protest in #Rio #Brazil: “Military intervention is not a crime” via @tariqpanja UNBELIEVABLE.
Home » Posts tagged 'brazil' (Page 9)
Tag Archives: brazil
“No Recovery For You!” Brazil Officially Enters Recession, Goldman Calls Numbers “Disquieting”
“No Recovery For You!” Brazil Officially Enters Recession, Goldman Calls Numbers “Disquieting”
Well, you know what they say: when it rains it pours, especially when you’re the poster child for an epic emerging market unwind and you’re suffering through the worst stagflation in over a decade while trying to clean up the feces ahead of the summer Olympics.. or something.
Make no mistake, Brazil is in a tough spot.
Here’s a list of problems: 1) collapsing commodity prices, 2) the worst inflation-growth outcome in over a decade, 3) deficits on both the fiscal and current accounts, 4) street protests calling for the President to be sacked, 5) a plunging currency, 6) allegations of rampant government corruption. And we could go on.
On Friday, the latest quarterly GDP print shows the country sliding into recession (of course these determinations are always backward looking and just about every indicator one cares to observe seems to show that the economy is closer to depression than it is to the early stages of recession) as output contracted 1.9% in Q2. Here’s the summary from Barclays:
Q2 15 real GDP in Brazil surprised on the downside, contracting -1.9% q/q sa and compatible with a y/y print of -2.6%. This follows a downwardly revised -0.7% q/q sa Q1 real GDP print (previous: -0.2%), and also a flat real GDP print in Q4 14 (previous: 0.3% q/q sa). As a matter of fact, the past three quarters were revised to the downside, which now implies a strong negative carry-over for this year: if real GDP is flat in H2 15, the annual growth would be -2.3%.Relative to our forecast, household consumption, fixed-assets investments and imports all surprised on the downside. These components reflect the adverse conditions for domestic demand, as a reflection of higher inflation, interest rates, fall in income and weaker currency.
…click on the above link to read the rest of the article…
Why It Really All Comes Down To The Death Of The Petrodollar
Why It Really All Comes Down To The Death Of The Petrodollar
Last week, in the global currency war’s latest escalation, Kazakhstan instituted a free float for the tenge. The currency immediately plunged by some 25%.
The rationale behind the move was clear enough. The plunge in crude prices along with the relative weakness of the Russian ruble had severely strained Kazakhstan, which is central Asia’s largest crude exporter. As a quick look at a chart of the tenge’s effective exchange rate makes clear, the pressure had been mounting for quite a while and when China devalued the yuan earlier this month, the outlook for trade competitiveness worsened.
What might not be as clear (on the surface anyway) is how recent events in developing economy FX markets following the devaluation of the yuan stem from a seismic shift we began discussing late last year – namely, the death of the petrodollar system which has served to underwrite decades of dollar dominance and was, until recently, a fixture of the post-war global economic order.
In short, the world seems to have underestimated how structurally important collapsing crude prices are to global finance. For years, producers funnelled their dollar proceeds into USD assets providing a perpetual source of liquidity, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop. That all came to an abrupt, if quiet end last year when a confluence of economic (e.g. shale production) and geopolitical (e.g. squeeze the Russians) factors led the Saudis to, as we put it, Plaxico’d themselves and the US.
The ensuing plunge in crude meant that suddenly, the flow of petrodollars was set to dry up and FX reserves across commodity producing countries were poised to come under increased pressure. For the first time in decades, exported petrodollar capital turned negative.
…click on the above link to read the rest of the article…
Hundreds Of Thousands Take To The Streets In Brazil Demanding President’s Impeachment
Hundreds Of Thousands Take To The Streets In Brazil Demanding President’s Impeachment
Protests are underway in Brazil as hundreds of thousands take to the streets to call for the impeachment of President Dilma Rousseff. Here’s Bloomberg:
An estimated 25,000 protesters in Brasilia marched toward Congress, chanting against Rousseff and corruption, carried a long banner demanding “Impeachment Now.”Rouseff monitored proceedings from her official residence, due to meet with some of her cabinet in the afternoon, said Justice Minister Jose Eduardo Cardozo.
Background:
When the world’s foremost mainstream media outlets begin to run stories with titles like: “How to Impeach a Brazilian President: A Step-by-Step Guide“, you know your political career may be in trouble.
Brazil’s Dilma Rousseff – who recently became the country’s most unpopular democratically elected president since a military dictatorship ended in 1985, with an approval rating of just 8% – faces a litany of problems, not the least of which are accusations around fabricated fiscal account data and corruption at Petrobras where she was chairwoman from 2003 to 2010.
But beyond that, Brazil is mired in stagflation and, as Morgan Stanley recently noted, is at the center of the global EM unwind triggered by falling commodity prices, slowing demand from China, and an imminent Fed rate hike. Underscoring the depth of the economic malaise is the following graphic from Goldman which shows that when it comes to inflation-growth outcomes, it doesn’t get much worse than what Brazil suffered through in Q2.
…click on the above link to read the rest of the article…
The Crisis Is Spreading: China, Australia, Brazil, Canada, Sweden…
The Crisis Is Spreading: China, Australia, Brazil, Canada, Sweden…
Earlier today, we posted an excerpt from IceCap Asset Management’s latest letter to investors focusing on the farce that is the Greek bailout #3, which can be summarized simply by the following table…
… and Keith Dicker’s assessment which was that “for Greece, it’s mathematically impossible to repay its debt” and that the Greek “economy continues to plummet to deeper depths and is now -33% less than where it was in 2008.”
But the truth is that for all the endless drama, Dicker continues, “the Greek debt crisis isn’t THE crisis. Rather it is simply a symptom of a much larger global debt crisis.”
The problem is that the “larger global debt crisis” is finally metastasizing and spreading to more places, all of which are large enough that they cannot be simply swept under the rug, like Greece.
* * *
IceCap’s Keith Dicker continues:
We’ve written before that governments all around the world have borrowed too much money and the weight of these debts are choking economic growth.
And to make matters worse – these very same governments and their central banks have implemented various plans that have only made matters worse.
Our view has not changed – the global debt crisis has escalated to a point where the government bond bubble has inflated itself to become the mother of all bubbles. It’s going to burst, and when it does it wont be pretty.
Further evidence to support our view is as follows:
Canada – the collapse in oil and commodity markets has pushed the country into recession and the Canadian Dollar to decline to levels lower than that reached during the 2008 crisis.
Oil dependent provinces Alberta and Newfoundland remain in deep denial. Since everyone in these provinces have only ever experienced a booming oil market, many naively believe things will bounce back – and quickly.
Meanwhile, both Toronto and Vancouver housing markets also remain in denial as they continue to go gangbusters. Buyers today are likely buying at all-time highs.
…click on the above link to read the rest of the article…
Malaysia Meltdown: Asian Currency Crisis 2.0 Sends Ringgit, Stocks, Bonds Crashing
Malaysia Meltdown: Asian Currency Crisis 2.0 Sends Ringgit, Stocks, Bonds Crashing
When China went the “nuclear” (to quote SocGen) devaluation route earlier this week in a last ditch effort to rescue its export-driven economy from the perils of an increasingly painful dollar peg, everyone knew things were about to get a whole lot worse for an EM currency basket that was already reeling from plunging commodity prices, slumping Chinese demand, and the threat of an imminent Fed hike.
Sure enough, EM currencies from Brazil to South Korea plunged, and monetary authorities – unsure whether to play down the move or cry foul – scrambled to respond.
With some Asian currencies already falling to levels last seen 17 years ago, some analysts fear that an Asian Currency Crisis 2.0 may be just around the corner.
That rather dire prediction may have been validated on Friday when Malaysia’s ringgit registered its largest one-day loss in almost two decades.
As FT notes, “sentiment towards Malaysia has been damped by a range of factors including sharp falls in global energy prices since the end of June. Malaysia is a major exporter of both oil and natural gas, with crude accounting for almost a third of government revenue.” The central bank meanwhile, “has opted to step back from intervening in the market in response to the falling renminbi, unleashing pent-up downward pressure on the ringgit.” That, apparently, marks a notable change in policy. “The most immediate challenge is the limited scope of Malaysia’s central bank to step in,” WSJ says, adding that “for weeks, it tried to stem the currency’s slide, digging into its foreign-exchange reserves to prop up the ringgit and warning banks from aggressively trading against its currency.”
Surveying the damage, here’s the one-day:
And the one week:
And the one month:
…click on the above link to read the rest of the article…
Emerging Market Currencies To Crash 30-50%, Jen Says
Emerging Market Currencies To Crash 30-50%, Jen Says
Less than 24 hours ago, we argued that although it might have seemed as though Brazil hit rock bottom in Q2 when it suffered through the worst inflation-growth mix in over a decade, things were likely to get worse still.
The country, which is also coping with twin deficits and a terribly fractious political environment, is at the center of what Morgan Stanley recently called “a triple unwind of EM credit, China’s leverage, and US monetary easing” and now that its most critical trading partner has officially entered the global currency war, all roads lead to further devaluation of the faltering BRL.
And it’s not just the BRL. As Bloomberg reports, former IMF economist Stephen Jen (who called the 1997 Asian crisis while at Morgan Stanley) thinks EM currencies could fall by an average of 30% going forward on the back of the PBoC’s move to devalue the yuan. Here’s more:
[The] devaluation of the yuan risks a new round of competitive easing that may send currencies from Brazil’s real to Indonesia’s rupiah tumbling by an average 30 percent to 50 percent in the next nine months, according to investor and former International Monetary Fund economist Stephen Jen.
Volatility measures were already signaling rising distress in emerging markets even before China’s shock move. An index of anticipated price swings climbed above a rich-world gauge at the end of July, reversing the trend seen for most of the past six months.
“If this is the beginning of a new phase in Beijing’s currency policy, it would be the biggest development in the currency world this year,” said Jen, founder of London-based hedge fund SLJ Macro Partners LLP. “The emerging-market currency weakening trend is now going global.”
Latin America is a particular concern because of the region’s high levels of corporate debt, said Jen
…click on the above link to read the rest of the article…
This Is What Global Currency War Looks Like: A Complete History Of Recent FX Interventions
This Is What Global Currency War Looks Like: A Complete History Of Recent FX Interventions
After the dramatic collapse in the SNB’s defense of the Swiss Franc peg to the Euro, there was a period of relative FX peace in which few if any central banks engaged in outright currency intervention (aside from the countless rate cuts so far in 2015 in response to the soaring strength of the USD, which has risen dramatically over the past year for all the wrong reasons). Then China last night reminded us what happens when in a centrally-planned world one or more markets take too great advantage of relative FX differentials, in this case Japan, whose Yen plunged from USDJPY 80 to 125, and the Euro, which tumbled from EURUSD 1.40 to just above parity.
Now, it’s China’s turn.
But as we pointed out before, FX interventions never take place in a vacuum, and especially during periods of rising dollar strength, when the entire FX world, and especially exporters and mercantilists, go berserk.
Furthermore as Stone McCarthy notes, “this is the sort of “international development” that the Fed will need to keep an eye on and assess as conditions align for the start of policy normalization.” The reason is simple: what China just did could make a rate hike impossible as multinational US corporations will be slammed with a double whammy of soaring dollar and sliding CNY, making US exports that much tougher. And as we won’t tire of repeating, the Fed can not print trade.
And just to help remind readers of what happens when the entire world engages in wholesale currency war, here is a complete list of all the recent FX interventions, courtesy of Stone McCarthy.
Summary of Recent FX Interventions:
The last period of any significant Fed interventions in foreign exchange markets was during 1994-1995 when the dollar reached all time lows against what were then the benchmark currencies of the Japanese yen and German deutsche mark, and the period of the Mexican Peso Crisis. After that, it was acting to defend the value of the yen and new-minted euro.
…click on the above link to read the rest of the article…
The Seventh-Largest Economy in the World Spirals Down
The Seventh-Largest Economy in the World Spirals Down
HSBC, which knows a thing or two about the world, and about Brazil, is bailing out of Brazil.
It’s unloading its “entire business in Brazil,” it said this week, including retail banking and insurance. It will hand its long list of wealthy clients and over 21,000 employees to Bradesco, one of the largest private banks in Brazil, for $5.2 billion. Too much? Bradesco’s stock has since plunged over 9%.
Once the deal gets regulatory approval and closes, HSBC is out of Brazil. “The transaction represents a significant step in the execution of the actions announced during the Investor Update on 9 June 2015,” it said. After that update, Reuters had described HSBC’s motivations with these choice words:
For shareholders, betting on Brazil was risky as lenders grapple with tax hikes, weak credit demand, rising defaults, and the impact of what looks likely to be the country’s worst recession in over two decades.
The seventh largest economy in the world in 2014, according to the World Bank, is spiraling down, with private sector output, as Markit put it, falling at the “sharpest pace since March 2009.”
This is how Markit titled its Brazil Services PMI report on Wednesday: “Service sector activity drops at joint-fastest rate in survey history.”
The index hit 39.1 in July (50 is the dividing line between contraction and expansion), the fifth month in a row of contraction, with all sub-sectors in the survey “registering substantial falls in business activity.”
To add to the toxic mix, costs soared, with the rate of increase reaching an 81-month high, third fasted in survey history, due to “inflationary pressures, exchange rate factors, and client fee adjustment.” No green shoots in the immediate future: new orders fell for the fifth month in a row. The “deteriorating operating environment” caused the pace of job losses to accelerate “to a survey record.”
…click on the above link to read the rest of the article…
The South American Financial Crisis Of 2015
The South American Financial Crisis Of 2015
Most nations in South America are either already experiencing an economic recession or are right on the verge of one. In general, South American economies are very heavily dependent on exports, and right now they are being absolutely shredded by the twin blades of a commodity price collapse and a skyrocketing U.S. dollar. During the boom times in South America, governments and businesses loaded up on tremendous amounts of debt. Since much of that debt was denominated in U.S. dollars, South American borrowers are now finding that it takes much more of their own local currencies to service and pay back those debts. At the same time, there is much less demand for commodities being produced by South American nations in the international marketplace. As a result, South America is heading into a full-blown financial crisis which will cause years of pain for the entire continent.
If you know your financial history, then you know that we have seen this exact same scenario play out before in various parts of the world. The following comes from a recent CNN article…
The dollar’s gains should make history nerds shake in their boots. Its rally in the early 1980s helped trigger Latin America’s debt crisis. Fifteen years later, the greenback surged quickly again, causing Southeast Asian economies, such as Thailand, to collapse after a run on the banks ensued.
In particular, what is going on right now is so similar to what took place back in the early 1980s. At that time, Latin American governments were swimming in debt, the U.S. dollar was surging and commodity prices were falling. The conditions were perfect for a debt crisis in Latin America, and that is precisely what happened…
…click on the above link to read the rest of the article…
The Rise Of The Yuan Continues: LME To Accept Renminbi As Collateral
The Rise Of The Yuan Continues: LME To Accept Renminbi As Collateral
As far-fetched as the notion may be to those who are wedded – by choice, by misguided beliefs, or by virtue of being completely beholden to the perpetuation of the status quo – to idea that the dollar will forever retain its status as the world’s reserve currency, the yuan is set to play a critical role in global finance, investment, and trade going forward.
We’ve long argued that the BRICS bank, the AIIB, and to an even greater extent, the Silk Road Fund, will help to usher in a new era of yuan hegemony in international investment and trade. A number of recent developments support this, including Beijing’s push for the renminbi to play an outsized role in loans doled out through the AIIB, the denomination of loans from the BRICS bank in yuan, and China’s aggressive investment in Pakistan and Brazil via the Silk Road initiative (here and here).
As for financial markets, China recently confirmed the impending launch of a yuan denominated gold fix which conveniently dovetailed with the LBMA’s acceptance of the first Chinese banks to participate in the twice-daily auction that determines London gold prices.
Now, in the latest sign of yuan proliferation and penetration, the renminbi will be accepted as collateral by the LME along with the dollar, the euro, the pound, and the yen.
Here’s WSJ with more:
China’s domestic stock market may be in turmoil but the country’s currency, known as the yuan or renminbi, is making a seemingly relentless push deeper into the global financial system.The latest step: the London Metal Exchange, the world’s largest venue for trading metals where $15 trillion of metals was traded last year, is set to accept yuan as collateral for banks and brokers that trade on its platform.
…click on the above link to read the rest of the article…
Deflation Is Winning – Beware!
Deflation Is Winning – Beware!
Expect the ride to get even rougher
Deflation is back on the front burner and it’s going to destroy all of the careful central planning and related market manipulation of the past 6 years.
Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. Tanking commodity prices are confirming that idea.
Whole groups of enterprises involved in mining and energy are about to be destroyed. And the commodity-heavy nations of Canada, Australia and Brazil are in for a very rough ride.
Whether the central banks can keep all of their carefully-propped equity and bond markets elevated throughout the next part of the cycle remains to be seen. We know they will try very hard. They certainly are increasingly willing to use any all tools at their disposal to keep the status quo going for as long as possible.
Whether it’s the People’s Bank of China stepping in to the market to buy 10% stakes in major Chinese corporations in a matter of weeks, the Bank Of Japan becoming the majority owner of key ETFs in the Japanese markets, or the Swiss National Bank purchasing $100 billion of various global equities, we see the same desperation. Equity prices are being propped, jammed and extended higher and higher without regard to risk or repurcussions.
It makes us wonder: Why haven’t humans ever thought to print their way to prosperity before?
Well, that’s the problem. They have.
And it has always ended up disastrously. History shows that the closest thing that economics has to an inviolable law is: There’s no such thing as a free lunch.
Sadly, all of our decision-makers are trying their hardest to ignore that truth.
First, The Fall….
So how will all of this progress from here?
We’ve always liked the Ka-Poom! theory by Erik Janzen which we explained previously like this:
…click on the above link to read the rest of the article…
Putin Leads BRICS Uprising
Putin Leads BRICS Uprising
There’s been a virtual blackout of news from this year’s seventh annual BRICS summit in Ufa, Russia. None of the mainstream media organizations are covering the meetings or making any attempt to explain what’s going on. As a result, the American people remain largely in the dark about a powerful coalition of nations that are putting in place an alternate system that will greatly reduce US influence in the world and end the current era of superpower rule.
Let’s cut to the chase: Leaders of the BRICS (Brazil, Russia, India, China and South Africa) realize that global security cannot be entrusted to a country that sees war as a acceptable means for achieving its geopolitical objectives. They also realize that they won’t be able to achieve financial stability as long as Washington dictates the rules, issues the de facto “international” currency, and controls the main levers of global financial power. This is why the BRICS have decided to chart a different course, to gradually break free from the existing Bretton Woods system, and to create parallel system that better serves their own interests. Logically, they have focused on the foundation blocks which support the current US-led system, that is, the institutions from which the United States derives its extraordinary power; the dollar, the US Treasury market, and the IMF. Replace these, the thinking goes, and the indispensable nation becomes just another country struggling to get by. This is from the Asia Times:
“Leaders of the BRICS… launched the New Development Bank, which has taken three years of negotiations to bring to fruition. With about $50 billion in starting capital, the bank is expected to start issuing debt to fund infrastructure projects next year. They also launched a foreign-exchange currency fund of $100 billion.
…click on the above link to read the rest of the article…
NSA’s Top Brazilian Political and Financial Targets Revealed by New Wikileaks Disclosure
Top secret data from the National Security Agency, shared with The Intercept by WikiLeaks, reveals that the U.S. spy agency targeted the cellphones and other communications devices of more than a dozen top Brazilian political and financial officials, including the country’s president Dilma Rousseff, whose presidential plane’s telephone was on the list. President Rousseff just yesterday returned to Brazil after a trip to the U.S. that included a meeting with President Obama, a visit she had delayed for almost two years in anger over prior revelations of NSA spying on Brazil.
That Rousseff’s personal cell phone was successfully targeted by NSA spying was previously reported in 2013 by Fantastico, a program on the Brazilian television network Globo Rede. That revelation – along with others exposing NSA mass surveillance on hundreds of millions of Brazilians, and the targeting of the country’s state-owned oil company Petrobras and its Ministry of Mines and Energy – caused a major rupture inrelations between the two nations. But Rouseff is now suffering from severe domestic weakness as a result of various scandals and a weak economy, and apparently could no longer resist the perceived benefits of a high-profile state visit to Washington.
But these new revelations extend far beyond the prior ones and are likely to reinvigorate tensions. Beyond Rousseff, the new NSA target list includes some of Brazil’s most important political and financial figures, such as the Finance Ministry’s Executive Secretary Nelson Barbosa; Luiz Awazu Pereira da Silva, a top official with Brazil’s Central Bank; Luiz Eduardo Melin de Carvalho e Silva, former Chief of Staff to the Finance Minister; the Foreign Affairs Ministry’s chief of economics and finance, Luis Antônio Balduíno Carneiro; former Foreign Affairs Minister and Ambassador to the U.S. Luiz Alberto Figueiredo Machado; and Antonio Palocci, who formerly served as both Dilma’s Chief of Staff and Finance Minister under former president Luiz Inácio Lula da Silva.
…click on the above link to read the rest of the article…
There’s Something Wrong With The World Today and It’s 1995
There’s Something Wrong With The World Today and It’s 1995
There weren’t any surprises in the “final” GDP update for Q1. Going back to -0.2%, the same interpretations still apply, especially and including the inventory contribution. Economists and policymakers want to talk particularly about how Q1 is prone to “residual seasonality” but that is missing the bigger part of the problem. Whether Q1 was -0.2% or +2% doesn’t really matter, as what truly makes this a dangerous economic situation is that Q1 and all the prior quarters were not a steady +4%.
To listen to economists today is to suggest that such an expectation amounts to wishful thinking, and that such “normal” growth is no longer. That sentiment may apply, but only to the narrow manner in which orthodox economics can integrate real world factors. In other words, “they” accept that there is something wrong but cannot answer the relevant and primary question as to what that might be.
This problem is obvious in every economic account, including GDP. Using year-over-year figures to harmonize among other economic systems, the lack of growth is striking post-crisis – made all the more so by the size of the huge hole left in the wake of the Great Recession itself. That means, even by this count, the opportunity cost of this non-recovery is severely understated.
I picked 1995 as a starting point for a reason, which I’ll get back to below. Suffice to say, in isolating only the growth periods of each economic cycle the current version is by comparison about half that of the late 1990’s. The middle cycle, the housing bubble age, shows what is plainly a transition from the first to the third. The primary opportunity cost is not simply the difference between them, but rather far more importantly the compounding nature of time. In other words, the longer these deficiencies drag the more costly in very real economic distortions that cannot be measured.
…click on the above link to read the rest of the article…
“Brazil Just Getting Worse and Worse”
“Brazil Just Getting Worse and Worse”
The “B” in the falling BRICS…
Brazil is in a tough spot. Led by weak investment and plummeting confidence, growth, after slowing markedly since mid-2013, came to a virtual halt in 2014. This largely reflects the impact of diminished competitiveness, the erosion of policy credibility, owing to a persistent deterioration of fiscal outcomes and above-target inflation, and a worsening of external conditions for the country.
Risks to the outlook are significantly to the downside, and include adverse ramifications from the ongoing corruption probe concerning Petrobras, the possibility that fiscal policy goals may not be fully met, and energy and water rationing.
External downside risks emanate from a tightening of global financial conditions, geo-political tensions, and contagion from adverse developments in other emerging economies.
These risks could conflate if they were to combine with domestic policy shortfalls, and would threaten macro and financial stability.
The phrase, “threaten macro and financial stability,” is official-speak and central-banker jargon for a resounding economic and financial crash. It’s Brazil’s doomsday scenario.
This was written not by some doom-and-gloomer, but by the IMF. It how its report on Brazil starts out.
The report never mentioned “austerity,” the classic IMF prescription to make sure the teetering country’s sacred bondholders – mostly financial institutions – don’t end up holding the bag. But “austerity” has become object of derision. So the report bandies about the exact synonym, “fiscal consolidation,” after initiating it promisingly:
Fiscal consolidation should proceed without delay along the announced lines, while monetary policy should remain tight to bring inflation to target.
State-owned Petrobras, the country’s largest company, the once shining knight and in the once most promising industry, has been torn apart by corruption allegations that go all the way up the political ladder. And things have essentially ground to a halt.
…click on the above link to read the rest of the article…
