Bank of America Merrill Lynch cut its 2020 Brazilian economic growth outlook to 1.9% from 2.2%, and JP Morgan to 1.8% from 1.9%. Economy Minister Paulo Guedes and other officials have consistently said the government’s economic reforms and record low interest rates will deliver growth this year comfortably above 2%, with Guedes confident of 2.5%. JP Morgan said investment growth this year will now be lower at 5.0%, while exports will fall 0.5% compared with an earlier forecast of 0.5% expansion.
Real’s relentless decline continued on Thursday, falling below 4.50 per dollar for the first time ever. The Brazilian currency ended trading at new closing low of 4.4750 per dollar, meaning it has depreciated by more than 10% in just two months. Brazil’s central bank dipped into the currency derivatives market on Thursday for the fourth time this month, selling $1 billion of swaps contracts following Wednesday’s $500 million sale to slow or even reverse the real’s fall.
Brazil’s state-controlled oil company Petrobras said it has started the sale process for its 51% stake in the gas unit Gaspetro and for its stakes in the Merluza and Lagosta oil fields in Brazil’s Santos basin, according to a securities filing. Gaspetro is a holding company owning stakes in 19 firms that operate in the Brazilian gas distribution business.
The General Price Index – Market (IGP-M) fell 0.04% in February compared to 0.52% in January, accumulating 6.82% in the last twelve months, the Getulio Vargas Foundation reported. The Broad Producer Price Index (IPA) reversed the trend and fell 0.19% in February, after advancing 0.50% in the previous month. The wholesale cost indicator accumulates an increase of 8.38% in 12 months. The Consumer Price Index (CPI) also slowed and increased 0.21%, from 0.52% in January, and accumulates 3.67% in 12 months.
A Brazilian government test has confirmed the first case of coronavirus in Latin America, after a Sao Paulo hospital flagged the possible infection of a 61-year-old who had visited Lombardy, in northern Italy. The diagnosis comes during Brazil’s carnival holiday, a peak time for domestic travel when millions of revellers throng major cities for boisterous street celebrations. Sao Paulo stock market, which has been closed since last week, is set to open at 1 p.m. local time. Brazilian shares in exchange-traded funds in New York have dropped nearly 6% this week.
The extended holiday is expected to generate R$8 billion ($2bn) billion in tourism-related activities this year, estimates the National Confederation of Goods, Services, and Tourism (CNC). If confirmed, the turnover represents a one percent real increase over the same period last year and the highest figure since 2015. According to the CNC, “the gradual rebound of economic activity”, low inflation and a stronger dollar against Brazilian real should favour a greater inflow of tourists.
Worries about the spread of coronavirus and its potential impact on the global economy pushed down the index for Brazilian shares in exchange-traded funds on the New York stock market on Tuesday. Around 5:20pm local time, iShares MSCI Brazil , an index fund, or ETF, for Brazilian stocks traded in New York, slipped 1.2% to 39.84 points, while the Dow Jones Brazil Titans 20 ADR, which combines the main Brazilian ADRs, fell 2% to 20,711.20 points. Trading at the Sao Paulo stock exchange is expected to resume at 1pm local time after being closed Monday and Tuesday for Brazil’s Carnival holiday.
After an arbitration hearing, around 21,000 workers at Brazil’s state-owned oil giant Petrobras (a third of total workforce) have ended a strike of nearly three weeks that left the firm scrambling to avoid a drop in production. Labor unions said they were protesting the closure of a fertiliser plant in the southern state of Parana, with around 1,000 total layoffs. Petrobras said the strike did not affect production thanks to the hiring of outsourced labour.
The crash in yesterday’s global markets took the spread of the 5-year Credit Default Swap (CDS) contract to Brazil, a measure closely accompanied by country risk, which was again traded at 100 points, according to data compiled by Markit.This morning, the CDS spread operated at 100 points, from 93 at the end of Friday, even at the lowest levels in more than ten years. The 7.3% increase is in line with that of other emerging markets, such as Mexico (7.1%), Colombia (7.8%) and Russia (7.0%).
The president of the Swiss bank UBS in Brazil, Sylvia Coutinho, estimates that Brazil “has the largest environmental assets on the planet” and conditions to assume a global role in “green finance.” Capital is looking for these environmental assets, as warned at the World Economic Forum in Davos, and I think the government took note of this message, so we must learn to monetise our environmental assets, she said.