Interest Rates challenged by President

Brazil’s president has taken another step forwards in her attempts to encourage interest rate reductions. This is clearly an important issue, not just for all who invest in Brazil but anyone who just lives there too!

Brazilian news recently reported a set of meetings with her economic team by the country’s president, Dilma Rousseff. She has again emphasised that in her view there’s no need for the cost of loans in the Country to remain so high. This is particularly puzzling, she feels, as the Selic rate (basic interest level) set by Brazil’s Central Bank (although still in double figures, 10.5%) is slowly but surely dropping.

That ‘benchmark rate has gradually been edging downwards in recent times, by cautious half-a–percent steps every time and the President wants to see much more progress. After all, the vast majority of Brazil’s main competitors throughout the world have much lower basic rates.

Also of great concern to Dilma and her team is the difference between the two main kinds of interest. There is one for banks to lend out money and one paid by the banks themselves to raise their cash in the first place. The technical term for the gap between the two is ‘the spread’.

There are a great many possible measures that could be taken to reduce this further. Indeed, the eventual package will be of great interest (no pun intended!) to anyone who borrows money. This includes literally millions of newly middle-class people who for the first time ever are able to obtain (and afford) mortgages. These enable them to buy their dream homes via the ground-breaking (in more ways than one!) new affordable housing scheme Minha Casa Minha Vida

President Dilma Rousseff visits huge North East development

Those who are interested in the near-revolutionary affordable homes scheme ' Minha Casa Minha Vida ' naturally keep an eye on housing projects of this type in the whole country. But for many, the North East of Brazil in particular provides useful insights into how such approaches can best work. Indeed, they indicate infrastructure developments needed to allow them to work at all. A case in point (obviously among others) is the Arco Iris programme of construction at Natal.


However, taking a wider view, it would be hard to exagerrate the importance of two interconnected things. These are reliable water supplies for the people on the one hand and good transport connections on the other.

On Wednesday this week President Dilma Rousseff started an important ‘tour of inspection’ visit to a massive infrastructure and environmental project in the Region.

It is the Sao Francisco River irrigation and water-supply scheme, designed to provide secure supplies to a huge area of nearly 400 towns and cities (plus their surroundings) comprising twelve million people.
It includes a canal, pumping stations, aquaducts and reservoirs plus of course linking conduits of various sizes.

A parallel and connected endeavour is the Transnordestina railway project of over 1700 km altogether. This is intended to link inland areas to the Atlantic ports of Pecem and Suape.

The whole approach takes in all or part of the states of Ceara, Pernambuco, Paraiba and Rio Grande and the work (parts of which have unfotunately over-run itheir target date) will cost a great deal of money ; estimated and expected totals of over seven billion $R are quoted.

However, the Brazilians expect that the development and improvement will be well worth the cost and will pay dividends for local and international investment institutions.

UK newspaper the Financial Times urges Brazil to be more choosy

The influential UK newspaper the Financial Times (known almost universally by its initials ‘F.T.’) published some ‘advice’ for Brazil this week.

While acknowledging the advances made by the country in recent years, the paper, via its Sao Paolo correspondent Joe Leahy, urges the BRIC giant to be more selective about the countries it deals with.


This is especially important now, he thinks, that the Country is developing so fast in so many ways.

Sometimes countries have to pick sides and always should try to act on principle more than expediency. Brazil does sometimes act in this way (as with its criticism of Iranian ‘stoning’ executions) but is unfortunately often more ambivalent.

A lot of the gist of the article seems inspired by the recent visit to Cuba of President Dilma Rousseff and what many see as her soft-pedalling in Havana on the human rights issue in the island nation. It is also focused largely on the Cuban regime-critical internet blogger, Yoani Sanchez, someone who is decidedly not a popular figure in government circles there!

Mr.Leahy analyses that Brazil is leaving the so-called Third World and is emerging as a global power (after all, the country is now in sixth place in terms of national GDP, having recently overtaken the United Kingdom). In this situation her international attitudes will have a profound effect on many things, not least the inward flow of international investment which is so vital to national prosperity
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This all means the country’s government and diplomats should be more discerning about which side of the fence, or indeed multiple fences, they should aim to be on.

Prince Harry to Visit Brazil

The British Queen’s grandson Prince Harry will visit Brazil on her behalf a little later this year. Most of his journey to the Americas then will take in the Commonwealth territories of Jamaica, Belize and the Bahamas. This is because of the obvious interest in these countries of Queen Elizabeth’s diamond jubilee celebrations this year.

With sixty years on the throne, she is now the second-longest reigning British monarch and is only a few years away from exceeding Queen Victoria’s record. However, Prince Harry’s travels will culminate in Brazil,the leading South American nation, which is of such economic importance these days to Britain.

Brazilian investment news these days includes an interesting new fact. It is that the UK is now Brazil’s fourth-largest provider of overseas international investment, a fact emphasised by Foreign Secretary William Hague during his visit last month.

The Prince (second son of the Prince of Wales, Charles and the tragic ‘Lady Di’) will pack-in a number of very different events in Brazil. These will include a game of volleyball on a beach (which one is still a closely-guarded secret), meetings with students and ordinary citizens and conferences with government officials. Another focal point will be exploring co-operation options regarding the Olympics ; Britain is hosting them this year and Brazil next time, in 2016.

The imminent timing of Harry’s visit is probably not coincidental in another sense, as he and his team will probably have considerable ‘soothing’ to do. After all, his elder brother, Prince William, will shortly be on military deployment in the Falkland Islands. This is controversial (to say the least) in Argentina, but also her neighbours, Brazil and Uruguay

CONCERN ABOUT RIO +20

It’s only about five months until the important environmental conference ‘Rio +20’ takes place in the Brazilian city of the same name. The international gathering will be held under the auspices of the United Nations and is intended as a follow up to the famous UNCED (United Nations Conference on Environment and Development) in 1992 in Rio de Janeiro (hence the name ‘Rio plus twenty’).

It will also be the tenth anniversary of the subsequent WSSD (the World Summit in 2002 on Sustainable Development) in South Africa. This latest Rio conference, in June this year, is of course again being hosted and organised by the Brazilian government who earlier this month issued a controversial draft agenda for the event.

Already concerns are being expressed in some quarters about a perceived lack of ‘hard focus’. This is regarding the specifics proposed by the Brazilians, made public on the last day of January.
The overall themes of the conference ( and this is the crux of the unease) are supposed to be based on developing a green economy in the context of sustainable development and poverty eradication and also the institutional frameworks necessary in the first place for that sustainable development.

The main foreign criticisms of the twenty-page draft agenda seem to centre on one main area. That is the perception by some that several of the proposals to benefit international social and economic progress would actually detract from the environmental objectives. Others disagree of course.

The two sides of this question will obviously have considerable thrashing-out to do before and after the Conference, if indeed it is to end up being useful and/or successful.

Whatever the outcome, tackling climatic and environmental issues clearly has great relevance worldwide but also for those who care about Brazil’s long-term welfare in particular. The economy will be affected by decisions made and that will have a clear impact on everything from international investment to domestic housing policy.

Too many imports

There are quite a number of Brazilian ‘good news’ stories these days, regarding the country’s economy. However, an evolving modern society like theirs is complex. In recent times there have been a certain amount of ‘furrowed brows’ in this leading BRIC nation about the balance between imports and exports. In short, there are too many of the former, at least according to some commentators.

But what about the actual statistics ? Well, output from domestic productive industry only grew by a tiny amount ( less than half of one percent) last year. This was despite the surge in demand from the internal market for goods of all kinds. The shortfall can only be made up by imports of course. All this has a definite effect on international investment in Brazil.

Another fact, this one pointed out by  the Centre for Industrial Economics and Technology at UNICAMP (university of Campinas) is that while Brazil’s GDP has grown by 16% in the last four years, the value of industrial production only managed a quarter of that figure.

Professor Celio at the Centre explained that high taxation, costs of energy and services and of course the dollar exchange rate all tend to work against international competitiveness for Brazilian industry at present.
While unemployment in Brazil is thankfully very low at present, in the long term the import/export situation needs to be improved or the situation will worsen. With fewer people working and earning, fewer of them will be able to afford to buy domestic products.These obviously include either consumer goods or indeed homes of their own, such as those avalable via the Minha Casa, Minha Vida scheme.

FACEBOOK PULLS AHEAD IN BRAZIL

An interesting ‘technological’ item of Brazilian news today. The social network site Facebook has for the first time pulled ahead of its nearest rival to become the most popular in the country. This has recently been announced by ‘comScore’, a respected statistics firm.

It seems that the former favourite, Orkut (provided by Google) has now slipped slightly below Mark Zuckerberg’s site. The most recent figures, for December, indicate that Orkut attracted the still hugely impressive total of 34.4 million unique visitors while being overtaken by Facebook’s 36.1 M in the same month.

Of course, many in the online community are keeping their Orkut accounts while also signing-up for Facebook ; it’s certainly not a question of ‘either/or’. Nonetheless, the surge towards the latter site has been particularly remarkable over the last year, when Facebook’s numbers of visitors have nearly tripled. Orkut has increased only very slightly, by about five per cent.

Compared with other countries, Facebook usage in Brazil has apparently moved the country into the top four. It’s now the case that the South American giant is in this respect only exceeded by (in order) the United States, India and Indonesia.

Commenting on the recent Facebook boom in Brazil, Alex Banks, comScore’s MD in Brazil remarked that the nation has always been oriented towards such sites but previously usage favoured those provided by other organizations. All that is now changing, however.

It’s also interesting to note the position of other ‘players’ in the market. The number three position seems now to be held by Windows Live Profile (up by one-eighth over the last year) now on 13.3 M visitors, with ‘flavour of the month’ Twitter now scoring 12.5 million, a surge of over forty percent in the last twelve months.

The growth of these popular communications systems have immense implications for business in the country as well as personal contacts.

For those interested in domestic or international investment their potential is enormous.