Brazil’s Economy Grew 0.4% in Quarter, Boosted by Agriculture

Brazil’s economic expansion continued in the first quarter as the country’s vital agricultural sector expanded rapidly from the previous three-month period.

Gross domestic product grew a seasonally adjusted 0.4% in the first quarter from the last three months of 2017, and expanded 1.2% from the same period a year earlier, Brazil’s statistics agency said Wednesday.

Brazil’s economy suffered its worst recession on record during 2015 and 2016, and began a recovery at the start of last year, eventually expanding 1% during 2017.

The agricultural sector grew 1.4% in the first quarter from the last three months of 2017, while contracting 2.6% from the same period a year earlier. Industry grew 0.1% in the quarter and 1.6% from a year earlier, while investment increased 0.6% in the quarter and 3.5% from a year earlier. Services expanded 0.1% in the quarter and 1.5% from a year earlier.

Household spending increased 0.5% in the quarter and 2.8% from the previous year. Government spending shrank 0.4% from the fourth quarter and decreased 0.8% compared with a year earlier.

Source: MarketWatch

Brazil watchdog lays out plan to raise competition in fuel market

Brazil’s antitrust regulator on Tuesday laid out a plan to increase competition in the fuels market, which could lower prices in the medium term after a spike that sparked a week-long strike by truckers which roiled Latin America’s largest economy.

In a study, the economic department of the Cade regulator and its technical body laid out nine measures that it says could boost competition in a sector often accused of collusion.

The proposal includes changes to the tax code and the regulatory framework, such as lifting a ban on direct sales of ethanol from producers to gasoline stations, allowing refineries and distributors to own gas stations and distributors to import fuels.
Cade and Brazil’s oil regulator ANP will set up a working group this week, comprising three representatives from each watchdog, to assess the implementation of the nine measures.

The plan should decrease local fuel prices in the medium term, the study said, in effect providing a new response to growing calls for government measures to offset rising global prices.

The government on Sunday agreed to introduce fuel subsidies and tax cuts as striking truckers demanded. But so far, officials have resisted demands to change state-controlled oil company Petróleo Brasileiro SA’s pricing policy that takes global prices as a benchmark.

Cade’s board will meet later on Tuesday to discuss potential actions related to the fuel crisis.
Source: Reuters

Brazil truckers’ mega-strike sees slight easing

A mega-strike by Brazilian truck drivers furious over high fuel costs eased slightly Tuesday after nine days that paralyzed transport across Latin America’s biggest economy and rattled the unpopular government.

With fewer roadblocks by truckers and an increase in the flow of fuel from refineries, buses and goods vehicles slowly started to get back on the road.

“The situation is improving,” the head of the National Oil Agency, Aurelio Amaral, was quoted as saying on G1 news site.

Rio de Janeiro, where almost all gas stations have been shut for several days, saw some fuel deliveries. A column of 300 food trucks also made it into the city, where many supermarkets have run out of fresh products, G1 reported.

Public schools in Rio also reopened Tuesday after a day of being closed.

In Sao Paulo, the big Ribeirao Preto oil terminal was back online after the truckers’ blockade was lifted.

However, despite these partial improvements, transport remained paralyzed in much of the country, crippling the vast agricultural industry and making commutes a nightmare for millions.

Ten airports remained out of aviation fuel, the Infraero airports’ administration said.

The prolonged strike comes despite President Michel Temer agreeing on Sunday to a key demand to cut the price of diesel fuel.

Late Monday, Temer said he had “absolute conviction that between today and tomorrow” the crisis, would finally end. In a tweet, Temer gave a slightly longer horizon of “one to two days.”

Experts say that the knock-on effects could take weeks to settle, dealing a severe blow to an economy struggling to grow again after a record deep recession that last two years.

Temer is Brazil’s most unpopular president in history, according to polls. He is not running in October presidential elections.

Source: Agence France Presse

Brazil cuts fuel prices after strike leaves food, fuel scarce

The decision was announced by Brazilian President Michel Temer as a week-long strike by truckers paralyses much of the country’s economic infrastructure.

Brazil’s President Michel Temer, under pressure from a week-long national truckers’ strike which led to fuel and food shortages, ceded to protesters’ demands on Sunday and slashed the cost of diesel.

The cut, equal to 0.12 US cents (0.46 Brazilian reais) a litre, was to be locked in place for 60 days, the president said in televised remarks, as the strike paralyses much of the country’s economic infrastructure.

Temer also agreed to four other demands truckers made.

His decision came after Sergio Etchegoyen, the Minister of Institutional Security, said the country was “on a path to normalisation” although he added: “It’s not quick.”

Authorities deployed the military to clear barricades erected by strikers and have been escorting fuel trucks since Friday to maintain access to refineries.

But federal transportation police reported that as of Saturday night, nearly 600 roads were at least partially blocked throughout the sprawling South American country.

Gas stations were virtually out of fuel, and perishable foods were disappearing from store shelves.

Now, Temer said: “we have done our part to ease the problems and suffering,” mentioning that he heard reports that millions of animals could die of hunger if the crisis did not ease.

The average price of diesel was 92 US cents (3.36 reais) in January and rose to 3.6 before the strike, according to news portal G1. On May 26, it hit $1.04 (3.8 reais).

Brazil is a member of the G20 group of the world’s largest emerging and advanced economies, but the first five days of the strike were estimated to have cost the country’s economy $2.8 billion, according to the daily Folha de Sao Paulo.

The truckers put a stranglehold on movement of goods in Brazil to protest increases in fuel prices.

Prices have risen under a politically sensitive decision made in late 2016 to allow the state-run Petrobras oil giant autonomy to set its pricing.

The rise in world oil prices in recent weeks has also been a factor.

The truckers’ determination has been a heavy blow to Temer’s centre-right government, five months ahead of the presidential election.

Economy paralysed

Trucks move 60 percent of the goods that are transported in Brazil, and a protracted strike could cause havoc as it emerges from a 2015-16 recession.

Priority is being given to airports, power plants, and the supply of medical facilities, where the system for transferring organs for transplant was paralysed by the strike.

In Rio, the city’s articulated bus system was partially disrupted because of a lack of fuel.

Bus lines in other states were also forced to shut on Saturday.

Service was restored after fuel trucks arrived, but buses were operating at 20 percent capacity on Sunday.

In most big Brazilian cities, only emergency bus service functioned on Sunday, to save fuel for the start of the work week on Monday, when state universities have announced they will be closed.

The truckers have pressed on with the strike despite an agreement announced by the government with union representatives late Thursday to call a 15-day suspension.

At that time the government pledged to abolish at least one tax on diesel and implement subsidies to maintain a temporary 10 percent fuel price reduction announced Wednesday by state oil company Petrobras.

Source: TRTWorld

Strike Halted in Brazil After Agreement to Fix Fuel Prices

Brazil’s government hailed an agreement to suspend a four-day nationwide truckers’ strike over diesel prices that wreaked havoc on Latin America’s largest economy and sparked major shortages of food and fuel.

Flanked by other senior ministers and union leaders, chief of staff Eliseu Padilha told reporters Thursday evening in Brasilia that the two sides had agreed to call off the strike for 15 days. Diesel prices, which had been adjusted daily according to market rates, will now be fixed for 30 days. The government and state-run oil company Petrobras will split any extra costs. Nine of the 10 unions involved in the job action signed the agreement, Padilha said.

The agreement should end the rapidly-escalating crisis that saw drivers lined up for hours at gas stations, supermarkets ration goods, and flights grounded. But the after-effects of the strike are likely to linger, with all carmakers due to stop production lines Friday and American Airlines scrapping its Miami-Brasilia flight on concern about fuel supplies. The protests also exposed the weakness of lame-duck President Michel Temer’s government as it limps into its last six months in office and highlighted Brazilians’ resistance to market-friendly economic policies.

Authorities proved hard pressed to calm the chaos let loose by the strike that erupted Monday, set off by fuel-price increases of about 50 percent over a year. Temer, who’d like to be remembered as the man who got Brazil back on track after its worst recession, fumbled initial attempts to pacify the situation: Petrobras cut the price of diesel by 10 percent for two weeks, but that retreat spooked investors and also failed to appease the truckers.

The wobbly response spooked investors. Concern that Petrobras was caving to political pressure and might abandon its market-based fuel policy caused the company’s shares to plummet as much as 16 percent, the most in a year. The Sao Paulo stock exchange index fell as much as 2.3 percent Thursday.

Brazil, which is larger than the continental U.S., is specially vulnerable to disruption in transportation. It relies heavily on trucks to move cargo as it has only a small network of railways that cater mostly to shipping raw materials such as iron ore or soybeans.

Finance Minister Eduardo Guardia said that the government would create a subsidy for diesel prices and compensate Petrobras for any losses, allowing the oil company to maintain its market-driven price policy. The deal doesn’t include gasoline.

Petrobras issued a statement describing the agreement as “highly positive.”

Source: Bloomberg

Brazil April current account surplus larger than expected

Brazil’s current account surplus shrank to a smaller-than-expected $620 million in April, down from $1.1 billion the year before, central bank data showed on Thursday.

This brought the deficit in the twelve months through April to 0.43 percent of gross domestic product. Brazil attracted $2.6 billion worth of foreign direct investments in the month.

Economists polled by Reuters expected a median $1.1 billion current account surplus and $3 billion worth of foreign direct investment.

Source: Reuters

Brazil’s Economic Peril Could Increase Avoidable Child Deaths

Tax and spend politicians and their supporters have begun framing austerity in a negative way. Austerity – spending what you make, or even less so you have a reserve – is now regarded as a negative by people that believe taxes and more government lead to growth, even if those beliefs are what led to their economic collapse.

Such is the case in Brazil, which has led the world in defaulting on loans from other countries due to its boom-bust overspending. Now Brazil is once again trying to contain its deficit and is lowering the rates of increases in social spending and groups are concerned by this cyclic “austerity” and created statistical estimates which they use to claim childhood mortality rates could be 8.6 percent lower by 2030 if spending in two major social programs are not increased rather than limited.

Thanks to unfunded expansion, Brazil can claim it is the eighth largest economy in the world, but yet another deep economic crisis caused by runaway spending has required a new round of reductions for programs. The authors are concerned about the Bolsa Familia Programme (BFP) and the Estrategia Saude da Familia (ESF) – Brazil’s main welfare program and primary healthcare service. The BFP was launched in 2003 and in 2016 was estimated to cover 25 percent of Brazilian families. The ESF delivers community-based healthcare services like vaccination, child healthcare services, treatment of simple conditions, and chronic disease management. Obviously vaccines are good things, whereas chronic disease management is incredibly costly when it’s 25 percent of the country.

In their paper, advocates for increased spending created their own statistical model to measure the projected effects of the economic crisis, poverty, as well as the impact of reductions to these two programs on child health in all 5,507 Brazilian municipalities for the period 2017-2030. Their estimates were that maintaining coverage from social protection programs could lead to a child mortality rate up to 8.6 percent lower in 2030.

In addition, their estimates say maintaining coverage of the BFP and ESF might reduce avoidable childhood deaths by nearly 20,000 and avoidable childhood hospitalizations were up to 124,000 lower between 2017 and 2030, compared to austerity.

They also lament the changes might impact the poorest. It’s no surprise that such cuts impact the poorest people, the wealthy don’t use those services.

Source: Science20

Brazil inflation slows unexpectedly in mid-May

Inflation in Brazil unexpectedly slowed in mid-May, highlighting how a weak economy is hampering central bank efforts to lift price increases back to its target range.

Consumer prices tracked by the benchmark IPCA index rose 2.70 percent in the 12 months through mid-May, government statistics agency IBGE said, below the median 2.81 percent forecast in a Reuters poll of economists.

The result undershot even the lowest estimate in the poll, Standard Chartered’s forecast of 2.75  percent, and held well below the bottom end of this year’s central bank target range of 4.5 percent, plus or minus 1.5 percentage points.

The numbers are the latest in a string of weaker-than-expected inflation figures since the start  of 2018.

Double-digit unemployment rates and widespread idle capacity have kept a lid on price hikes as Latin America’s largest economy recovers slowly from its deepest recession in decades, despite record-low interest rates.

While a selloff in the Brazilian real to a two-year low could generate inflationary pressures by boosting import prices, analysts say the weak economy is likely to curb the pass-through effect.

The IPCA index rose 0.14 percent from mid-April, IBGE said, compared to a median 0.25 percent estimate.

Inflation had reached 2.76 percent at the end of April and 2.80 percent in mid-April.

The central bank last week defied widespread expectations it would cut interest rates in a decision that was widely seen as a response to a weaker currency.  The minutes from its meeting showed policymakers weighed a rate cut before ultimately deciding to hold borrowing costs.

“The central bank made it clear at this month’s meeting that the easing cycle is now at an end,” said economists at Capital Economics in a report. “Inflation shouldn’t be a major headache…  instead, the next move in rates is likely to hinge on what happens around October’s presidential election.”

Source: Reuters

Analysis of Past Recessions in Brazil Suggests Current Recovery Is Worst in Country’s History

According to economists who have been assessing economic growth indicators, it is becoming increasingly clear that Brazil’s current recovery is the slowest in its history.

Analysis conducted by economist Affonso Celso Pastore, which took into account a decades-long analysis of the country’s GDP (Gross Domestic Product) numbers and eight of the country’s recessions since the 1980s, reveals that Brazil’s economic growth following a recession has never been as slow before.

Four quarters have gone by since Brazil’s latest economic recession came to an end, but the country’s growth is merely 2.2% percentage points above the valley found in the fourth quarter of 2016. In 1998, which had been the year Brazil’s economy had recovered the slowest following a recession, the country managed to grow 4.2%.

The data on the recession and recovery periods all belong to Codace: a committee that was created by the Getulio Vargas Foundation (FGV) that registers the start and end marks of the different economic cycles.

“Seven months ago, we had pointed out how slow economic recovery was; now, all the projections that had put growth at 3%, some even at 4%, have been rendered useless and we’re looking at 2% growth,” Mr. Pastore said.

The business sector, which is what really gets a country’s economic gears turning, has struggled to pick itself back up. As far as industry goes, only a few sectors, such as the automobile sector, have gained traction. A majority of the sectors still has idle capacity. The most optimistic indicators regard the segments that support production.

It is also worth noting that, despite all the adjustments, most companies that have emerged from the recession are in debt, meaning they will be forced to continue to implement cuts and adjustments.

Source: Folha de S. Paulo

Brazil inflation rate up in mid-May, holds below target range

Brazil’s inflation rate likely accelerated slightly in mid-May but held below the official target range as a slow economic recovery continued to hamper the central bank’s efforts to reignite price hikes, a Reuters poll of economists showed.

Consumer prices tracked by the benchmark IPCA index probably rose 2.81 percent from the year before, according to the median of 22 estimates compiled by Reuters.

That is slightly higher than the 2.76 percent rate seen at the end of April, but nearly matches the mid-April 2.80 percent reading.

Inflation has held below the bottom end of this year’s official target range, of 4.5 percent plus or minus 1.5 percentage points, for nearly all of 2018. None of the respondents forecast it would rise back to the range in mid-May, with the highest estimate at 2.90 percent.

The findings should increase investors’ focus on the minutes of the bank’s last policy meeting, set to be released on Tuesday, in which policymakers unexpectedly withheld from cutting interest rates.

In a statement, the bank attributed the decision to a shift in the “balance of risks for prospective inflation”, which was widely interpreted as a reference to a recent currency selloff that drove the Brazilian real BRBY to multiyear lows.

A weaker currency could bump up inflation by raising import prices, though a weak economy is likely to dampen that effect. Brazil’s unemployment rate has held at double digits while companies continue to grapple with widespread idle capacity.

“We see inflation still at comfortable levels at least until the end of this year, despite some weakness” in the Brazilian real, JPMorgan economists wrote in a client note.

The IPCA index likely rose 0.25 percent from mid-April, according to the median of 23 estimates ranging from 0.20 to 0.33 percent. BRIPCA=ECI

With inflation unlikely to pick up steam anytime soon, the bank is likely to turn its focus to its 2019 inflation target, set at a lower 4.25 percent rate. The bank said its decision to leave rates unchanged was consistent with inflation converging to the 2018 target and, “to a greater extent, 2019.”

Yet a weekly central bank survey put inflation at 4.01 percent at the end of 2019, still below the midpoint of that year’s goal.
Source: Reuters