Brazil

Central bank President Alexandre Tombini said keeping interest rates on hold for now is enough to tame Brazil’s above-target inflation, a view that clashes with traders’ bets, Bloomberg News reported today. The inflation outlook “shows that the monetary policy strategy is in the right direction,” Tombini told lawmakers in Brasilia Tuesday.

Brazilian companies that piled on $270 billion in international debt during the boom years are seeing their funding costs rise after the nation’s credit rating was cut to junk, Bloomberg News reported today. The spread for five-year credit-default swaps to protect against a government default, one benchmark for setting what Brazilian companies must pay for external funding, has jumped 7.5 percent to 400 basis points since the downgrade, the highest since 2009. Read more.

The president of Brazil should have been ecstatic. She had just won re-election after an intense campaign in which she fiercely defended her role in making Brazil, for a few fleeting years, a rising star on the global stage, the International New York Times reported. But in the days after her victory last October, President Dilma Rousseff was worried, confronted in private deliberations with her closest advisers by signs that Brazil’s triumphs were at risk of coming undone. “We went too far,” Aloízio Mercadante, Ms.

Standard & Poor’s cut Brazil’s prized investment grade credit rating to junk on Wednesday and warned that it could lower it again in the coming months, in a major blow to President Dilma Rousseff’s government, the Financial Times reported. S&P attributed the move, which surprised analysts who had not expected such a downgrade until at least next year, to government backpedalling on its budget deficit targets as well as what it described as divisions in Ms Rousseff’s cabinet over fiscal policy.

During a previous stint in government, Brazilian finance minister Joaquim Levy won the nickname “Edward Scissorhands” after the 1990s film because of his ability to cut public spending, the Financial Times reported. Ever since President Dilma Rousseff brought him back to Brasília in January to play the role of the government’s economic bad cop, Mr Levy has delivered a blunt warning: either Brazil gets its fiscal house in order or it will see its debt relegated to junk status. “The money is gone,” the former banker said in May, referring to recent years of free-spending.

Brazil’s troubled economy showed more signs of deterioration on Tuesday as consumer confidence sank to a record low and unemployment climbed, The Wall Street Journal reported. It is the latest blow to a country beset with high inflation, a slumping currency and a festering corruption scandal that has left President Dilma Rousseff with approval ratings in the single digits. More bad news is expected Friday, when a report on gross domestic product is projected to show that Brazil’s economy is officially in recession.

State-controlled Petróleo Brasileiro SA is growing uneasy with some aspects of the business reorganization of ailing oil-drilling-rig builder Sete Brasil Participações SA, a situation that may pose risks on the refinancing of $3.8 billion in debt, two sources said on Monday.

Brazil’s unemployment rate rose sharply in July to its highest level in five years, in the latest sign of the country’s economic malaise as policymakers struggle to turn round a deepening recession and quell a growing political crisis, the Financial Times reported. Unemployment in Latin America’s largest economy rose for the seventh straight month, hitting 7.5 per cent. That is up from 6.9 per cent in June and much worse than the 7 per cent the market had forecast. The figures, which point to a sharp deterioration in Brazil’s labour market, rattled investors.

Brazilian stocks fell, the real led global currency declines and local bond yields rose to records as dim prospects for Latin America’s largest economy weighed on investor sentiment, Bloomberg News reported. The real dropped to a 12-year after President Dilma Rousseff suffered a setback in Congress that eroded measures to pare budgets and avoid a junk credit rating. The benchmark Ibovespa equity index fell after the central bank’s signal that borrowing costs will stay at a nine-year high undermined retailers.

Brazilian companies this year have filed the largest number of bankruptcy protection requests on record, credit research firm Serasa Experian said on Wednesday, the latest symptom of the nation's most severe economic downturn in 25 years, Reuters reported. According to Serasa Experian's indicator of bankruptcies and judicial recovery requests, a total 627 requests were filed across Brazil in the first seven months of the year. That is the largest such number since the enactment of a law on bankruptcy proceedings in 2005.