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http://www.zerohedge.com/news/2014-12-29/brazils-economy-just-imploded

China may have mastered the art of fabricating economic data to a level unmatched by anyone except the US Department of Labor, but its derivative countries have much to learn. And none other more so than one of China's favorite sources of commodities over the past decade: Brazil. It is here that things are going from worse to catastrophic, as disclosed in today's update of Brazil's fiscal picture.

Here are the disturbing facts showing that behind the world's propaganda growth facade, it is all hollow: Brazil's consolidated public sector primary fiscal balance, which posted a significantly worse than expected R$8.1bn primary deficit in November driven by the R$6.7bn deficit of the Central Government, dipped into negative territory: -0.18% of GDP, driven by the significant deterioration of the Central Government finances.

BZ%20fiscal%20surplus.jpg

This is the worst fiscal outturn since November 1998. Furthermore, the primary surplus of subnational government (States and Municipalities) has also been eroding, a reflection of the authorizations given by the Treasury since 2011 for increased borrowing by the States. For instance, the States and Municipalities posted a negligible 0.08% of GDP surplus during Jan-Nov 2014, down from 0.46% of GDP during Jan-Nov 2013.

It gets worse: the overall public sector fiscal deficit widened to a very high 5.82% of GDP (the highest fiscal deficit since September 2003) given the high 5.64% of GDP net interest bill and steady erosion of the primary fiscal surplus. Given the BRL depreciation during the month, the interest on the stock of Dollar swaps issued by the central bank reached R$8.7bn.

The steady decline of the public sector savings rate is leading to a wider current account deficit despite weaker growth and low investment. In fact, the twin fiscal and current account deficits are now tracking at a combined, very troublesome 9.9% of GDP, the worst picture in 15 years (since September 1999). Repairing the severely unbalanced macro picture demands a deep fiscal and quasi-fiscal adjustment and a significantly weaker BRL.

brazil%20gs%202.jpg

Last but not least, gross general government debt rose to 63.0% of GDP in October, up from 56.7% of GDP in 2013 and 53.4% of GDP in 2010 (and the highest level since October 2009).

Brazil slowly sinking into the global abyss with everyone else?

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Brazil's Economy Is On The Verge Of Total Collapse

brazil%20gdp.jpg

Today's Brazilian economic data follows up quite well to our article from a month ago "Brazil's Economy Just Imploded" and as the earlier article on the crashing Brazilian Real hinted, things for the Brazilian economy how gone from imploding to, well, worse because not only did the twin fiscal and current account deficits rise even more, hitting a whopping 11% of GDP - the worst since August 1999, but its government debt soared to 63.4% in 2014, up from 56.7% a year ago, and the highest since at least 2006. In short - the entire economy is now on the verge of total collapse.

Not sure it's on verge of total collapse just yet, but the debt accumulation appears to be gaining traction.

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http://www.theguardian.com/business/datablog/2015/mar/06/the-noise-from-brazil-an-economy-on-the-brink

Rising inflation, slowing growth, a weakening currency, surging debt and a deepening corruption scandal - Brazil is suddenly looking vulnerable

The more you look at Brazil’s fundamentals, the more shaky the country looks. And we are not talking about the defensive prowess of David Luiz here. It is the country’s economic backline that risks tumbling down like a set of dominoes.

When a Latin American economy is in trouble a good place to start is its inflation rate. Brazil’s is today running at 7.5%. While this is nowhere near the 2,000-3,000% of the early 1990s, when the price of everything went up several times a week, it is far higher than the central bank’s mid-point target of 4.5%.

On Wednesday, in an effort to bring inflation down, Brazil’s central bank raised interest rates to 12.75%, a six-year high.

The problem is that the country is hiking interest rates – and trying to curb high prices – at a time in which its economy is on the brink of recession.

Between 2002 and 2008, Brazil’s economy expanded at 4% a year. It has since averaged less than 2%. GDP is expected to contract 0.5% this year.

High inflation makes matters worse in at least two ways. First, high prices hinder shoppers’ purchasing power. The Economist calculates that about half of the country’s growth over the past decade was driven by consumption.

A drop in purchases will not only dampen economic prospects but would lead to a recession that would freeze the pay of millions because the minimum wage is linked to GDP and inflation.

Elsewhere, salaries in both the public and private sector have grown above GDP for the past decade and are now unlikely to keep pace with inflation. Tax hikes and fare rises will not help either.

If only they'd hired the miracle worker Carney....

One of the BRIC's about to wobble?

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http://www.bloomberg.com/news/articles/2015-02-25/the-0-for-27-tally-on-debt-ratings-seen-worsening-brazil-credit

To appreciate just how bad things are in Brazil, consider this: its companies have suffered 27 rating downgrades in the first two months of the year.

The number of upgrades? Zero.

The tally illustrates how Brazil’s tottering economy and the widening bribery probe that pushed Petroleo Brasileiro SA into junk has eroded companies’ creditworthiness. From commodity producers to construction companies, virtually no industry has been spared. The last time Brazil had such a rash of downgrades was in 1999, when the nation was on the brink of default.

“This is a truly unique moment in terms of debilitation and weak finances,” Joe Bormann, a managing director for Latin America corporate finance at Fitch Ratings, said from Chicago. “We expect downgrades to outpace upgrades in what could be a record this year. Prospects are not good at all.”

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http://www.economist.com/news/americas/21637436-mistakes-dilma-rousseff-made-during-her-first-presidential-term-mean-her-second-will-be

..But it is the economy where the storm-clouds are stacked highest. The end of the commodity supercycle means falling prices for Brazilian exports of soyabeans, iron ore and, most recently, oil. And the policies Ms Rousseff pursued during her first term have proved disastrous. A combination of macroeconomic laxity and microeconomic meddling, intended to boost growth, merely undermined public finances and her credibility. GDP rose by just 6.7% during her first four years. Her biddable Central Bank governor, Alexandre Tombini, and finance minister, Guido Mantega, cut interest rates and let rip on public spending even as inflation rose and tax receipts slowed. If her second term is to be any better, she will need to undo much of what she did in the first.

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http://dealbook.nytimes.com/2015/02/11/a-corruption-scandal-at-petrobras-threatens-brazils-bond-market-and-economy/

The accusations of corruption at Brazil’s state-controlled petroleum giant Petrobras have already led to a political scandal and a change in management. Now, the problems are threatening other Brazilian companies and may even tip the country into recession.

It would be hard to overstate Petrobras’s importance in Brazil. It produces more than 90 percent of the country’s petroleum, owns all of the nation’s refineries, operates more than 21,000 miles of pipelines, dominates wholesale gas and diesel distribution, and even owns the largest chain of service stations.

“The government’s plan was to make Petrobras as big as possible,” said Samuel Pessoa, an economist at the Fundação Getulio Vargas in Rio de Janeiro. He estimated that the company, through its own operations and its subcontractors, was responsible for about a tenth of Brazil’s economic output.

In the wake of a police investigation, called Operation Car Wash, that indicated that Petrobras’s suppliers and subcontractors had bribed executives in return for inflated contracts, the company has halted payments on many projects. Petrobras has also prohibited new contracts with some of the country’s biggest engineering and oil services firms.

The drop in the company’s spending will probably shave 0.75 percent off growth of the nation’s economy this year, Mr. Pessoa said — enough to tip a sluggish economy into a mild recession.

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Brazil Retail Sales Drop Most On Record, Goldman Warns Will Get Worse

20150616_Brazil.jpg

Just a few months ago, we warned Brazil's economy was on the verge of collapse as the fiscal situation was deteriorating rapidly. It appears, judging by the most recent data from the oil-rich nation, that we were right. Broad retail sales have now declined for five consecutive months with the seasonally adjusted broad retail sales index now at the same level as early 2012. Core retail sales declined 3.5% YoY during April (weakest print since Aug 2003) and broad retail sales declined by an even larger 8.5% YoY (lowest on record), and as Goldman warns, the outlook for private consumption and retail sales in the near term remains very weak.

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Just As Brazil Hits Rock Bottom, Things Are About To Get Even Worse

Brazil.png

For anyone who might have missed it, Brazil is in trouble. "Macro imbalances in Brazil are large, the worst in almost a decade. The fiscal deficit at -8.1% of GDP is also at its widest in more than 20 years, with the combined twin deficits now tracking at a disquieting 12.5% of GDP. Brazil stands at a crossroads – both roads involve currency depreciation."

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At least my beer will be cheap when I go to Rio in November. I look at the game that is played by that the financial powers and we all know that in the long term commodities are always going to go up...just a simple function of population growth and the growing middle class, so Brazil, Canada etc will bounce back, but when they do they will find all their assets will be owned by the vultures who manipulated things into the temporary state they currently are in now. In my view this is the time to be a vulture and buy into the commodities, it may be 5-10 years before you see significant rewards, but it is inevitable that you will.

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Interesting thread.. it would be good to understand more about how the strength of the Brazilian economy reflects what is going on in the far east.

Given the Chinese stock market has been quite buoyant of late, I presume the correlation is not necessarily that strong.

Brazilian exports are largely made up of ores/metals, oil and food stuffs. Oil revenue will have dropped because of a supply-side glut from the US, not a demand drop globally (demand is still increasing), food stuffs may reflect the strength of the global economy but not particularly China I wouldn't have thought.

Iron ore must be the best indicator.. but this is mainly used for the construction industry AFAIK, not so much in the wider economy.

My guess is this shows us China has cut back on throwing up ghost cities and is concentrating more on manufacture, service and export industries.

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Just As Brazil Hits Rock Bottom, Things Are About To Get Even Worse

Brazil.png

For anyone who might have missed it, Brazil is in trouble. "Macro imbalances in Brazil are large, the worst in almost a decade. The fiscal deficit at -8.1% of GDP is also at its widest in more than 20 years, with the combined twin deficits now tracking at a disquieting 12.5% of GDP. Brazil stands at a crossroads both roads involve currency depreciation."

She doesn't seem particularly concerned.

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http://www.theguardian.com/world/2015/jun/09/brazil-economy-falters-welfare-cuts

The signs that Brazil’s economy is in trouble have been visible for a while now, but the worst could be still to come. The figures published last month for gross domestic product in the first quarter of 2015 confirmed the absence of growth that has plagued Latin America’s powerhouse for the past five years.

With GDP down by 0.2% since the new year – a fall of 1.6% compared with the same period of 2014 – Brazil has registered its worst result in six years. Even if it has actually fared better than the 0.5% drop forecast by the markets, the outlook for the world’s seventh-largest economy nevertheless looks gloomy. The figures are bad enough to reduce the already limited room for manoeuvre available to the newly appointed and ever so orthodox finance minister, Joaquim Levy. Last month he announced far-reaching austerity measures, with cuts amounting to 69.7bn reals ($22.4bn), prompting an outcry from members of his own party, who want a more flexible line.

From a few months ago.

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http://www.forbes.com/sites/kenrapoza/2015/08/11/brazils-political-crisis-has-created-a-bottomless-pit-for-economy/

Brazil’s political crisis keeps getting surprisingly worse. The vice president, Michel Temer, has basically said he no longer supports his president, Dilma Rousseff, and added that his Democratic Movement Party (PMDB) would oppose the ruling Workers’ Party (PT) in the next election. The local currency lost another 2% against the dollar on Tuesday and is trading at R$3.50. Anyone who thought that Brazil was closer to R$2.80 than R$4.00 has to recalculate risk. Year-to-date, weak commodities, a strong dollar, and a political crisis without end, has made Brazil the worst performing BRIC market.

The iShares MSCI Brazil (EWZ) is down 26.5% year-to-date.

This is as much about politics as it is about the market itself. Brazil does not look attractive for anyone other than long term value hunters, and even those guys today are nervous about a soft coup that continues to dig a deeper hole under Latin America’s largest economy.

There is no short- or medium-term solution to the crisis because of the judicial uncertainty involving the Petrobras scandal. The oil giant has taken down at least a half dozen major executives at the firm, along with the owners and CEOs of Brazil’s largest conglomerates, like Marcelo Odebrecht. It has also driven a gap between the PT and its most important ally in the congress, the PMDB. The current environment is unsustainable and requires strong, if not radical changes before the overall market sentiment improves. This is particularly true with foreign investors, who may not take their cue from the handful of long-term bulls that exist in the local market.

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Depression Tracker: Unemployment Soars In Latin America's Most Important Economy

BrazilTeaser.png

If there’s anything Brazil certainly does not need, it’s more bad news. The country is, in many ways, a symbol of the great EM unwind and the situation is made immeasurably worse by political instability. The economic outlook - which was already bad enough between a harrowing bout of staglflaton and dual deficits on the fiscal and current accounts - just got a lot worse as unemployment spiked to 7.5%, well ahead of consensus and the worst in five years. How bad is it you ask? Bad enough that BofAML now says the "key" stat to focus on is the number of participants in recurring street protests.

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the end of the commodity cycle from a technical perspective usually ends in stuff going parabolic,nasdaq style.

we haven't seen that yet....so I would not write off just yet.

from a chartists point of view, we would be about 1977-1978 of the last cycle.

right in the doldrums before things go batsh1t mental for a year.

Edited by oracle

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Ahhh, I remember 2006 very well...everyone was saying buy bank shares and...invest in Brazil.

Very true. Would like to see charts showing performance of the BRICs since that point. In fact, I think I'll have a look a nd see for myself which of the 4 performed best over that timespan.

Edit to add, obviously it will be China I'm guessing but relative performance would be interesting.

Edited by CHF

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http://www.zerohedge.com/news/2015-08-28/no-recovery-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.

And from Goldman:

The forecasted deeper 2015 recession will contaminate the 2016 growth outlook.
Given the worse-than-expected 2Q figure and the downward revision to 1Q sequential growth, our profile for 2H2015 growth points now to a 2.6% contraction of real GDP in 2015 (down from our previous -2.1% forecast) and worsens the statistical carry-over for growth in 2016 to -0.8%
. That is, were the economy to stay flat throughout 2016 at the expected 4Q2015 level, real GDP would contract by 0.8% in 2016. Hence, we are now forecasting real GDP to contract 0.4% in 2016 (down from the previous -0.25% forecast). This is consistent with average quarterly real GDP growth of 0.10%-0.20%, a path that is still subject to obvious downside risks given the prevailing high level of macro and political uncertainty and recognized negative skew in the distribution of domestic and external risks.

BrazilQ2GDP_0.png

The latest on the political front is that President Dilma Rousseff has 15 days to explain to the the Federal Accounts Court why everyone seems to think that she intentionally delayed nearly $12 billion in social payments last year in an effort to make the books look better than they actually were. And while we won’t endeavor to weigh in one way or another on that issue, what we would say is that if someone in Brazil is doctoring this year’s books, they aren’t doing a very good job because things just seem to keep going from bad to worse.

Case in point, on Friday, Brazil said its primary budget deficit was R10 billion in July, far wider than expected. The takeaway: "no 2015 primary surplus for you!"

Here’s Goldman with the breakdown:

The consolidated public sector posted a worse than expected R$10.0bn deficit in July, driven by the weak performance of both the central and regional governments. The central government posted a R$6.0bn deficit in July and the states and municipalities a larger than expected R$3.2bn deficit. Finally, the state-owned enterprises added another R$810mn to the overall deficit.

On a 12-month trailing basis the consolidated public sector recorded a 0.9% of GDP primary deficit in July, worse than the 0.6% of GDP deficit recorded in December and, therefore, increasingly distant from the new unimpressive +0.15% of GDP surplus target. Hence, it is increasingly likely that we may observe a second consecutive year of primary fiscal deficits.

The overall public sector fiscal deficit (primary surplus minus interest payments) widened to a very large 8.81% of GDP, from 6.2% of GDP in the 12 months through December 2014. The net interest bill is running at 7.92% of GDP in the 12 months through July.

Gross general government debt worsened to 64.6% of GDP, up from 58.9% of GDP at end 2014 and 53.3% of GDP in 2013.

The twin combined fiscal and current account deficits now exceed a disquieting 13.2% of GDP.

Overall, we have yet to detect a visible turnaround in the fiscal picture. The overall fiscal deficit is tracking at a disquieting 8.8% of GDP, driven in part by the surging net interest bill, which was exacerbated by the large losses on the central bank stock of Dollar-swaps. We expect the gradual fiscal consolidation process to last at least 3-4 years, perhaps longer.

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A Panicked Brazil Promises Billions In Austerity, Does 180 On Budget After Downgrade

BrazilTeaser_2.png

On the heels of a painful S&P downgrade, Brazil now says it plans to enact some BRL26 billion in primary spending cuts for the 2016 budget on the way to achieving in a primary surplus that amounts to 0.7% of GDP.

Germany 7 - Brazil 1

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