24th of October 2012: BNCC 10 Years Anniversary

24th of October 2012: BNCC 10 Years Anniversary – Afternoon Seminar and Reception

Lately, it seems like a trending topic: the growing relationship between Brazil and Norway. However, some have been working to tighten this bond for 10 years now: the Chairman, Board Members and participants of the BNCC, Brazil-Norway Chamber of Commerce. The milestone was marked by a celebration that took place last wednesday, 24th of October, with a first part at Shippingklubben and a second more festive part at the Brazilian Ambassador’s residence.

The past was recalled by Chairman Terje Staalstrøm, the future was drawn by Statoil’s Senior Vice-President Thore Kristiansen, the ideal team was described by the Norwegian National Football Team Manager, Drillo, words of support and encouragement were expressed by the freshly arrived Brazilian Ambassador Flavio Helmold Macieira, and our very own Larissa Costa Slottet was invited to speak amongst this inspiring group of people.

In her presentation, “7 tips for a successful business trip to Brazil”, Larissa gave a few “freebee” dos and don’ts. If I had to choose one single tip that should by no means be forgotten or ignored, it would have to be the last (but definitely not least): “Build personal relationships”. Consistent with the international perception of Brazilians as a people of human relations, feelings and emotions, subjective factors play a considerable part in decision making. Far from a mere cliché, this image can be found word-by-word in the Brazilian Protocol for Business Etiquette (“Brazilians need to know who they are doing business with before they can work effectively”), showing that what seems like a stereotype can have profound implications in a cultural encounter.

The direct practical repercussions of this characteristic on business relations are various. For instance, as Larissa explained, the contact should start with the presentation of an individual, which will later lead to the presentation of the product itself. Likewise, the individual involved in the interaction plays a more determining role on its success than the actual company behind him. Due to this particularity, changing actors in the midst of the negotiation means going back to the starting point, with a new relationship to build from scratch. This is a precious lesson to keep in mind while doing business in Brazil.

 

Brazil falls behind Indonesia in UNCTAD World Investment Report 2012 – 23 July

The United Nations Conference on Trade and Development (UNCTAD) has released its World Investment Report 2012 containing a list of the world´s most attractive destinations of foreign investment for the next two years.   Brazil ranked the world´s 5th most attractive destination of foreign investment, behind China (1st), the U.S. (2nd), India (3rd) and Indonesia (4th).  UNCTAD survey interviewed 400 large multinational executives. Brazil has dropped from 4th to 5th place in the ranking, falling behind Indonesia which jumped from 6th place.

UNCTAD also released a list of major destinations of foreign direct investment (“FDI”) in 2011. UNCTAD report shows Brazil leapt from 8th to 5th place among major destinations of FDI, rising to US$66.7 bn in 2011 ahead of Singapore (US$64 bn), The U.K. (US$53.9 bn), The Virgin Islands (US$53.7 bn), Russia (US$52.9 bn) and Australia (US$41.3 bn).

Converse like a Brazilian – Brazilian Business June 14th

http://thebrazilbusiness.com/article/converse-like-a-brazilian?utm_medium=newsletter

 

LEGAL ALERT – Tax Change on Inflow of Foreign Capital
Hellebust International (in cooperation with Gasparini, De Cresci e Nogueira de Lima Advogados in São Paulo), – June 15th

Decree 7.751/2012 – Changes on IOF (Tax on Credit, Exchange and Insurance Transactions)
On June 14, 2012, the Brazilian Federal Government amended the IOF Regulation (Decree 6,306/2007) after the actions to decrease the inflow of foreign capital in March, returning the minimum average term to 720 days.
Such amendment occurred under Article 15-A, item XXII, as the tax rate for exchange transactions is 6%, whenever funds flow into the country, with origin on a foreign loan, subject to registration under the Brazilian Central Bank, hired directly or by issuance of bonds on the international market, when the minimum average term is less than 720 days. Such minimum average term was (i) 720 days, throughout February 29th, 2012; (ii) 3 years, between March 1st, 2012 and March 11th, 2012; and (iii) 1,800 days, between March 12th, 2012 and June 13th, 2012.
Dilma promises measures to economic growth  – NN June 5th

The Brazilian president Dilma Rousseff has determined new measures to grow the economy and to accelerate public and private investment growth in Brazil. The government is considering a range of measures to be adopted in the private sector, such as collecting corporate tax earlier, applying investment tax relief, speeding depreciation and cutting the price of power down. In the public sector, the government is mainly planning to increase investments, including investments in the PAC growth acceleration program.

The Brazilian economy is expected to grow no more than 2.5% in 2012, which is a concern for Dilma. After announcing the first-quarter GDP growth of 0.2%, Dilma reported national accounts investments fell during this period as released by the Brazilian Institute of Geography and Statistics (IBGE)

United Nations: Brazil the most protectionist country – “Estadão” June 1st
In the past six months, the Brazilian government applied a record number of protectionist measures throughout the world, since the global economic crises intensified, according to data from the UN, WTO and OECD.  The report will be handed to leaders of the G-20 to warn them that some countries are breaking their promise of not applying protectionist measures.  After four years of crisis, trade barriers are now reaching 4% of the global trade – US$500bn, which is equivalent to Brazil´s and India´s total exports. The U.N., WTO and OECD are warning the growing protectionism threat is a risk for the global economy.

These entities are urging countries to “resist the temptation of adopting nationalist policies” such as policies that replaces imports and consequently creates tension among countries. Brazil has adopted a total of 17 new measures against imports, which was more than any other country, including Argentina which is being accused of adopting a nationalist measures. The Brazilian government also announced five new measures to support the local industry in the past six months.  Some of these measures were questioned by the U.S. and Europe. In the past two years, Brazil was also the leader in implementing antidumping measures.

Rental prices for offices in Brazil

In this article, you will be informed about the average rental prices of prime offices in Brazil. We covered the largest and more productive state capitals of the country, located in three Brazilian regions

Image by binw.marketing

Rio de Janeiro – RJ

Depending on the neighborhood, rentals in the “Marvelous City” are even more expensive than in New York. Although the prices have decreased comparing to 2011, per square meter of commercial offices in Rio de Janeiro are still more expensive than São Paulo and Brasília. The highest prices are in Zona Sul, Orla, Downtown, Barra da Tijuca and Cidade Nova neighborhoods.

Two reasons contributed for Rio de Janeiro to remain as the top expensive rent location. First, there is the city’s geography, with restricted available spaces for new constructions. In second place there is the recovery of Rio de Janeiro’s economy, growing the national and foreign companies’ interest in establishing operations in this town.

Given the lack of location to accommodate new ventures, Rio de Janeiro has been adopting a strategy already used by other great cities, such as New York, Paris and London: the reform of old buildings, practice known as retrofit.

General rental price (per month): BRL 130.91 /sq. meter per month – BRL 12.16/sq foot

Annual rental growth:  -7.7%

Neighborhood

Price per sq. m.

Price per sq. ft.

Zona Sul BRL 203.30 / month BRL 18.89 / month
Orla BRL 181.40 / month BRL 16.85 / month
Downtown BRL 126.77 / month BRL 11.77 / month
Barra da Tijuca BRL 98.20 / month BRL 9.12 / month
Cidade Nova BRL 90.00 / month BRL 8.36 / month

São Paulo – SP

São Paulo suffers from the greatest issue of the large metropolitan business centers: lack of space. The city receives more and more people and is not being unoccupied to balance its numbers. The city scored the lowest vacancy rate of the world in 2011, only 0,8%. In comparison, London was rated in 5%, Honk Kong, 3.1% and Geneva, 2.5%.

If we analyze the kinds of business established in São Paulo it gets obvious why the city is in desperate need for more and more office spaces. São Paulo ranked as the Brazilian city that most received foreign investments in 2011. About 43% of the international investments were directed to the creation of headquarters and centers for research, marketing, design and consumer attending services. Other 25% of the foreign investments were directed to the service sector, with an emphasis on the consulting and outsourcing businesses.

Good news is that São Paulo is to offer 300 to 400 thousand square meters of new office areas per year from 2012 onwards, what must decrease the prices and increase the vacancy rates.

General rental price (per month): BRL 123.7/sq meter per month – BRL 11.49/sq foot

Annual rental growth:  33.9%

Neighborhood

Price per sq. m.

Price per sq. ft.

Faria Lima BRL 176.50 / month BRL 16.4 / month
Itaim Paulista BRL 165.8 / month BRL 15.4 / month
Vila Olímpia BRL 133.2 / month BRL 12,37 / month
Avenida Paulista BRL 110 / month BRL 10.22 / month

Brasília – Distrito Federal

The region known as Plano Piloto has the highest rental prices. The capital of Brazil has very few corporate buildings, and it is actually suffering from a lack of space for new constructions.

Yet, the demand for offices in Brasília continues to climb. As it gets more and more difficult to find an office in the North or South Wings of the Plano Piloto, the trend is to look for offices located in the outskirts of the city.

General rental price (per month): BRL 107/sq meter – BRL 9.94/sq foot

Annual rental growth: 21%

Recife – Pernambuco

Recife is undergoing important transformations, as more companies and investors are showing interest in the city. Home to the country’s most important technology hubs – Porto Digital – as well as the Port and Industrial Complex in Suape, the most important city in the Northeast region have a strategic position for regional manufacturing and distribution as well as exports to other countries.

Compared to other main cities in Brazil, the market for offices in Recife is still small, with growing demand and short supply of quality properties. The high end developments expected for delivery over the coming five years will considerably increase the stock of Class A offices in Recife, what shall increase the value and attractiveness of that city’s real estate market.

The highest valued neighborhoods are Boa Viagem, Aflitos and Espinheiro.

General rental price (per month): BRL 62.9/sq meter – BRL 5.84/sq foot

Belo Horizonte – Minas Gerais

The number of available prime offices in Belo Horizonte are not meeting the demand, and the high prices of the prime lands are making impossible the construction of new corporate buildings. The most expensive rents are in the neighborhoods of Savassi, Anchieta and Sion.

General rental price (per month): BRL 75 /sq meter – BRL 6.97/sq foot

Annual rental growth: 13,47%

Other cities’ numbers

  • Vitória – Espírito Santo:

General rental price (per month): BRL 53.8/sq meter – BRL 5,0/sq foot

Annual rental growth – 19,1%

  • Curitiba – Paraná:

General rental price (per month): BRL 55/sq. meter – BRL 5.11/sq foot

Annual rental growth – 39,9%

  • Salvador – Bahia:

General rental price (per month): BRL 56.8/sq. meter – BRL 5.27/sq foot

Annual rental growth – value not found

The numbers for this article were obtained from the 2012 Cushman & Wakefield “Office Spaces Across the World” survey.

 

The state of Rio de Janeiro announces investments of R$15.4bn (US$8.06bn) in the naval sector 
Translation based on an article published in NN, 04/30/12

A total of R$15.4bn (US$8.06bn) will be invested in the naval sector between 2012 and 2014, up 17% in relation to the 2011-2013 period, the president of the Federation of Industries of the State of Rio de Janeiro (Firjan) Eduardo Eugenio Gouvêa Vieira announced during the opening ceremony of the “Naval Sector and Offshore Sector II Results” .  Out of this total, R$6bn (US$ 3,07 bn) will be invested in the construction of new shipyards, up 37% against 2011, he said.

This total does not include potential investments in Inhaúma and in numerous shipyards in Barra do Fudado, he said. In the same event, Rio de Janeiro state government announced the construction of a ship parts complex in Duque de Caxias city. The government is expecting the new ship parts complex will attract shipyard equipment suppliers to support the oil industry´s local content policy.  The agreement was signed by the State Secretary for the Economic Development, Energy, Industry and Services of Rio de Janeiro Julio Bueno, in partnership with the shipbuilding union (Sinaval) and Industrial Development agency (Codin).

BG kicks off construction of billionaire global technology centre in Brazil – “Valor” 20th April

BG´s to-be-constructed global technology centre in Rio de Janeiro has an ambitious goal of becoming the Brazilian pole of excellence for the global oil & gas industry.    BG will invest an estimated US$2bn by 2025 in the construction of its global technology centre in Brazil, which is the high end of research and development (“R&D”) policy. The Brazilian Aeronautics Technology Institute (“ITA”) in the state of São Paulo is an example of what BP can achieve in terms of R&D in the Brazilian market. “ITA has become one of the world´s largest aeronautics technology centres” said BG Brazil Policy and Corporate Affairs Vice President Henrique Rzezinski.

BG´s global technology centre is expected to become a large R&D pole for the oil & gas sector. BG´s global technology centre will form partnerships with universities and research centres in Brazil and also work in alliance with oil & gas excellence centres from universities from different countries, such as England, Unites States and Scotland. BG´s decision of building this global technology centre in Brazil is related to the fact that the company is expecting to produce 600,000 barrels of oil equivalent per day by the end of this decade.  If this is achieved, BG will become Brazil´s second largest oil producer, behind Petrobras.  The construction of BG´s global technology centre is due to start between the end of June and the beginning of the second half of 2012.  The centre is expected to start operating mid-2013.

A more interesting decline

Borrowing costs have started to fall at last, but the hard part lies ahead

Apr 21st 2012 | SÃO PAULO | from the print edition

“HISTORIC”; “drastic”; “unbeatable”: no one could accuse Caixa Econômica Federal, Latin America’s fourth-largest bank, of downplaying its latest interest-rate cuts. Anywhere except Brazil, the supposedly cut-price loans it offers would look more like usury. Interest on overdrafts, for example, has fallen from 157% a year to 51%. Customers whose salaries are paid into a Caixa account will soon be offered a credit card charging 2.85% monthly—down from 12.86%. Yet Caixa is not exaggerating about the break with the past that its new rates represent. For Brazilians with recent memories of hyperinflation, an overdraft at 51% a year is an unheard-of bargain.

Now the government is trying to force the pace. On April 18th the Central Bank made its sixth consecutive cut to its policy rate, bringing it to 9%, an all-time low in real terms. Its policymakers see subdued global demand as an opportunity to reset rates at a lower level, without risking a return to higher inflation.

However, government officials believe Brazil’s big banks wield hefty market power, and worry that they will gobble up the benefits instead of passing them on to consumers. As a result, they have resorted to browbeating, dragging bankers into the finance ministry and ordering them to cut rates and lend more. Earlier this month Murilo Portugal, the president of Febraban, the bankers’ trade association, met Guido Mantega, the finance minister. He suggested that lower reserve requirements and taxes, together with greater rights for creditors, would help to cut rates. Mr Mantega later retorted publicly that the conditions were already in place for Brazilian banks to stop being the “world champions of spread”. He suggested the cuts could come out of the banks’ profits instead.

The combination of monetary policy and badgering seems to be working. Both Caixa and Banco do Brasil, another large bank the government controls, have cut the cost of consumer credit in recent weeks. On April 16th HSBC lowered the rate on loans for its lowest-risk Brazilian customers, and the following day Santander said it would be giving small businesses cheaper credit. On April 18th Bradesco, Brazil’s third-biggest bank, said it would cut rates too.

Yet despite such progress, both the Central Bank’s policy rate and the margin between banks’ borrowing costs and what they charge for credit remain well above levels elsewhere (see chart). Spreads on consumer lending, in particular, are whopping by international standards, only recently falling below 30 percentage points. High borrowing costs are widely cited as a reason why Brazil’s trend growth rate of 4% lags behind those of other big emerging economies such as China or India. Unfortunately, now that the low-hanging fruit has been picked, further rate cuts will be much harder to achieve.

One barrier is the government-backed savings accounts that offer tax-free annual interest of 6.17%, guaranteed by law. That puts a floor of around 8.5% underneath the Central Bank’s policy rate, since going lower would probably provoke a mass migration from floating-rate government bonds. It sets the benchmark for other savings accounts too. But the government has shied away from the political fight that would be needed to change the rules.

Subsidised loans to favoured businesses by the country’s development bank, BNDES, are another obstacle. Because they stimulate demand, the Central Bank has to keep the base rate higher than would otherwise be required to control inflation. The BNDES’s loan book has grown substantially in recent years, and its rates are as heavily subsidised as ever. On April 16th its chairman, Luciano Coutinho, said it would be lending lots more this year as part of a government stimulus package.

The biggest culprit of all, though, is Brazil’s low savings rate, which has averaged just 16.5% since the mid-1990s. Merely matching Mexico, itself no champion saver at around 22.6% of GDP, would allow the base rate to fall by more than two percentage points without risking higher inflation, calculates Alex Segura-Ubiergo of the IMF. If the tightening were to come mostly from public savings, the effect would be even more pronounced. But there is no sign of that happening. To the contrary, consensus analysts’ forecasts have inflation rising again later this year. That would force the Central Bank to raise rates in response. The respite for Brazilian borrowers may not last.

 

ANP: Oil production rises for third month in a row – The Oil News- NN 11th April

Brazil´s oil production soared by 6.9% in February against the same period in 2011, according to the Brazilian National Petroleum Agency (ANP).  Oil production reached approximately 2.205 million barrels per day in February, down 1.1% against January 2012. Natural gas production reached 67 million cubic meters per day in February, up 6.8% in comparison with February 2011 and up 5.7% against January 2012, according to data published in ANP´s website. Pre-salt oil production was down 22.5% in comparison with March 2012 due to an interruption of the extended well test in the Carioca Nordeste field in the Santos basin. Petrobras was responsible for 92% of the total oil and gas production in the country. Shell, Chevron and Statoil Brasil produced an average of 60,000 to 80,000 barrels per day in a month.

OGX, the oil arm of Eike Batista´s group of companies, started oil production in February reaching an average of 11,600 barrels of oil equivalent per day (boed).  The company was ranked Brazil´s fifth largest oil producer. Oil production in onshore mature basins (such as Espírito Santo, Potiguar, Recôncavo, Sergipe and Alagoas basins) totaled 175,700 boed, comprised of 144,900 oil barrels per day and 4.9 million cubic meters per day of natural gas. Out of this total, 3,100 boed were produced in concession areas not operated by Petrobras, where 416.1 boed was produced in the state of Alagoas, 894.8 boed in the state of Bahia, 3.0 boed in the state of Espírito Santo, 1,512.6 boed in the state of Rio Grande do Norte and 248.9 boed in the state of Sergipe.   Offshore fields produced a total of 129.3 bpd of oil and 33,900 cubic meters of natural gas. The Bom Lugar field operated by Alvorada had the highest oil production among the offshore fields reaching 47,0 bpd.  Morro do Barro field recorded the highest natural gas production of 31,400 cubic meters per day.

Limitation of Foreign Participation in Brazilian Companies

Foreigners in Brazil can come across several difficulties, especially related to protectionism and bureaucracy. This article will point out the major limitations for foreigners in the country.


Image by Blog do Mílton Jung

Understanding the limitation

This practice in Brazil is not very different from other countries. In order to preserve the domestic economy, the Brazilian law provides restrictions for foreign companies’ participation. According to Dilma Rousseff, those laws are not protectionists practices, they are only a way of defending the economy.

The Brazilian government say that the country will not commit the same mistake of the past, when the country closed the domestic economy, what generated a delay on the national technological industry. According to Rousseff, the country will still protect national industries and jobs for locals, but the economy will not be extremely protectionist.

An example of how the government works to protect the national economy is the reduction and limitation of products and services provided by foreign companies on the national market. Another example is the percentage of stocks that one foreign can reach in a company is also limited.

What are the consequences for the country?

Theoretically, this protectionism is good for the country once the domestic economy is shielded from the external economy. The job generationand the internal growth should be more focused on the internal development, improving the technological department, for example.

What is wrong with this practice and already being corrected by the Brazilian government is that the country still does not have technological potential to compete with the international market, as in the past the limits to foreign participation was much stronger than it is nowadays, leaving Brazil behind in terms of technological development.

What are the limitations for foreign companies?

There are different limitations for each case of services provided by foreign companies in Brazil. Sometimes they are subtle, but there are cases in which Brazilians are very privileged by the government.

An important point is that some people naturalized Brazilian for more than ten years can, in almost all of the cases, have the same rights of a local. Here are the sectors in which foreign companies can work or not:

Economy sectors totally forbidden

Radio, TV and Publishing

Exclusive for Brazilians or foreigners who have been naturalized for more than ten years. It was created to preserve the national culture and job generation

Air transportation

Totally oriented only for natives, nowadays there are a few companies not established in the national territory working along with some Brazilians air transportation companies. It is important to highlight that foreign companies can not administer airports.

Health care

Another sector protected by the government only for Brazilians. It happens to protect the internal investment in researches and job generation. It is important to say that the Brazilian law grants some exceptions.

Security services are completely forbidden for any foreign company for ethic and patriotic reasons.

Economy sectors partially forbidden

Cable television is commercialized by foreign companies if an important parameter is correct: more than 51% of the voting capital must have been commercialized by locals. If this requirement is within the rules, foreign companies can start to commercialize cable television channels.

Road Transportation is provided to foreign companies, but only 20% of the voting capital can be in the foreign control. That measure is important to privilege the internal job generation.

Fishing is an exception that theoretically should be exclusivity for Brazilians or naturalized people, but by filing some requirements foreigners can practice some fishing activities in the country.

Economy sectors not forbidden

Telecommunications licenses are provided for foreign companies according to their technological and financial potential. Sometimes pricing policies and the amount offered for the license are important factors to work in Brazil as a foreign company.

Rural properties foreign companies or foreign legal person in the country can work or have rural properties in Brazil. The only exception is that the properties can not be bigger that one quarter of the municipality territory. If the foreign is married to a Brazilian, things are even easier.

Are there alternatives?

All of these rules can be objected on the Brazilian court or modified according to the government interests. These rules are changing really fast due to the politics adopted by the President Dilma Rousseff, that does not want to close the economy but does not want to let the domestic economy vulnerable to the international market.

Another important point is that if your company is planing to work in any of these sectors, it is important to know some influent Brazilians, once all the alternatives become easier when working with locals.

 

 

 

In Brazil there are a number of newsletters published which give information on business opportunities, frame conditions for business and market developments. Some are in Portuguese only, others in English.

 

In São Paulo, a Norwegian named Egil F. Nes is the co-founder of the publication “The Brazil Business”. His background is digital media and technology and the newsletter has attracted a wide group of readers from among the international business community.

 

Check it out at  http://thebrazilbusiness.com

 

The Economist Education in Brazil_Studying the world” – The Economist, 17th March.

EUA – The Wall Street Journal

Brazil Minister Says Global Currency War Is Intensifying

 

By TOM MURPHY And LUCIANA MAGALHAES

 

A global “currency war” will intensify this year as the world economy slows, Brazilian Finance Minister Guido Mantega said, adding that Brazil is “well prepared” to defend its currency against unwanted appreciation.

 

“Global economic growth in 2012 will be below that of 2011,” Mr. Mantega said ahead of his participation at a meeting of finance and monetary officials from the Group of 20 nations this weekend in Mexico City. “One of the results of the slowdown is that the global currency war is intensifying.”

 

As developed economies have aggressively eased monetary policies in a bid to revive their sputtering economies, their currencies have weakened. That, in turn, has made their exports more competitive and has prompted investors to move money into higher-yielding assets—in many cases in emerging markets such as Brazil, where economic growth and base interest rates are considerably higher.

 

The Brazilian real in recent days, has appreciated to about 1.70 real to the dollar, a 9% gain so far in 2012. The stronger real hurts Brazilian exporters and manufacturers.

 

Mr. Mantega said Brazil‘s government has “a large arsenal of instruments” that it will use “to prevent an excessive appreciation of the Brazilian currency.”

 

Since late 2010, when Mr. Mantega first starting speaking of currency wars, Brazil‘s government has used a number of tools in efforts to stem the real’s appreciation.

 

These actions have included frequent purchases of spot dollars and dollars for forward delivery by the central bank. The bank also has occasionally held swap auctions, at which investors exchange dollar-linked bonds for paper indexed to domestic interest rates.

 

More controversial moves have included taxes on short-term foreign loans, short-dollar positions in the futures market and short-term fixed-income investments.

 

Mr. Mantega declined to set an ideal level or a trading band for the Brazilian real.

 

Although Brazil‘s complaints about currency depreciation may be high on its list of priorities at the G-20 meeting, Europe’s debt crisis, the “firewall” bailout funds to contain it and its impact on global growth will no doubt dominate the discussions.

 

“The Europeans, and not only them because the U.S. also bears its share of responsibility, are dragging down the world economy,” Mr. Mantega said. Brazil, at the G-20 meeting, will express its worries about European policies, which, he added, are focused only on the immediate problem of debts, not on the broader issue of how to stimulate world economic growth.

 

“The [European] firewall is not completed and there is risk of contagion, including for emerging-market countries,” he said.

 

Mr. Mantega said Brazil will suggest greater coordination of international economic policies during the G-20 meeting, with the aim of promoting greater world growth.

 

Such policies could include greater government spending or tax cuts, he said. “Brazil is one of only three G-20 countries likely to post higher growth in 2012 than in 2011,” Mr. Mantega said. He added that Brazil has been able to do this through both monetary loosening and tax incentives.

 

Mr. Mantega said Brazil favors a greater role for the International Monetary Fund, including increased capitalization of the IMF in the face of the current crisis. However, he said increased IMF funding for debt-laden European countries should be based on bilateral agreements and IMF monitoring. The monitoring should focus on both debt management and promotion of economic growth, he added.

 

Mr. Mantega said finance ministers of the so-called BRIC countries of Brazil, Russia, India and China will again discuss the possibility of creating a development bank with resources from the four countries. “This is still under discussion,” he said.

 

He said the BRIC finance ministers will meet in Mexico on Saturday to discuss the development bank idea and to present a common proposal for changes at the World Bank, where the multilateral lender’s president, Robert Zoellick, recently said he would step down when his term expires June 30.

 

“The BRIC countries will not propose a specific name for the World Bank presidency, but we will propose a profile, a set of criteria, based not on nationality but on merit,” Mr. Mantega said.

 

 

PETROBRAS NEW PRESIDENT ON FEBRUARY 9TH – NRCI Risk Update 30th January

Petrobras Replaces CEOBrasilia: Monday, January 30, 2012Petrobras CEO José Sérgio Gabrielli leaves the company to be replaced by Maria das Graças Foster, a company veteran with close ties to President Rousseff. Gabrielli, appointed to the position by former President Lula in 2005, steered Petrobras through six important years which included the massive pre-salt discovery in 2007 as well as the controversial 2010 $70bn share offering that increased the government’s stake in the company. Gabrielli is expected to pursue a political career by joining the government of the state of Bahia, where he may run for governor in 2014.Graças Foster, likely to be approved at the next meeting of the company’s board of directors on February 9th, joined Petrobras in 1978 as an engineer and currently serves as director of gas and energy. Just like Rousseff, Graças Foster is a competent technocrat and perceived as a tough manager. Furthermore, analysts expect her to support the government’s rather interventionist policies toward the oil industry, thus reducing the potential for conflicts between the company and the government. President Rousseff is a strong advocate of the local content policy that requires 65 percent of Petrobras’ equipment to be made in Brazil, which has caused several bottlenecks in the supply chain. Local media reports of a broad reshuffle of the top management to coincide with the appointment of Graças Foster, although this is denied by the government.The Petrobras stock failed to live up to its expectations following the pre-salt finds, instead falling 40 percent since late 2009. But markets reacted positively to the news of Graças Foster’s appointment, as the stock immediately soared 4 percent to an eight-month high. Despite the respect Garças Foster enjoys in the oil industry and financial markets alike, her close ties to President Rousseff certainly raise questions of excessive political interference in the industry. The government already holds a 48 percent share in Petrobras and controls about two thirds of all voting shares. Still, a healthy relationship with the company’s largest shareholder proves vital for Garças Foster as she leads Petrobras toward its goal of doubling output by 2020.

Advise to Russia –Do as Brazil did (but pre pre-salt)- Financial Times, 26th January

Economic overview 2011/2012 – Ministry of Finance, 26 January

In a recent overview of Brazil’s economic situation, finance minister Guido Mantega predicted that GDP growth during 2012 will be somewhere between 4% and 5%, with a figure closer to 4% likely if the current global economic problems continue. He also said he expected Brazil’s final growth figure for 2011 to be between 3% and 3.5%.

He pointed out that Brazil has recently overtaken the United Kingdom as the world’s sixth largest economy (it is now behind only the US, China, Japan, Germany and France) and suggested that in the next few years it will rise further in the ranking, given that in 2011 its growth rate was higher than any of the other top six countries apart from China.

He expressed particular satisfaction with the rate of job creation, which has pushed unemployment down to a historic low of 5.2%. “In a year in which unemployment rose in the rich countries, Brazil managed to create 2.3 million formal jobs up until November,” he said.

Earlier this week it was announced that Brazil’s annual inflation rate in 2011 was slightly under 6.5% – just inside the target range of 4.5% plus or minus two percentage points. Mantega forecast that annual inflation in 2012 will be much nearer the middle of the target range, at around 4.7%.

 

Opening a business in Brazil

Setting up shop has just got easier. But not much

Why make it simple?

Jan 21st 2012 | SÃO PAULO | from the print edition

BRAZIL is not an easy place to start a business. The World Bank ranks it 120th out of 183 countries—worse than Burkina Faso or Nigeria. Take one small example. Until recently, you needed at least two partners to form a limited-liability company. Sole traders had to find a “1% sócio”—an employee, friend or family member willing to lend his name to the articles of association, or a shell company set up solely to hold a tiny share.

Things may have just got a little easier. A new law, which supposedly came into effect on January 9th, allows a lone business-owner to set up an Empresa Individual de Responsabilidade Limitada (Eireli for short): a single-holder limited-liability firm. The main requirement is capital of 62,200 reais ($35,250).

This is a big deal. Alas, it may not happen as planned. In December the federal body that oversees state business registries told them to turn away firms trying to register Eirelis, as well as foreigners without permanent right of residence. No reason was given. Later, lawyers were briefed that the law’s aim was to let Brazilian sole traders protect their personal goods against lawsuits or bankruptcy—not to make life easier for big business or foreigners.

 

 

Brazil’s benchmark interest rate falls to 10.5% per year – Agência Brasil- January 19

For the fourth consecutive time, the Central Bank’s Monetary Policy Committee (“Copom”) has reduced the country’s interest rate, the Selic, by 0.5 percentage points. So, the Selic went from 11% to 10.5%.
Back at the beginning of 2011, Copom faced a surge of inflation (there was an election in 2010) and raised the Selic five consecutive times until it peaked at 12.5% in July.
However, six weeks later at its next meeting in August 2011, Copom began to loosen the reins as the international scenario worsened. In a controversial decision that was not unanimous, Copom voted 5 to 2 to lower the Selic by 0.5 percentage points and has continued the reductions at subsequent meetings.
The successive reductions of the Selic are in line with market expectations as can be seen in weekly financial institution surveys by the Central Bank, known as the Focus report. According to the latest Focus, the market forecast is for the Selic to close out 2012 at 9.5%. The conventional wisdom is that reducing the Selic stimulates economic activity by making credit cheaper and boosting consumer spending. Lower interest rates also improve the government’s balance sheet by lowering the cost of the public debt. A lower Selic also has a positive effect on the exchange rate, expanding exports and lowering the amount of dollars that enter the country, which keeps the real from further valuation against the dollar.