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FX Traders Fear "Worst Case Scenario" For Brazil As FinMin Cancels Travel Plans, Rousseff Meets With Lula
It’s not that we want to pick on Brazil, it’s just that simply put, it’s one of the most important emerging markets in the world, which means that when depressed demand from China, plunging commodity prices, a shock devaluation from the PBoC, and the generally lackluster pace of global trade conspire to trigger an emerging market meltdown, Brazil is very likely to end up at the center of it all and sure enough, that’s exactly what’s happened.
Late last week, we noted that Brazil officially entered a recession in Q2, a quarter which also ushered in the worst stagflation in a decade and saw unemployment rise to five-year highs. Then on Monday, the government officially threw in the towel on running a primary surplus (striking a major blow to market confidence in the process) and then yesterday, we got a look at industrial production in July which missed wildly, coming in at -1.5% m/m versus consensus of -0.01%. Meanwhile, exports cratered 24%.
We could go on. And bear in mind that the budget issue is complicated by the fact that Rousseff’s political woes are making budget cuts next to impossible to pass. As Italo Lombardi, senior LatAm economist at StanChart told Bloomberg earlier this week, the admission that the country would likely miss its primary surplus target underscores the trouble "Finance Minister Joaquim Levy faces in winning congressional approval for austerity measures and pushes Brazil’s credit rating closer to junk status." "Politics are making Levy’s life very difficult," Lombardi added.
So difficult in fact, that he may now resign and that, according to at least one trader, would be the worst scenario possible. Here’s Bloomberg with more:
Brazil’s real declined for a fifth straight day and fell to a new 12-year low as speculation grew that Finance Minister Joaquim Levy is closer to leaving his post amid budget turmoil.
A gauge of the rout’s momentum rose to a five-month high as a Valor Pro newswire columnist, citing unidentified people at presidential palace, reported that Levy canceled a trip to the Group of 20 meeting in Turkey and planned to talk with President Dilma Rousseff later Thursday. In a setback for Brazil, the Treasury scrapped an auction of local fixed-rated government bonds for the first time in 19 months as yields at a six-year high made borrowing expensive.
“Seeing Levy leave would be worse than Rousseff stepping down or even her impeachment,” Guilherme Esquelbek, a currency trader at Correparti Corretora de Cambio, said from Curitiba, Brazil. “His departure is the worst scenario we can have right now.”
Meanwhile, Copom is stuck between a rock and a hard place - that is, they can’t hike to support the currency because the economy is in such terrible shape. Here’s Goldman on Wednesday’s MPC decision to hold Selic at 14.25%:
One could argue that given the drifting currency (approximately 20% since June) it would even demand additional rate hikes if the monetary authority's objective is still to, with reasonable confidence, drive inflation to the 4.50% target by end-2016. However, given the rapidly deteriorating real activity picture and heightened political/institutional noise and uncertainty, near-term rate hikes are unlikely.
And in the wake of last week's GDP data and Monday's confirmation of the budget blues, Barclays is out with a bit of decisively negative commentary both on the outlook for the economy and for the fiscal situation. Here's more:
We now forecast a 3.2% fall of real GDP in Brazil in 2015, to be followed by a 1.5% contraction the next year. The downside surprise in Q2 and the deeper recession in the second half of this year also imply a negative contribution to next year’s growth. Household consumption should continue contributing negatively to headline growth, together with fixed asset investment.
The disappointment with fiscal execution, coupled with the lack of capacity of the government to negotiate structural changes in how expenditures grow, leads us to expect a fiscal primary deficit for this year and next of 0.3% and 0.5% of GDP, respectively. For 2015, the fiscal measures approved in Congress were reduced meaningfully from the original proposal and are contributing with only 0.53% of GDP to the fiscal balance. Even including those, we forecast total real fiscal revenues to fall 3.2%, as the growth slowdown is having the biggest negative contribution on this year’s result.
And the inevitable result (as we’ve been saying for months):
The implication is a downgrade in less than one year. We believe the rating agencies will take off the investment grade rating in H1 16, starting likely in April by S&P, given the increased pace of deterioration of the macroeconomic juncture and the disappointment relatively to the agencies’ forecasts. Moody’s could follow suit in the second half of the year, if it becomes clear that the country will fail to achieve real GDP growth and the primary surplus as percentage of GDP near 2%, as the agency expects for 2017. At this point, it is very hard to foresee any meaningful change in the political and/or economic scenario that could avoid such an outcome.
Finally, in what is always the surest sign that a market-moving rumor is probably true, we got the official government denial this afternoon:
- LEVY SAYS HAS NO PLANS TO LEAVE BRAZIL GOVT: EL PAIS
Underscoring how serious the situation truly is, the headlines are still coming in with Bloomberg reporting that former President Luiz Inacio Lula da Silva "will travel to Brasilia tonight to meet with President Dilma Rousseff" for a one-on-one where the two will discuss "higher pressure on Finance Minister Joaquim Levy, 2016 budget proposal and possible restoration of CPMF tax."
Clearly, this is bad news. All sarcasm and jokes aside, it looks as though Brazil may be about to step off the ledge here. You now have a President with an approval rating of just 8% convening an emergency meeting with the former President, a finance minister on the verge of pulling a Varoufakis, a plunging currency, a hamstrung central bank, and a nightmarish fiscal situation.
So... who wants tickets to next summer's Olympic games in Rio?
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Brazil is a great movie. Thought inducing as well.
Zion is a scheme, not an ethnicity.
Their national team's debacle at World Cup last year was a bad omen.
currency trading is unnecessary, unproductive and immoral. It should be stopped. It should be made illegal. We don't need currency trading. We need to buy money only when we want to finance real trade.
To finance real trade you will need currency- commodity or fiat, it is still currency.
Centuries ago, merchants travelled and traded using gold & silver as currency.
Touchstones and scales were their protection agains the debasement of currency.
Today, a few bits of data on a hard drive or a piece of paper with fancy printing are supposed to do the same thing.
Good luck trying to verify the true value of either. Here's the thing, neither have any.
They let in four goals in six fookin' minutes! It was surreal!
They let in four goals...
How many points are there in a goal?
One goal is one point, any dunderhead knows that, unless you're American of course. They got their "football".
You talking about soccer?
4 goals is like 6 games worth of scoring in that boring ass game!
At least, in proper football, the prmary part of the game is a foot touching a ball.
American 'football' should be called handball, based on the what happens.
As of late, however, both activities should be called 'advertising ball' or 'distraction ball'.
If you watch a game for the skill involved, the score doesn't really matter.
But we all get trophies for showing up?
a fiscal primary deficit of .3% of GDP.... That is bettre than USSA by a decimal place!
World Cup 2014 and Olympics 2016 are going to bankrupt Brazil? Say it ain't so...
Greece 2.0. Now all we need is for Goldman Sach to cook the books and get another debt drama going.
My take without through insight. Brazil suffers from the same disease as Argentina. The people just cannot keep themselves in check once they have power or access that can be abused. Brazil had the chance to be sitting pretty right now but corruption wasted the boom time and now it's over and they are screwed. Corruption was both homegrown and due to outside influence. Those from outside have set the stage and much of the profits from the good times have been removed from Brazil. The outsiders also injected a brand of financial cancer into Brazil and plan to put Brazil into greater debt. Then they can have their way again, maybe cut outside liquidity to Brazil and/or create internal instability. BRICS, BRICS bank, Russia bank, pffffttt
The World Cup and especially the Olympics are to be there due to the corruption. The outsiders will rake in the profits and leave nothing by debt for Brazil. Maybe it will be a stage to discredit Brazil with chaos they instigate or a false flag. The group with the inside track for the corruption regarding the Olympics has seemed to be a little different than the World Cup, the financial team with the Olympics seems to have zionist/NWO type connections.
And once again, I am not saying the US or Europe is any better than Brazil regarding corruption just been able to hide the effects better.
Yeah, Hillary is a prime example of how we have been able to hide our corruption.
Maybe we can get them to join the North American Union and adopt the Amero.
Brazil is beyond fucked. Being fucked assumes at some point a return to normality. As opposed to past inflations and re sets this one hasn't even approached the apex.
On top of that this commie whore (Dilma, not Obozo) will be tagged in the Petrobas looting - only a matter of time. Same for that fat fucktard Lula. So factor in a govrernment collaspe at some point.
I may even have to tune in for the Fecalympics.
(fyg, pls do better with the Brazilian babe TA - this is not worthy)
"fyg, pls do better with the Brazilian babe TA - this is not worthY"
hERE YA GO
https://www.youtube.com/watch?v=3oJwntsYq3c
Well done Misean. The Fight Club salutes you.
Holy mother of god! they are breeding an army of Kardashians! We are seriously fucked (hopefully).
Even better: https://www.youtube.com/watch?v=42tYFTq1qw8
Finace Minister of Brazil Joaquim Levy? Lemme guess, dual citizenship? Can a non-tribe member print anyone's money?
Lemme guess.
The country goes down the toilet if the Finance Ministry falls back into the hands of the locals.
"You guys hate us so bad, then fuck you. Fix it yourselves. I don't need this shit."
It's trial baloon day at Zero today.
BRICS getting BRICslapped -
https://www.youtube.com/watch?v=eFaIhXEt6hg
https://www.youtube.com/watch?v=VB8EpbU1z9I
Up vote for The Saint, one of my all-time favorite shows, along with Danger Man/Secret Agent Man, The Prisoner, The Avengers, Rockford Files, Dr. Who, and Then Came Bronson. Yeah, I'm ancient (and irrelevant in a FB/Twitter world).
Thought The Prisoner was pretty cool.
Once visited Prtmerrion - strange place.
I am not a number I am a free man!
So you think this is Brazil's problem?
The sharks in the fishbowl are getting bigger every day, they will not survive without bigger and bigger preys... soon enough there will be just big sharks bitting each other.
Peak Oil, population overshoot, resource depletion, ecological destruction, and corrupt elites co-opted by G_ddamn Sucks, the Rockefeller-Rothschild syndicate, and the corrupt Int'l Olypmic Committee.
What more evidence for collapse would one want?
a 16 point bullet list
Won't this lower the price of hookers?
I'll take tickets to Women's Beach Vollyeball. Thanks.
What if we went back to the original olympics(708BC):
PentathlonThe Pentathlon became an Olympic sport with the addition of wrestling in 708 B.C., and included the following:
Running / Jumping / Discus Throw 3 different racesAthletes used stone or lead weights called halteres to increase the distance of a jump. They held onto the weights until the end of their flight, and then jettisoned them backwards.
Discus throwThe discus was originally made of stone and later of iron, lead or bronze. The technique was very similar to today's freestyle discus throw.
WrestlingThis was highly valued as a form of military exercise without weapons. It ended only when one of the contestants admitted defeat.
BoxingBoxers wrapped straps (himantes) around their hands to strengthen their wrists and steady their fingers. Initially, these straps were soft but, as time progressed, boxers started using hard leather straps, often causing disfigurement of their opponent's face.
PankrationThis was a primitive form of martial art combining wrestling and boxing, and was considered to be one of the toughest sports. Greeks believed that it was founded by Theseus when he defeated the fierce Minotaur in the labyrinth.
Equestrian eventsThese included horse races and chariot races and took place in the Hippodrome, a wide, flat, open space.
I'm sure Brazil can come with a wide flat open place
And it was all nude.
Nude men. All male olympices. And 3 up votes? Bunch of homos. Not that there is anyrthing wrong with that.
What if we went back to the original olympics(708BC):
PentathlonThe Pentathlon became an Olympic sport with the addition of wrestling in 708 B.C., and included the following:
Running / Jumping / Discus Throw RunningRunning contests included:
- http://www.olympic.org/Resources/Images/bullets/bulletGrey.gif) 1px 6px no-repeat;">the stade race, which was the pre-eminent test of speed, covering the Olympia track from one end to the other (200m foot race),
- http://www.olympic.org/Resources/Images/bullets/bulletGrey.gif) 1px 6px no-repeat;">the diaulos (two stades - 400m foot race),
- http://www.olympic.org/Resources/Images/bullets/bulletGrey.gif) 1px 6px no-repeat;">dolichos (ranging between 7 and 24 stades).
JumpingAthletes used stone or lead weights called halteres to increase the distance of a jump. They held onto the weights until the end of their flight, and then jettisoned them backwards.
Discus throwThe discus was originally made of stone and later of iron, lead or bronze. The technique was very similar to today's freestyle discus throw.
WrestlingThis was highly valued as a form of military exercise without weapons. It ended only when one of the contestants admitted defeat.
BoxingBoxers wrapped straps (himantes) around their hands to strengthen their wrists and steady their fingers. Initially, these straps were soft but, as time progressed, boxers started using hard leather straps, often causing disfigurement of their opponent's face.
PankrationThis was a primitive form of martial art combining wrestling and boxing, and was considered to be one of the toughest sports. Greeks believed that it was founded by Theseus when he defeated the fierce Minotaur in the labyrinth.
Equestrian eventsThese included horse races and chariot races and took place in the Hippodrome, a wide, flat, open space.
I'm sure Brazil can come with a wide flat open place
Here ya go
https://www.youtube.com/watch?v=3oJwntsYq3c
Hey ZH readers, as i posted at another topic, if anyone is interested in brazilian history and want to see our 'Ron Paul' that would have saved Brazil but zionist media never supported him, check out this video:
https://www.youtube.com/watch?v=efAgr7LKNO0
Its a speech that he made in english about the financial system and Brazil. You guys will like.
Cheers from banana republic.
BRA-zil
Nice big shithole, fucked up by politics and asshole "leadership"
Just in time for the Limpics!
Says some dude from Jamaica.
I agree , no way Jamaica is not a bigger shit than BraSIL.
AND DON'T FUCKING TELL ME I SPELLED IT WRONG
.,
Brazil, is a great movie.
Brasil is a country and any article about it should have way more photo's of Brasilian asses than this article.
Nobody cares a single fuck about Brasil apart from the single or hopefully, multiple fucks, it can deliver.
Fuck Brasil. Literally.
My first double post.
Figures it's about fucking Brasilians.
Fuck'em twice I say!
JUST FUCK YOU ONCE TO YOU SIR.
Revelation 18:4
King James Bible
And I heard another voice from heaven, saying, Come out of her, my people, that ye be not partakers of her sins, and that ye receive not of her plagues.
What did King James have to do with the Bible?
the pope and the king were the two most corrupt people on earth
He's been giving them out at his midnight basketball leagues in Cleveland.
For all this talk about the BRL declining in value in recent months, prices in the shops here are now getting closer to a reasonable PPP for visitors using other currencies. Truth is that the BRL has been grossly overvalued for the past 6-7 yeras maybe longer as the economy has boomed. A good exchange rate beteen the GBP and BRL is about £1 = R$5.5 or £1= R$6.00. This achieves PPP on many items.
Personally I think a trip to Brazil is now in the books as you get some real distance with the old US Dollar. Columbia looks good also.
I clicked to see a larger version of a nice bust and all I found is an article about an even larger bust. Fucking irony.
NSFW - wet T shirt. No bra.
https://www.youtube.com/watch?v=0z1rSYqs_Ko
You need to take a look at the "printer-friendly" version of the article and scroll down.
"Politics are making Levy’s life very difficult," Lombardi added.
Well isn't that interesting. We have the same problem in the US. I blame it on the Republicans for not teaching finance. Because the Democrats aren't going to do it.
And how about that Zionist media in the US? PBS even.
https://www.youtube.com/watch?v=D-CLHrGFiVI
Uh. "Wrong" one.
How about this one:
https://www.youtube.com/watch?v=PJWLt1TmAy4