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Meanwhile, Brazil's Currency Just Plunged To An All-Time Low...
On Monday, we updated the rapidly deteriorating situation in Brazil which for the uninitiated, faces a laundry list of seemingly intractable problems which Goldman recently summarized as follows:
We expect the economy to continue to face headwinds from:
- the ongoing fiscal and quasi-fiscal adjustment
- higher interest rates
- increasingly exigent credit conditions
- rapidly weakening labor market
- higher levels of inventory in key industrial sectors
- higher public tariffs and taxes
- high levels of household indebtedness
- weak external demand
- soft commodity prices
- political uncertainty
- extremely depressed consumer and business confidence
And believe it or not, that’s actually putting it nicely. The outlook for Brazil’s fiscal adjustment is clouded by the country’s political crisis which threatens Dilma Rousseff’s presidency and makes passing badly needed spending cuts virtually impossible. Meanwhile, the current account continues to face pressure from a commodities slump that's exacerbated by depressed Chinese demand.
Of course as Pedro Paulo Silveira, an economist at TOV currency brokerage in São Paulo told WSJ this week, “there’s a negative feedback between the economic and the political crises,” which helps to explain why the economy officially slid into recession in Q2 (a quarter during which Brazilians suffered through the worst stagflation in over a decade) and also suggests that before it’s all said and done, Moody’s and Fitch are likely to follow in S&P’s footsteps by cutting the "B" in BRICS to junk.
All of the above translates to near daily doses of bad economic news, downbeat analyst pronouncements, and currency turmoil and indeed, Tuesday was no different as the real slid to a record low and Brazil CDS blew out to near six year wides:
Of course the plunging BRL puts the central bank in a tough spot. That is, the risk of FX pass-through means adopting countercyclical policies in order to boost the economy is pretty much a no-go lest inflation expectations should become completely unanchored. Here’s Goldman, commenting after the release of September IPCA-15 inflation data:
We expect annual headline inflation to end 2015 above 9%. The lagged pass-through from BRL depreciation, pass-through (second-round effects) from the large shock to administered prices to freely determined prices, inertia, and formal and informal indexation mechanisms are also likely to keep inflation under significant pressure in 2016 despite the projected severe contraction of real GDP in 2015 and likely extension of the recessionary cycle into 2016.
And here’s further commentary from Goldman on the current account (where the deficit actually managed to print better than expectations last month):
The deterioration of the current account in recent years reflects to a very large extent the very significant decline of the public sector savings rate driven by the significant increase in non-investment spending. Therefore, as we have argued before we believe a weaker BRL and a significant, permanent, and structural fiscal adjustment are key to restore domestic (i.e., lower inflation) and external balance (i.e., to promote an orderly adjustment of the large current account deficit).
"Brazil needs growth, a development agenda, sufficiently low inflation [and] to find fiscal balance," Finance Minister Joaquim Levy (who very nearly quit out of frustration earlier this month) said today in Brasilia, even as lawmakers near a vote to override a Presidential veto on spending measures that threaten to undermine fiscal rectitude.
"[Although] Brazil’s government may ask Congress to postpone voting on President Rousseff vetoes of measures that threaten fiscal adjustment, the delay wouldn’t be positive, [as it] would be seen as further sign that the government doesn’t have enough political power to impede a loss, and the risk of vetoes being overridden would only be postponed," Lucas Aragao, partner at Arko Advice, told Bloomberg on Tuesday.
As Goldman suggested last month - and as tipped by the fact that the central bank's recent actions are indicative of a shift to crisis mode - expect the BRL to bear the brunt of the pain going forward. Here's Credit Agricole's Mark McCormick: "[I] don’t see much relief for the real in the cards in the short term. Idiosyncratic factors are driving the BRL now and we have a big week ahead with Congress slated to vote on Rousseff’s veto. Move to 4.5 in the next 6 to 9 months is not ruled out if growth continues to falter, fiscal outlook deteriorates and Brazil gets downgraded by another rating agency."
As for what happens if the dollar swap firewall eventually proves insufficient, we leave you with the following assessment from Sidnei Nehme, director of the NGO brokerage in São Paulo who spoke to WSJ:
“If there’s another rating downgrade, the bank will probably have to sell reserves. But that could be bad too, because the moment they mess with the reserves, that sends a sign of fragility and the real could be subject to speculative movements.”
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Since around this time in 2013, gold is up 50% vs. the BRL.
Just posting as a public service to those who only think about Au in USD terms.
For Real?
And if Brazil dies, you die, for real!
Brazilian.....just another name for a haircut. A VERY close shave indeed
No no no, that record low is just a Limbo pole, you try to dance/shuffle underneath it
White man can't dance
How about since around this time in 2011? Say, August.
Since August 2011, Gold is UP around 32% in Brazilian Reals:
http://www.kitco.com/gold_currency/index.html?currency=brl&timePeriod=10y&flag=gold&otherChart=no
GOOOOOAAAAAAAL.........D!!!
USD is up almsot 100%
a market crashing closely parallels a slow motion train wreck
Time to invest in Brasil yet?
Until the shock wave hits your particular carriage.
In unrelated news: Berlusconi is on a jet to Sao Paulo, and is going to buy 1,000 Brazilian sex slaves in counterfeit-lira-bearer-bond terms.
christine welcomes janet to the roach motel:
IMF's Lagarde: weaker global growth complicates development goals
http://www.reuters.com/article/2015/09/22/us-imf-development-idUSKCN0RM1XG20150922
Maybe so, but their babes are still 'the' babes.
Inverted BRL tracks (leads?) GLEN and FCX quite well.
I started doing business in Brazil in the late 90s. It was great. There was a law (don't know if it is still in force) that all payables had to be paid within 28 days. They had Motoboys running payments to the bank because banks would accept the payments for pretty much anyone.
... and yes the women were very attractive (at least in the south) and there were a lot of places you did not want to go because whether American or local, there was a chance you would be kidnapped and held for ransom.
2:1 was pretty much the expected exchange rate except during political unrest.
My wife is Brazilian. She gets a monthly benefit from her deceased father's military retirement. Needless to say this exchange rate is bad news when we try spending that money here in the states.
Yeah, you can kiss that money goodbye. I too am married to a Brazilian (daughter of a Brazilian Air Force General) and although he is still alive, we aren't counting on one penny of that pension. Her mother, however, is receiving her father's pension and it is indeed an obscene amount particularly for a woman who has never worked a day in her entire life. Brazil is really and truly fucked and paying FUCKING RIDICULOUS outsized pensions to daughters and wives of dead officers is in part why they are so fucked.
Well, that and the fact their labor laws are soooo ass backwards. Not to mention the import duties. Seriously all import documents must be signed in BLUE ink. What the hell is that about?
I need to marry one of these daughters of retired officers
...long sugarcane!
The woman in the photo can move in with me. I'll feed her.
Yeah, you think it's all bunda and great sex now but wait until you start realizing the actual cost associated with supporting a Brazilian. Brazilian women sell you a sad sack story about the horrible deprivation they endured back in the mother country but boy they sure adapt to their new found status in the US right quick. Countless hours spent on vacuousness the likes of which makes most American woman like downright salt of the earth. Most of them want fake tits (if they don't have them already) right out of the gate. Then it's their hair, treatments for cellulite, eyelash extensions and hair straightening. Did I mention that they generally don't do much with their horrible educations? Yeah, that translates into HOURS of Facebook. Fucking non-stop Facebooking. Don't get me started on designer clothes and keeping up with the other Brazilian bitches who married into money, usually starting as an au pair and chugging dad's cock all the way to divorce court.
Yeah, you go for it friend. See how long that party lasts.....
No matter where the women are born, they wil cause trouble.
Eskimos...pygmies....I don't give a fuck. They are all pains in the ass.
At least Brazillian babes take pride in appearance, and embrace tight asses and big titties. I appreciate that. I really don't care about mental stimulation from them (I got you bitchez for that).
American whores only care about covering their flab with tatts, and hauling your ass off to divorce court so you can pay alimony for her and her new lesbo lover.
I don't know dude. Pygmies are pretty hot.
Actually that pig Kardasian looks like f****ng pygmy.
The girl from Ipanema emailed me and asked if I'd donate to her account at the nursing home.
You think "taking pride" in their appearance translates into waking up looking fresh and putting on some mascara and heading out the door I imagine. LMFAO. No, think 60 minutes of prep at least and possibly more. Think obnoxious self conceit bordering on pure neurosis. It's not nearly as sexy as you think and in fact gets pretty fucking old when you're actually in a hurry. Supporting broads who quite openly and proudly declare that they won't set foot out the front door without putting on makeup is actually fairly off putting to put it mildly. Oh & btw, Brazilians don't have big titties by nature and if you don't think the Brazilian women are keen to haul your ass off to divorce court, think again. Plus you get the added benefit of being on the hook for much more than usual as they aren't terribly well educated and have very little chance of ever supporting themselves through their own endeavors.
Yeah, you go for it friend. See how long that party lasts.....
Yeah - it lasts about as long as Brazil's defense against Germany 2014 World Cup semifinal.
https://www.youtube.com/watch?v=Oo2_yFv1kmQ
About 25 minutes. Even the British BBC announcers were making fun at the Brazilians for their pathetic defense.
marriage is scam everywhere in the western world, but I think you get overal better and cheaper pussy in latin america...
more likely you will get a woman that actually cook and clean, won't balloon into a land whale, and it is likely likely that a brazilian will let you put it on her pooper and give you better sex overal... plus boobjobs in Brazil are waaay cheaper, even a lot more cheaper in Colombia or Venezuela.
Hit and Quit it or short term date/lease is still a better business.
Brasil could auction hunting permits for Guarani natives...or sell more youngsters into the sex trades....very inventive people.
This could be the way the world is going. Only fixing the monetary system will we see a chance for a new beginning BUT that will be painful and it needs to happen 'organically'. ...than means we need an economic disaster.
Until then we see the horrors of the Weimar visited upon many of the world's peoples.
You didn't think Obama was just gonna let BRICS have an easy ride did you?
1. Russia Xmas 2014
2. China Summer 2015
3. Brazil Fall 2015
India better buckle up they're next
Brazil is the new Argentina ?
Then in a few months Venezuela will go Argentine ?
What about Peru ?
Venezuela is already going Argentine. I think Peru is in better shape...
Bra...Zil...
I got zil, bra...
Is Brazil part of the BRICS? Part of the new "bank" that is to take an equal place in world finance? Part of the new global powerhouse?
That did not last long. But it no one's fault but their own. This was not caused by outside forces, from what I know. But by internal corruption that stole the country blind during the more recent good times and their own politicians who did not reinvest in the country when the money was flowing.
Now Brazil is a target for the economic hitmen. And the corruption is still unchanged so it is expected that the foreign finance vultures will have their way.
You are right it's their own fault. But I guarantee you most of the ignorant class are blaming the US for their fiscal problems. I got an ear full of it last time I was there in 2014. They don't realize what sleeping in bed with Chinese will do for you.
Come with me to Rio, come with me tonight. We'll fall in love on a champagne flight. You're such a classy lady, you were made for Brazil.
https://www.youtube.com/watch?v=8cZhS-Mqr6o
Y'all bitchez too young to remember that.
Brazil? The mixed race utopia? Every hebrew's dream nation? You mean it isn't super prosperous? But it's so DIVERSE! So Multi-cultural! Maybe it just needs more Muslims?
There was a young blonde woman in my grocery store yesterday. She was very tall and her legs did not stop. She was speaking a language I did not recognize to her older companion, possibly her mother. I guess it was Portuguese. The mother was not tall and a brunette. Looks like they both made it to the Great White North.
PS. The girl in the article is better looking than the girl I saw in the store. So we didn't snag one of the best.
2 post op tranny lesbians. Surgery paid for by the Canadian government.
Just one word:
Offshore non-deliverable currency swap.
Can anyone point me to a chart (graphic) of the major world currencies vs the USD or gold (covering at least the past 1 year, but prefer the past 5~10+ years)? Thanks.
Lets do a debt restructuring in exchange for ten million 20 something beach models.
Senhor Silveira needs to look up the difference between "negative" and "positive" feedback!
Wow --- and to think that ZH was, just a year of so ago, telling us how BRICS was going to replace the US as the world economic power. Such wonderful pattern recognition skills. And besides Brazille there is China which has been systematically destroying its environment, minor things like air and water, and a large percentage of people with money are fleeing to --- guess where. And Russia, that stays aflot as long as Oil is north of $50.00 a barrel. Or maybe 40. But not 30. and South Africa. Cause??? India is the only country not likely to have serious problems in the next 5 years.