Archive for the ‘Brazil Economy’ Category

Rio Floods: Fixing Favelas and the Future

April 9, 2010

At least 170 people died after a week of heavy rain prompted mudslides and floods in Rio de Janeiro state. More than 50 houses were engulfed as mud and rubble poured into the Morro do Bumba favela near Rio de Janeiro. The shantytown was built on top of a disused landfill which makes it prone to landslides.

Most of the victims were swept away in landslides that roared through favelas (slums) built on steep, unstable hillsides. The tragic affects of the floods do not touch tourist areas.

With the images of the deadly mudslides and flooding in Rio de Janerio circling the globe, the Brazilian government has sought to preempt any ideas that rains risk turning the preparations or the 2014 soccer World Cup and the 2016 Olympic games themselves into debacles.

In a conference call with international reporters this week Brazilian Planning Minister Paulo Bernardo said funds were being marshaled to repair damages from the flooding in Rio and elsewhere (other Brazilian population centers have also been lashed by floods lately). In the call, Bernardo said 7 billion reais ($3.9 billion) had already been set aside for recovery of flood-stricken areas as part of the government’s pro-economic growth package.

He also said that investments will be made in sanitation, housing and infrastructure so that Rio and other cities will be better prepared for heavy rains in the future.

“So the government is not predicting—is not foreseeing any type of major hindrance or disaster in this regard because all the measures are being taken … We do not foresee any natural disasters … during the World Cup or the Olympic Games because … they will be held … outside the rain season in Rio de Janeiro particularly.”

On Thursday, the government also announced it was dispatching some $100 million in emergency funds as well as a new fleet of ambulances and medical systems to help Rio de Janeiro cope with the impact of the flooding.

For more maps of the areas around Rio, click HERE.

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Brazil Oil Update

April 9, 2010

China Showing Interest in Brazil’s Oil

Chinese energy companies will likely participate in bidding for Brazil’s offshore subsalt oil reserves when auctions begin and are already seeking to buy stakes in existing oil projects.

Chinese President Hu Jintao plans to visit Brazil next week to strengthen ties with Brazil as it taps tens of billions of barrels in the offshore subsalt province that has become a new frontier for petroleum exploration.

Auctions for the subsalt blocks have been yet been scheduled because Congress is still discussing new rules for companies investing projects there, part of an attempt by President Luiz Inacio Lula da Silva to boost state control over those areas.

Chinese companies are also interested in investing in refineries and biofuels projects, possibly allowing them to import finished motor gasoline that is already blended with ethanol.

Chinese companies have been insistent on being majority shareholders in new joint ventures, which would prevent them taking part in projects with state oil company Petrobras that are already in development.

Brazil’s 11th bidding round for oil blocks, which includes onshore and shallow water projects but not subsalt blocks, will likely not take place until 2011.

Petrobras Finds Light Oil in New Tupi Well

Brazil’s oil giant Petrobras said on Wednesday it found light oil in a new well that confirmed its estimate of 5 billion to 8 billion barrels in the Tupi offshore field.

The oil field is part of the country’s massive offshore subsalt area, which Brazil hopes will turn it into a major player in energy markets.

The new well, known as Tupi OW, is located at a depth of 2,131 meters (7,000 feet) and is 270 km (167 miles) from the coast of Rio de Janeiro.

Petrobras holds a 65 percent stake in Tupi, Britain’s BG Group has a 25 percent stake and Portugal’s Galp has10 percent.

For relocation to Rio de Janeiro, visit RentinRio.com

Brazil Announces $880 Billion Infrastructure Plan

April 1, 2010

Brazil has announced big, big plans to build $880 billion-worth of infrastructure between 2010 and 2016.

The projects are part of an economic stimulus program whose first phase is half-completed, President Luiz Inacio Lula da Silva announced Monday.

The new plan, named the ‘Growth Acceleration Program 2’ or PAC 2, places importance on increasing the country’s energy production capacity, construction of homes and necessary improvements for hosting the 2014 football World Cup and the 2016 Summer Olympics in Rio de Janeiro.

“PAC 1 and PAC 2 are a commitment by the Brazilian state to the redemption of this country. Whoever arrives in the presidency will not be able to tear it up and do something else,” Lula said while rejecting the opposition’s allegations that the announcement only hides the electoral motives of the ruling party.

The president, however, said bureaucratic red tape has been delaying the PAC projects, which ‘cannot stop’ and must begin ‘as soon as possible.’

The new programs include construction of two million homes, which will contribute to reducing the country’s housing deficit by half, and a high-speed rail service between Rio and Sao Paulo.

Visit RentinRio.com to plan your stay in Rio de Janeiro

New Report Provides Positive Analysis of Brazil’s Tourism Industry

March 26, 2010

Brazil Tourism Report Q2 2010 – New Market Report Published

This quarter’s tourism report has shown that Brazil’s tourism industry has already benefited greatly from the announcement of several high profile events planned to be held in the country. The 2014 FIFA World Cup is set to be a huge draw for visitors and the addition of the 2016 Olympics in Rio de Janeiro will further boost the industry. In January 2010, the government said it would invest 1 million Brazilian reals to improve facilities throughout the country before of the World Cup. 

Inbound visitor numbers had been growing but the industry could benefit from greater stability. While arrivals rose from 4.7 million in 2001 to 7.2 million (about a 65% increase) in 2008, the report estimates a fall in that number in 2009 because of the impact on developed countries of the global financial crisis. The recovery should be relatively quick, with a forecasted increase of tourist arrivals of 9.2 million by 2014.

The number of Brazilians looking to travel within their own country and that can afford to do so is growing. According to Instituto Brasileiro de Turismo (Embratur) president Jeanine Pires, the revenue generated by tourism in 2008 was nearly 17% higher than in 2007, which was the best year on record. 

Sector growth appears to be building up momentum as the global economy recovers. Brazilian airline Gol Transportes Aéreos reported an increase in year-on-year (y-o-y) growth for January 2010. Compared with January 2009, Gol’s revenues were up by 32.1%. 

In the hotel sector news has been positive too, with French corporation Accor planning to add nearly 5,000 rooms in Brazil with an investment of about EUR200mn. This will be achieved through expansion of their 20 Formule 1 and Ibis hotels in Brazil throughout 2010.

Renovations are a positive area for investment in Brazil’s tourism infrastructure. A lack of infrastructure has held the sector back to date but this looks set to change as investment increases over the coming years.

View the report here.

To rent long and short term vacation apartments in Rio, visit RentinRio.com.

Brazil’s Favela Conditions Improving

March 25, 2010

A United Nations report published ahead of the Fifth World Urban Forum in Brazil says the proportion of the population of Brazil living in “favelas” or shantytowns was reduced 16 percent between 2000 and 2010.

In Brazil, a country of 192 million people, those that have escaped slum conditions annually over the last decade did so as a result of slum upgrading. Most of the families in this country who have left behind their status as slum dwellers actually stayed in the favelas, but with more services and urban infrastructure, or neighboring municipalities and the outskirts of cities.

Geographer Jailson de Souza, founder of the Observatorio de Favelas, a social organization that carries out research on Brazil’s shantytowns, and who is currently secretary of education in the Rio de Janeiro municipality of Nova Iguaçu, said the term “favela” is not necessarily synonymous with “slum.”

“U.N. experts might not consider some of our most populous neighbourhoods informal settlements or slums,” he said, citing La Rocinha in Rio de Janeiro, classified by some as a lower middle-class or working-class neighbourhood.

He said that what has been seen in Brazil is “a steady improvement in living conditions in the favelas, which does not mean a reduction in the number of people living in those areas.”

In fact, some of the country’s favelas have even expanded in size, such as those of Rio de Janeiro, the second-biggest Brazilian city after São Paulo to the south.

According to the Pereira Passos municipal institute, between 1999 and 2008, the surface area covered by favelas in Rio de Janeiro expanded by around three million square meters.

And the Brazilian Institute of Geography and Statistics (IBGE) reported that in 2008, one-third of Brazil’s 5,554 municipalities contained favelas.

But many of these neighborhoods experienced improvements, as a result of spending on housing by governments – which has increased although it has not kept up with demand – and of rising income and employment, which has “enabled workers to spend more on their homes and seek new housing alternatives,” de Souza said.

Today, the middle class absorbs more than 50 percent of total income in Brazil, compared to one-third in 1992, he pointed out. Between 2003 and 2008, some 32 million people experienced an improvement in their socioeconomic status, including 2.6 million who joined the consumers market for the first time, the economist said.

And according to the U.N. Habitat report, the number of Brazilians living in slums was reduced by 10.4 million people over the last decade, with the most significant improvement being seen in sanitation.

The report refers to certain socioeconomic policies that have been adopted and mentions the drop in the birth rate and in rural-to-urban migration in Brazil, although it notes that 54 million people still live in favelas.

Rio Battles Over Brazil’s Oil

March 25, 2010

The debate over Brazil’s oil riches is heating up.

The lower house of Brazil’s Congress voted last week to split the portion of the country’s royalties from oil revenues that go to Brazil’s states equally among the states. The vote is part of a broad overhaul of the nation’s oil laws being undertaken due to huge offshore oil discoveries that occurred over the past three years. This vote came as an outrageous blow to the state government of Rio de Janeiro, Brazil’s biggest oil-producing region.

If the bill becomes law, Rio and other oil-producing states will only earn a fraction of the royalties they once expected. Rio’s annual oil revenue would fall to about $134 million from about $4.3 billion, state officials said.

Sérgio Cabral, Rio’s governor, is not giving up without a fight. Cabral called the vote in Congress a “lynching” and contended that it was unconstitutional. He said promised public works projects for the 2014 soccer World Cup and the 2016 Olympics in Rio could be endangered by a sudden drop in revenues, although the federal government has pledged to back Rio’s Olympic effort.

Gov. Cabral organized a large march through Rio’s streets on Wednesday afternoon to protest the move by Congress. Tens of thousands of people, many of them state employees who had been given the day off, showed up despite the heavy rains, with many arriving on buses from all over the state.

“No one has the right to take away that which nature has put within the limits of Rio de Janeiro,” Carlos Lupi, Rio’s labor minister, said in a speech at the march and rally.

The government is seeking to alter the Brazil’s oil laws to centralize control over future oil revenues in the federal government’s hands. The new region is estimated to hold more than five billion barrels of crude oil and could transform Brazil into a global oil power.

Although the bulk of the oil will not be drilled for least four years, President da Silva and his allies in Congress are pushing to get a series of four oil-related laws passed before Congress goes into recess in June or July.

The bills would attempt to make the Brazilian national oil company, Petrobras, the operator of all future oil discoveries from the new region, known as the presalt region. They would also include the capitalization of Petrobras, a stock issuance expected to be valued at more than $50 billion.

With what could be hundreds of billions of dollars at stake over decades, the proposed bills have become extremely contentious in Congress, where opposition politicians are seeking to stall a full vote on the bills until after the presidential election in October.

The proposals on oil reform and the issuance of stock in Petrobras came under a cloud last week when two members of Congress from states that do not produce oil, Ibsen Pinheiro and Humberto Souto, proposed the idea of equally distributing the portion of royalties from oil revenues that go to states and municipalities. This would include both past and future oil developments. The lower house approved the proposal 369-72.

The federal government receives about 40 percent of the nation’s oil royalties, and most of the rest currently goes to the oil-producing states.

Analysts said they expected that Mr. da Silva would eventually veto any bill that included a radical redistribution of royalties. However, faced with the presidential election in the fall, in which he is trying to transfer his huge popularity to his chosen successor, Dilma Rousseff, his chief of staff, the president has been treading softly on the proposed redistribution.

For information on relocation to Rio de Janeiro, visit RentinRio.com.

Brazil Economy Update: Highest Industrial Output Since ’95

March 5, 2010

Brazil’s January industrial output data showed the strongest growth year-on-year for that month since 1995, signaling a continuing strong recovery.

Industrial output in January compared to January last year ramped up 16.0% higher, according to data from the Brazilian Census Bureau, or IBGE released Thursday.

IBGE said Brazil’s industrial production was now back to a level last seen in January 2008.
Analysts polled by the Estado news agency expected a 16.30% rise year-on-year with their forecasts ranging between 14.70% and 18.60%.

January’s 16% increase was the highest since 1995 when output leapt 16.9%, IBGE’s coordinator for industry, Andre Macedo said.

More indicative of Brazil’s recovery was January’s industrial output comparison with December, which rose 1.1%, exactly in line with market forecasts.

IBGE data showed an 8.6% leap in the production of consumer durables in January compared to December, but also a massive 36.4% increase on the year-on-year figure.

Capital goods production slipped 0.1% in the month-on-month comparison but was 12.8% higher on the year-ago month.

Within the capital goods segment, Brazil’s booming construction equipment sub-sector, was outstanding with a 202.6% expansion.

Brazil’s auto sector led the way in influencing January’s rise in industrial output, accounting for 41.4% of the overall figure.

According to IBGE amid other industries showing the best performance in January were metal products, up 12% and electrical and communications equipment, which jumped 14.3%.

Brazil’s January output rise followed two negative months of growth interrupting ten consecutive monthly increases.

January’s increase wiped out the impact of the two previous months’ negative performance, IBGE said in a statement.

During 2009 Brazil’s industrial growth declined 7.4% compared to a rise of 3.1% in 2008.

The Argentina Oil Conflict: Why it’s not the Next Brazil

March 5, 2010

The recent diplomatic battle between Argentina and Britain over drilling for oil off the coast of the Falkland Islands/ Malvinas has opened wounds nearly three decades old for many Argentines. Political analysts and energy consultants also claim that post-war sentiments isn’t the only reason for Argentina’s troubles, and that perhaps many problems may be the country’s government’s own making.

While many Argentines feel embarrassed over the failed war with the British over the Falklands/ Malvinas in 1982, and consequently feel embarrassment over Britain’s claim of ownership over the oil, it appears that many are resigned to the situation. Argentina is already envious of Brazil’s huge oil discoveries over the past three years, and this is just another blow to the country’s spirit. An October poll by Ibaro metro consultancy found about 80% of respondents thought Argentina’s claim on the islands was important.

Argentina’s leftist President Cristina Kirchner has denounced Britain before the U.N. and other international forums, and diplomatic tensions between the two countries have risen to perhaps the highest level since the war. Although anger has been expressed, neither President Kirchner nor any other government representative has mentioned that no oil-drilling rigs are operating in Argentina’s own expansive waters, largely because many oil companies are wary of working in Argentina these days, analysts say. Furthermore, neither country has given up on its sovereignty claims, and a rig for a British company arrived off the Falklands/ Malvinas this week to begin drilling.

Polls show Argentines weary of Mrs. Kirchner’s autocratic style and populist economic policies. In the last year alone, her government has nationalized the country’s largest airline, seized billions of dollars in private pension funds and now is trying to tap more than $6.5 billion in currency reserves to pay long-overdue foreign debt. Argentina also has a system of export taxes that has kept domestic oil prices low, and that has dissuaded some of the larger oil companies from investing in offshore exploration.

Energy consultants say that because Argentina doesn’t have stable rules and prices that make offshore investment profitable, companies are exploring other geological regions. Analysts agree that there are very few companies exploring the Argentine sea, and that there should be a lot more.

President Kirchner’s government has claimed the British have violated Argentine sovereignty and threatened to make life tough for oil ships passing through Argentine waters. Argentina also complains the British government does not have the right to unilaterally exploit resources in the “disputed” waters around the Falklands/ Malvinas without first consulting or obtaining approval from Argentina’s government.

Its neighbors have defended Argentina’s claims. President Luiz Inácio Lula da Silva of Brazil criticized the United Nations on Tuesday for not forcing the British to negotiate.

Argentina has been producing oil for more than a century but has not found anywhere near the billions of barrels of oil that Brazil and its foreign partners have discovered around Rio de Janeiro since 2007. Brazil has become an huge economic power, partly due to the recent oil discoveries, and mostly in part to it’s government’s policies.

For relocation to Rio, visit Rent in Rio.

Brazil’s Real Skyrockets?

February 26, 2010

(and the GDP too?)

Brazil’s real is set for the biggest gain in the world this month as economic growth accelerates and the central bank prepares to raise benchmark borrowing costs to curb inflation.

The real rose 5.1 percent this month to 1.8038 per dollar as of 12:40 p.m. New York time, from 1.8950 on January 29. The advance, which reverses much of last month’s 7.9 percent plunge, is the largest among all currencies tracked by Bloomberg. The real will gain to 1.72 by year-end, according to the median forecast of analysts surveyed by Bloomberg.

“Brazil is still a solid story, and the real is an attractive currency,” said Vitali Meschoulam, an emerging- market strategist at Morgan Stanley in New York, who forecasts the real will rise to stronger than 1.7 this year. “The economy is the fastest growing in Latin America. It is among the first to raise interest rates and the strong foreign direct investment dynamics hasn’t changed.”

The real advanced as traders raise their bets that policy makers will boost the key borrowing costs from a record low of 8.75 percent as soon as next month to curb inflation. The central bank this week required lenders to deposit an additional 71 billion reais ($39 billion) to withdraw economic stimulus as a broader measure of inflation that includes wholesale prices quickened to the fastest in 19 months.

Interest Rates
Yields on interest rate future contracts due January 2011, the most traded on Sao Paulo’s BM&F exchange, increased two basis points, or 0.02 percentage point to 10.43 percent, up from 10.27 percent on Feb. 19. That rate suggests traders anticipate the central bank will push the benchmark rate to above 12 percent by year-end.

The real earlier rose as much as 1.4 percent to 1.7989, its strongest level since January 20 on a closing basis, as some investors in the currency futures market closed positions betting against the real.

The real’s gain this month pares its losses this year to 3.2 percent. The currency tumbled 8 percent in January in its biggest slump since October 2008 as China, the biggest buyer of Brazilian exports, curbed bank lending to slow the economy.

Goldman Sachs Group Inc. and Bank of America Corp. recommended clients this month buy the real, saying that growth in Latin America’s biggest economy will lure foreign investment.

Foreign Direct Investment
The $1.6 trillion economy will expand 5.5 percent this year, up from 0.5 percent growth last year, according to a central bank survey of about 100 economists published February 22.
Foreign direct investment will jump 73 percent to $45 billion, matching the record in 2008, as the country builds houses, roads and stadiums for the 2014 World Cup soccer games and 2016 Olympics.

Growth indicators suggest “the current account deficit will be easily financed through foreign investment,” said Jose Francisco de Lima Goncalves, chief economist at Banco Fator SA.
Brazil’s credit rating may be reviewed for an increase by Moody’s Investors Service next year if President Luiz Inacio Lula da Silva’s successor continues to improve the country’s debt indicators, the ratings company said yesterday.

Moody’s raised Brazil’s long-term debt rating to Baa3, the lowest investment grade, from Ba1 in September, following similar moves by Standard & Poor’s and Fitch Ratings a year earlier. Moody’s has a positive outlook on the rating.

Rio Oil Rush: Relocation and Real Estate

February 19, 2010

With the recent oil rush in Brazil, Rio de Janeiro has emerged as one of the most sought after destinations for corporate relocation. However, relocation in any case always involves lots of time, energy and money in finalizing a suitable apartment alone. The demand for rental apartments and corporate relocation agencies in Rio is soaring high. Even the corporate relocation agencies are doing their best to offer state-of-the-art-facilities to their customers and be visible in their business. One such agency, with an office in New York City, which has carved a niche for itself in catering the rental apartments in Rio, is Rent In Rio. 

“Our relocation specialists will assist you in every step of the whole relocation procedure: finding suitable schools for the children, Portuguese lessons for the family, to hiring a car for yourself whilst you are getting to know our marvelous city. Our agency will also gladly assist you in finding suitable temporary or long term accommodation and will walk you through all the necessary paperwork and documentation that is required,” says Daniel Babush, President of Rent in Rio.com. “ We have Studios, 1,2,3,4 and 5 Bedroom apartments as well as penthouses. We can assist with temporary and long-term rentals whether furnished or unfurnished. We have successfully relocated numerous employees from oil companies, the diplomatic community and other blue chip companies.” Babush says.

Rodrigo de Azeredo Santos, head of Brazil’s Trade Promotion Programs Division of the Ministry of External Relations has said in an interview that Brazilian oil reserves, biofuels and availability of hydroelectric power generation are added guarantees that Brazilian property investment is safer due to the assurance that energy will be available to sustain the economic growth. The oil discoveries are so important for property investors in Brazil as similar oil boom in Dubai and Norway have regularly seen their property market post record price increases annually.

Brazil’s property market is now in good shape for overseas investors. According to Jose C. Santiago, licensed and certified attorney of law in Brazil in his portal LawOfficeInBrazil.com has stated that the country is a buyer’s market, with low prices because there are more homes for sale than there are buyers. The demand for property in Brazil is expected to increase by approximately 900,000 units each year.

Overseas investors looking for good property returns with relatively low-entry costs may consider investing in Brazil following the oil discovery, which may strengthen the country’s economy and in turn raise property prices. Business week has reported that Brazil is a smart place to invest. It is a self-reliant country on the energy front, a position that has been further strengthened by the recent discovery of new oil fields.