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Honored Advisor
Posts: 13,053
Registered: ‎05-13-2010
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Not so good things going on in Brazil

[ Edited ]

Now, I don`t know if it`s a big deal or not so i`m not commenting, but there`s stories of the police on strike and a "purge" going on.   It might be like in this country where there`s a riot in Ferguson and Portland, life goes on in the country the hogs are slopped and the crops tended to and such. 

 

It seems to me if these stories are true, their economy is in trouble and that could effect exporting and production and foreign investment.  Would a person buy a farm down there if the police protection might not be there?   

 

Like I say i don`t know, but it`s something to keep a eye on.

 

http://www.politicaloutsource.com/2017/02/police-go-on-strike-in-brazil-cities.html 

 

http://www.dailymail.co.uk/news/article-4195318/Thugs-randomly-shooting-passes.html

Contributor
Posts: 20
Registered: ‎09-29-2016
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Re: Not so good things going on in Brazil

BA- This kind of stuff goes on in Brazil a lot.  I was their a couple years ago for six months for work. And at the time it was the public transit drivers who were on strike.  Now if it get's serious yeah i am sure this could have a larger effect on their economy.

Senior Contributor
Posts: 286
Registered: ‎10-18-2016
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Re: Not so good things going on in Brazil

Why do you suppose the top PBR bullriders are from Brazil?  A 2,000 pound, mean, man-eating brahma is a lot less worrysome than being shot from an overpass.  

Honored Advisor
Posts: 13,053
Registered: ‎05-13-2010
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Re: Not so good things going on in Brazil

There always were stories of port strikes at harvest and squatters setting up camp in the middle of a bean field and machinery left unattended in the field would be stripped.  But now it`s talk of "anarchy", the worry has been a trade dust up with China might lead to their investment in Brazil for their bean needs...IDK I think these countries have alot more problems than we do.

 

Brazil Debt Mounts, What’s Next?

 

The level of Brazil’s federal public debt rose 10% in 2016, and is expected to climb again this year, meaning improved credit ratings are unlikely for now.

So says Bank of America Merrill Lynch. It notes Brazil’s fixed-rate bond maturities for 2017 were greatest in January, but it also has significant maturities in April, July and October. Brazil’s federal public debt was 3.1 trillion reais (~$1 trillion) in 2016, compared to 2.8 trillion reais in 2015, and the National Treasury financing plan indicates that level will climb to between 3.45 and 3.65 trillion reais this year, with more floating-rate debt to cut costs, write Bank of America Merrill Lynch analysts David Beker and Ana Maderia.

In Brazil, floating-rate debt, linked to the 13% benchmark Selic rate, is on the rise.
Source: Brazilian government via BofA/ML

Brazil’s central bank cut the benchmark Selic interest rate by 75 basis points to 13% in January.   The BofA Merrill analysts add:

“Debt continues to increase in Brazil given the high level of interest rates, negative growth and primary fiscal deficits. … Although debt keeps rising, foreign investor holdings have dropped significantly since Brazil lost its investment grade rating … We see potential inflows from foreign investors into local fixed income ahead given structural agenda and light positioning … the Treasury wants to continue increasing the share of floating debt … [which it prefers] to short-term bills (fixed-rate bonds sold at discount – LTNs [long-term notes]) …

So should investors be worried about the country’s ability to meet debt obligations this year (see table below)? BofA Merrill writes:

“Big fixed-rate bonds maturities this year, but the worst is over: Domestic debt maturities this year amount to R$528.4bn, of which R$143.9bn (27.2%) was due in January. Fixed-rate bonds account for the majority (67.6%) of the maturities this year …”

But there is still risk. From BofA Merrill:

” … it could take several years for Brazil to recover its investment grade rating. This is in line with the recent interviews by the main rating agencies. Although perception toward Brazil improved, debt-to-GDP should continue to increase in the next few years, gross government debt has reached 69.5% of GDP in 2016, and we expect the upside trend to continue, bringing it to 77.8% of GDP by 2018. The spending cap bill approval was positive, but the structural reforms’ effects on the fiscal accounts will likely take time …”

Brazil equities continue to climb: the iShares MSCI Brazil Capped exchange-traded fund (EWZ)  is up 12% this year and is up 93% over the past 12 months. That outpaces the price return in emerging markets overall: the iShares MSCI Emerging Markets ETF (EEM) is up 8% year to date and up 29% over the past year. The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is up 2.4% in 2017, up 8.3% over the past year and has a yield of 4.7%.