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China lifts investment in Brazil

China lifts investment in Brazil

China’s direct investment in Brazil has soared this year to a projected $US12 billion ($13.46 billion), catapulting it to the top of the South American giant’s foreign investment heap, Globo news reported on Sunday.

The flood of investments marks a major departure for China which pumped only $US82 million ($91.97 million) into Brazil in 2009 and $US213 million ($238.9 million) between 2001 and 2009, Globo’s G1 website said, citing Central Bank figures.

The projected $US12 billion ($13.46 billion) in Chinese direct investments in 2010 is more than double that of last year’s leader, the Netherlands, whose investments in Brazil totalled $US5 billion ($5.61 billion) in 2009.

Analysts attributed the surge from China to the impact of the global financial crisis on the United States and Europe.

“After China suffered from the contraction of the US and European markets, there was Latin America, which had not been explored much because of the distance and cultural differences,” said Paul Liu, head of the Brazil-China Chamber for Economic Development.

“Since Brazil came through the crisis relatively well, it ended up being a target of the Chinese,” he said.

Kevin Tang, director of the Brazil China Chamber of Commerce and Industry, said “the Chinese government clearly intends to make the point to businessmen that doing business in Brazil makes strategic sense, especially taking into account the World Cup and the Olympic Games.”

Brazil is hosting those high profile sporting events in 2014 and 2016, respectively.

Chinese investments are concentrated mainly in the energy, mining, steel and oil industries.

One of the biggest investments is a $US3.29 billion ($3.69 billion) project by Wuhan Iron and Steel Corporation (Wisco) with local partner LLX to build a steel mill in the state of Rio de Janeiro.

Source

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Brazil’s Mid-July Consumer Prices Unexpectedly Fall

Brazil’s consumer prices unexpectedly fell in the month through mid-July, boosting speculation that the central bank may slow the pace of interest rate increases tomorrow. Yields on interest rate futures fell. Invest in Brazil Bonds, request more information here.

Consumer prices as measured by the IPCA-15 index fell 0.09 percent in the June 15-July 13 period, the first monthly deflation in four years, the national statistics agency said. Economists surveyed by Bloomberg expected a 0.02 percent rise, according to the median of 36 forecasts. The 12-month rate fell to 4.74 percent from 5.06 percent in mid-June.

The yield on the interest-rate future contract maturing in January, the most traded on Sao Paulo’s BM&F Exchange, fell for a sixth straight day as signs of slower economic growth mount. After raising the overnight rate twice this year by 0.75 percentage point, the central bank may ease the pace to a half- point tomorrow, according to interest rate futures.

“I recognize that there’s a chance that the bank can decide on 50 basis points,” Tony Volpon, a Latin America strategist at Nomura Securities, who expects a 75 basis-point increase tomorrow, said. “The market is suffering from a hangover after strong numbers in the first quarter.”

The interest-rate future contract with January delivery fell eight basis points, or 0.08 percentage point, to 10.97 percent at 10:24 a.m. New York time. The yields on all traded contracts maturing through January 2015 fell. The real gained 0.6 percent to 1.7827 per dollar from 1.7926 yesterday.

Counterpoint

While traders see room for a smaller interest rate increase, economists forecast policy makers will increase the Selic by 0.75 percentage point tomorrow, according to 36 of 38 analysts surveyed by Bloomberg.

“I don’t think the central bank will slow the pace of interest-rate hikes without communicating it to the market first,” Eduardo Castro, who helps oversee 100 billion reais ($56 billion) in Sao Paulo at Santander, Brazil’s fifth-biggest fund manager, said in a telephone interview yesterday. “Internal demand, credit and wage growth and the labor market remain very strong.”

Policy makers are likely to choose a steeper increase tomorrow and so give themselves room to pause before the Oct. 3 presidential election, Andre Perfeito, an economist at Sao Paulo-based Gradual Investimentos said.

Conflicting Signs

The central bank, led by its president, Henrique Meirelles, has lifted the benchmark Selic rate twice in 2010, from a record low 8.75 percent in March, to try and push the annual inflation rate down toward its 4.5 percent target.

Today’s IPCA-15 inflation report showed that food prices fell 0.8 percent in the month through mid-July, compared with a 0.42 percent drop in the same period a month earlier.

Transportation, clothing and education prices also fell 0.36 percent, 0.15 percent and 0.02 percent respectively.

The $1.6 trillion economy is showing signs of cooling from an annual growth rate of 9 percent in the first quarter, its fastest pace since 1995, after job creation and tax collection in June trailed economists’ forecasts.

Brazil created 212,952 government-registered jobs in June, down from 298,041 in May, according to the Labor Ministry. Industrial output and retail sales expanded in May less than analysts forecast.

Brazil’s economic growth will cool in the third quarter after the government withdrew stimulus measures enacted during the global financial crisis including tax cuts, Finance Minister Guido Mantega said July 14.

Gross domestic product will rise 5.5 percent to 6 percent in the third quarter from a year earlier, he said.

Source