From São Paulo – Brazil
December 22 - 26, 2014
To reduce Treasury transfers, government raises long-term interest rates
12/22/2014
At a meeting this Friday (19) with President Dilma Rousseff, Finance Minister Guido Mantega
and his successor, Joaquim Levy, decided to raise key interest rates for long-term loans to
companies in the country, TJLP and PSI (Investment Support Program).
TJLP, adopted in 90% of loans from the BNDES (National Bank for Social and Economic
Development), will be 5.5% in the first quarter of 2015. Today, it is 5% per year.
It is the first increase since Oct. 2003, the beginning of the Lula government (2003-2010), when
long-term interest was at 12% per year. It was reduced until it reached 5% in Jan. 2012.
In the case of PSI, the final borrower rate was between 4% and 8% per annum and will jump to
a rate between 6.5% and 10% per year.
Created by Brazilians, Piipee Tries to Reduce the Usage of the Flush
12/23/2014
Christened with the suggestive name Piipee, a company from Bento Gonçalves, in the
southernmost state of Rio Grande do Sul, vows to end the smell of urine in public toilets as well
as save water.
The solution: a formula composed of perfumes, natural solvents and pine and eucalyptus oils
that, mixed with urine, turns the liquid green.
The founder of the company, Ezequiel Vedana Rosa, 26, says he had the idea four years ago.
He explained that the formula slows down the process in which urea, the substance present in
urine, turns into ammonia, the substance responsible for the bad smell.
Ezequiel majored in international relations and said that the product was developed at home.
As he got close to a formula similar to the one currently in use, Rosa sought the help of a
chemical engineer in order to make the product commercially viable. "I spent two year smelling
pee out of a cup", he said.
1
Source: Folha de São Paulo Newspaper
In addition to eliminating smells, the company will also sell a tablet holder. It will have two
parts, one that can be mounted onto the wall where it can activate the other part mounted
inside the toilet.
Each holder should cost between US$9 and US$13, and each refill, that lasts for 250 flushes,
will cost between US$1,90 and US$2,25.
Government considers opening of Caixa IPO for 2016
12/24/2014
The Brazilian government is considering opening an IPO for the Caixa Econômica Federal.
The current team project would be to make an initial public offering in about a year-and-a-half,
since the bank would have to go through a reorganization process beforehand.
The new economic team, according to interlocutors, recognizes the relevance and the economic
basis of the idea, but believes it is not among the priorities to be implemented from the start.
"It is a proposal of great political impact and, to be put into practice, Caixa would have to pass
through a process and be prepared for the operation," said an interlocutor of the future
commanders of the economy.
"It is still not part of the plans," he added.
The IPO would generate important resources for the National Treasury.
If the idea is viable in 2016, it will arrive at a good time.
If the primary target of 1.2% of Gross Domestic Product (GDP), announced by Joaquim Levy,
future finance minister, already represents a good challenge for 2015, achieving the 2% target
the following year will be an even more difficult task.
In addition, with the opening of the capital on the stock exchange and the consequent
transparency of their numbers, the bank would be closely watched by investors, which would
allow better control of their governance.
Even though it has worse indicators than other banks, even if compared to the Bank of Brazil,
Caixa has most of its risk concentrated in mortgage loans.
The Basel ration of the institution, in turn, was 15.3% in the third quarter of this year, two
percentage points higher than reported in the balance sheet in June. The Bank of Brazil closed
in September at 16.04%.
Info
12/24/2014
The National Monetary Council on Dec. 19 raised the long-term interest rate (TJLP) from 5% a
year to 5.5%.
The rate is used on 90% of the company loans made by the National Development Bank
(BNDES) and the increase was the first since January 2013. The council extended to 2015 a
BNDES loan program to finance innovation but reduced the program’s total financing by R$30
billion (US$11.3 billion), falling to R$50 billion (US$18.8 billion). In addition, the council raised
the interest rates on these loans from the range of 4% to 8% to between 6.5% and 10%.
Foreign Accounts
2
Source: Folha de São Paulo Newspaper
Brazil posted a current account deficit of US$9.3 billion in November, the largest ever for the
month.
This left the year’s deficit at US$80 billion, also a record for the period. For the 12 months
ending in November, the deficit reached US$88.7 billion or 4.05% of gross domestic product,
the worst result since December 2001.
November’s record deficit was blamed on the month’s trade deficit of US$2.3 billion compared
with a surplus of US$1.7 billion in November 2013.
Foreign direct investment in November totaled US$4.644 billion, down from US$8.3 billion in
November of last year. FDI for the year now stands at US$55.8 billion versus US$57.5 billion for
the same period in 2013.
With the dollar strengthening, spending abroad by Brazilian tourists declined 4.1% in November
to US$1.2 billion.
The Central Bank is now projecting that the year will end with a current account deficit of
US$86.2 billion and FDI of US$63 billion.
Labor
The unemployment rate in Brazil’s six largest metropolitan areas rose slightly in November,
from 4.7% to 4.8%, according to IBGE.
The increase was caused by the year’s first sign that more people are looking for work.
Unemployment has been kept down this year by the fact that few persons tried to join the work
force and begin looking for employment. In November, however, the number of persons seeking
employment rose 0.6% compared with November 2013.
The average monthly salary in November increased 0.7% from October and 2.7%
Brasilinform Daily Briefing December 22, 2014
versus November 2013, reaching R$2,148 (US$810).
The formal job market created only 8,381 jobs in November, the worst result for November since
2008 and down 82% from November 2013.
Inflation
The IPCA-15, a mid-month preview of the Broad Consumer Price Index (IPCA), registered an
inflation rate of 0.79% for December, up from 0.38% in November.
The index ended the year at 6.46%, slightly below the year’s target ceiling of 6.5% for the IPCA.
Transportation prices rose 1.59% in December due to a 42.4% jump in air fares. Food prices
rose 0.94% led by meat whose price increased 4.02%.
Petrobras takes on contractors' debt
12/26/2014
In order to avoid bankruptcies in the oil and gas sector and keep the politics on the usage of
national content in action, Petrobras is taking on payments that its suppliers owed to hired
contractors, including three of the companies involved in the Car Wash operation run by the
Brazilian Federal Police - that are investigating a corruption scandal within the state owned
company.
3
Source: Folha de São Paulo Newspaper
In addition to that, Petrobras is seeking ways to end contracts with companies that owe money.
Folha has learnt that Petrobras is taking this position in at least four different cases: 1. In the
UFN III consortium (a fertilizer factory) run by Galvão Engenharia; 2. In the Charqueadas
project, run by Iesa shipyard; 3. In the Integra consortium, run by Mendes Júnior; 4. In the
manufacturing of 17 support vessels, hired by Brasil Supply.
Only the latter company is not involved in the Car Wash operation. It should also be the only
company not to have its contract ended.
Even though all companies owe money to their suppliers, only the first three will have their
contracts ended.
To avoid that these suppliers go bankrupt, Petrobras has set up a financial operation called
"linked account" where the payment that should be made by bigger companies to smaller
companies are made, but in such a way that guarantees that the bigger companies do not get
their hands on the money.
Folha has learnt that two cases are more advanced: Galvão Engenharia and Brasil Supply.
Around US$ 300 million have been paid to Galvão Engenharia suppliers in the last week.
Around US$ 1 million were paid to Estaleiro Ilha hired by Brasil Supply destined for
staffpayment.
The companies have not made any official comments.
According to José Ricardo Roriz, director of the Oil and Gas Committee that is part of the
Federation of Industries in the State of Sao Paulo (Fiesp), this operation seeks to upkeep the
financial health of companies that depend on investments made by Petrobras, but that do not
have any contracts directly with the state owned company.
"Petrobras is taking an emergency measure not to compromise the chain in the oil and gas
sector that is currently under development", he said.
CRISIS
The financial issues experienced by the companies involved in the Car Wash operation began
with the interruption of additional payments that had been added to the contracts, normally
paid for by Petrobras.
Two years ago, the state owned company put together a committee to assess additional
payments and thus started to withhold a significant part of payments.
After the Federal Police operation was revealed, Petrobras decided to withhold almost all
additional payments.
Because there was no estimate for the release of payments by Petrobras, banks began to
withhold credit and even stopped giving out credit for projects.
4
Source: Folha de São Paulo Newspaper