Shaw Capital Management: Brazil's Economy

Top Quote Brazil's economy emerged from a deep but short recession in the second half of last year. The economy is expected to grow by at least 5.5% this year. But along with economic growth, expectations of higher inflation have also returned. End Quote
  • (1888PressRelease) November 10, 2010 - Shaw Capital Management Korea: Brazil's Economy - The government's target for annual consumer price inflation is 4.5%. To contain inflation Brazil's central bank has raised banking reserve requirements on term deposits from 13% to 15%. In addition to the increase in reserve requirements, the bank also restored additional charges on cash and term deposits to 8% from 5% and 4%, respectively.

    According to the Central Bank President Henrique Meirelles, the changes were necessary to neutralize the impact of excess liquidity brought by reserve requirement reductions made in 2008, amid the onslaught of the global financial crisis. However, for the central bank it would be a politically difficult task to raise interest rates in the run up to Brazil's presidential, congressional and other elections in October.

    Shaw Capital Management Korea: Brazil's Economy - The government has launched a new investment trust to invest in the domestic Brazilian economy. BM&F Bovespa, the São Paulo equities and derivatives exchange is to raise its stake in the CME Group of Chicago, the world's biggest exchange group, to 5% in an attempt to attract more institutional and retail investors to Brazil.

    Shaw Capital Management Korea: Brazil's Economy - The plan for the two exchanges is to work together to develop a new multiasset electronic trading platform based on the CME's Globex system.

    President Lula da Silva, the most popular President in Brazilian history, would like to see October's presidential election as a plebiscite on his eight years in power. He is asking voters to transfer his success to Ms Dilma Rousseff, his chief minister, whose candidacy has been endorsed by his Workers' party (PT).

    Shaw Capital Management Korea: Brazil's Economy - Ms Rousseff is further to the left than the present administration, but she has pledged not to make a sudden change of direction. The investors andvoters believe her so far.

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