Now investment expenditures are rising dramatically, given the demise of the last bastions of doomsday economists predicting a W. No L, no U nor even a W.
Business Confidence has reached its highest level since 2005, much higher than a year ago. Mother's Day Sales grew 35% compared to a year before, giving fuel motions to reduce Sales Tax permanently. The Lafer Curve theory seems to have been proved once and for all in Brazil.
Purchases of equipment, middle sized, financed by BNDES rose 40% in October 2009, and capacity is running 100% in many sectors. Imports have risen 15%, which will stabilize our exchange rate without continuous government intervention.
Though car production rose 92% in January 2009, a clear sign that the financial crisis would not hit the rest of our economy, sales of trucks lagged due to Doomsday Economics. Nouriel Roubini toured Brazil spreading fear and made headlines.
Now there is a waiting list for trucks as well.
Unemployment down to 7,7%, which for Brazil is rather low. Due to Labor Laws, and FGTS deposits, workers in Brazil change jobs every 4 years, rather than usual 8 years in other countries. This increases the unemployment rate, but actually workers are getting hold of their FGTS reserves, which usually pay zero interest rates.
Fortunately most businessmen do not take economists in Brazil very seriously, so the doomsday predictions did not affect Brazilians as much as American and Europeans.
There may be some inflationary pressures in 2010, and interest rate hikes, but nothing to be very worried about.
If you believe that self-esteem is a key ingredient of success, you now have the key to understanding what is going to happen to Brazil in the next 10 years.
Brazilian's by large had a low self esteem of themselves. "We will never get past the poverty trap", "We will always be the country of the future", "we don't have the drive", etc, etc, etc.
Well this is changing, and rapidly.
Brazil has now 2.000.000 MBAs and Business Graduates, people who believe that the future is made, not determined by the stars. That the future is not predicted by a couple of academic and gloomy economists, but it is built to specs, by engineers, administrators, auditors etc.
Even Brazilian Executives now think BIG, such as Andre Esteves, Ike Batista, and so many others. Far from being megalomaniacs, the argument can be made that Brazilian Businessmen tended to think small. Brazilian Businessmen, usually from family owned business were risk averse, invested only retained profits, and therefore had SMALL ambitions. The era of family owned businesses in Brazil is over.
Lula did wonders to improve the self esteem of the poorer, fatalistic population. A factory worker that managed to become President, and made a better job at it than the former president, a university intellectual.
Now we will have 6 years of the Olympic culture, with messages such as winning, "competition", "prepare", "train", "persevere".Brazilian kids will for the first time aim to win the Olympics, rather than aim to travel and participate in an Olympic game. Big difference.
A Brazilian Rating Company downgraded US Treasuries, rightly so, but that would have been unheard off a decade ago. So expect some poignant comments next time you travel to Brazil, and constructive criticism.
Growth in 2 Q came out to be 7,6%, annualized, proof that there never was a crisis nor even recession in Brazil, as we were predicting right from the beginning. No U, L or W, but a straight V.
And this is just the beginning. The third and forth quarters are always better than the first and second Q, so one can expect a solid second semester for many reasons.
1. Summer in Brazil is 1 Q, people on holiday, relaxing, traveling abroad and definitely not buying cars.
2. Investments in the 2 Quarter 2009, were nil, due to the negative predictions of practically every trend consultant. Now companies are desperately buying capacity for 2010.
3. Air plane traffic has increased another 20% in August, 240% annualized, which in Brazil is a leading indicator. Businessmen traveling and planning new ventures.
4. 36% of Brazilians, especially in the South, still fear they may lose their jobs. They still are not buying on credit. This should plummet to 10% by December, fueling extra demand and growth.
5. Many durable goods have been postponed by a year, and December will be the time to catch up, meaning double the amount of sales.
6. 4Q may see double digit growth, say 12%, annualized, something unheard of in Brazil for some time.
7. Henrique Meirelles promises to stay till the end of his term at the Central Bank.
8. Moody's finally gives its Investment grade to Brazil. 3/3.
9. 2016 Olympics will be in Brazil.
* GDP Growth Estimates of 5% in 2010.
* Trades Surplus Widens to 3 US$ billion in August
* Car production up 48% in August, annualized.
* Computer sales back to pre-US Crisis Level .
* Brazilian GDP Grows 1,2% second quarter of 2009, as we predicted. Due to spectacular growth in Consumer Products, that more than replaced reduced production in Machinery and Exports.
* Supemarket- sales up 16%, compared to a year ago. Robust growth in sales means robust investment plans for 2010.
* 2010 will the "the" year or Brazil.
* Ibovespa Stock Index back to September 2008 levels.
* Car Sales 20% higher than September 2008. And we still have 20% or more Brazilians that fear losing their jobs, due to the international news and US crisis. By the end of this month we should have a new CNT census with new and more favourable data on this item.
* Househond indebtness falls 15%, confirming what we have just mentioned. Still many fear financing, which by the end of the year should revert itself.
* Sales volume increases 10% since September 2008.
* Companies have continued to invest, increasing idle capacity, which means future non inflationary growth.
* Companies introduce 7.000 new products first semester , 57% increase vis a vis first semester 2008.
* Internet retail sales grows 27% this semester.
* Unemployment down 0,4%.
* Consumer Confidence Index back to September 2008.
* Brazil is back on a V, with no government deficits, bank failures, dismantled financial system, overleveraged families, banks or companies, without massive unemployment, real estate market in distress, etc etc etc.
* Brazil Dancing Through The Economic Crisis. That is what the Financial TImes has to say about the way we have handled our economy. Read for yourself.
* MOODY's considering upgrading Brazil to investment grade, a move long due. Moody's was "burned" by the Brazilian Moratorium in 1986, just after it had given us a BB- grade, for the first time. Big mistake by the Brazilian economist that orchastrated the moratorium, because we would have easily become investment grade in the 90's. S&P and Fitch had already given us Investment Grade last year.
* China Increases Imports From BRAZIL By 26%
* Caixa Economica, Brazil's Fannie Mae, finances 75% more loans compared to the first semester of 2008. No sub-prime in Brazil.
* ANFAVEA expects 6,4% growth in car sales in 2009.
* 71% of Brazilian Business are revising their sales estimates upwards.
* Tax reduction on durables will be maintained till September, and staggered down until December. This shows in-equivocally that consumers should not postpone their purchases, that the end of tax reduction is for real. This means that the third quarter will be very good, and the fourth quarter extraordinary.
* Nominal interest rates expected to decline to 8,75%, 2% real after inflation and after tax. This has never happened in Brazil over the last fifty years, and should stimulate consumer sales as never before.
* Part of Brazil's problems is the press coverage and Doomsday predictions that have led 44% of Brazilians to fear losing their jobs. In the US and Europe the ratio is similar or higher, and a disaster for consumer durables, since they are immediately postponed.
Mind you that no single economists has ever come close to predicting a 44% unemployment rate, but some how that is the general impression.
Fortunately, this fear has fallen 8%, it is now "only" 39% in June. We expect this to fall in Brazil, to 31% in July, 25% in August, 21% in September, and to 15% in December. Which means 15% more consumers for durable goods, and 30% more sales, since many will be playing catch up.
* Overall credit increases from 38% of GDP to 43%, still way under international averages. No need to de-leverage in Brazil, only in US, Europe, etc.
* Industrial inventories back to normal.
* Consumer Confidence up another 4,1% in June.
* Pay and Cable TV increases 17% first quarter 2009.
* Car sales up 8,5%, industry expects best year in its history.
* Real estate up 4,5% in May.
* Brazilian Banks pass Central bank's stress test.
11. Another month of net employment. 130.000 jobs created.
1. Construction sales up 4,5%.
2. Leading Index in São Paulo shows 3,8% growth in production.
3. Consumer confidence up 7% in June.
4. Credit expected to grow 18% in 2009, says Bank Association.
5. Retail sales grows 6,9% in April.
Bovespa gained 124% this year, ranking first place, with the Philippines in second with 117%.
Those who folllowed our advice and bet on Brazil, do not need to thank us, just deposit 2% of your gains to the charity of your choice in another website of ours, www.filantropia.org. Thank you.
In 1989 Moody's downgraded Brazil to BB- unjustly, causing enormous suffering and strife to the Brazilian people and government.
Moody's and S&P, and most Americans, have yet to understand the concept of Real Interest rates, rather than Nominal Interest rates, which is a misleading pricing method. It misleads investors into thinking that they are receiving much more "interest" than they really are. In Brazil that would be a crime of false advertising.
During 1989 to 2009, Brazil always had the ability to pay the Real Interest rate of its loans, plus an extra for amortization. It never deserved the rating of "questionable ability to pay".
Now a Brazilian Rating Company has used the argument against US Treasuries. Since they ARE NOT INDEXED to inflation "there is a questionable doubt that investor's will receive the true value of their investment, due to future US inflation".
For 30 year treasuries, where a 4% inflation will erode principal by 50% at least, a double CC would have been more appropriate. But that would have seemed adding insult onto injury...
But it is about time Americans realize that Nominal Interest Rates is a form of false advertising, bad pricing model, since part of that interest is inflation, not interest. And inflation is not income by any means.
That is one the reason's of the sub-prime crisis. Forcing poor people to pay "inflated interest rates" in the beginning of their life cycle, and paying totally eroded principal 30 years down the line. Ludicrous.
1. Withholding taxes on salaries increases 8,5% this year.
2. Pension Contributions, a government tax, increases 11% this year.
3. The Cofins, a tax paid by those benefited by bank lendings, has been reduced. Another important measure to diminish interest rates.
4. Sugar exports increases 110%.
5. Internal consumer demand increases 43% according to FGV, a coincident indicator.
1. For quite a while, the Brazilian press has treated Mr. Roubini as sort of a celebrity.
2. It endorsed and publicized all his forecasts on Brazil’s economy, in spite of his unwillingness to show the data upon which he developed such predictions.
3. Things are changing: last week, the weekly business newspaper Istoé Dinheiro questioned Roubini’s capability on making such forecasts, specially on a country he knows little off.
2. Foreign investments are pouring on the Brazilian economy. More than 4,3 billions dollars have been invest in a couple of weeks, a sign of the world’s confidence on the future of our economy.
3. The Ibovespa stock exchange index has reached 53,197.73 this year, a 42% increase during the last five months. In February, the same index was around 38,000 points. It should recover by September.
Now it is the 2011 interest rate futures that has become one digit, showing that low interest rates are there to stay. No inflation expectations are driving interest rates up in Brazil, as they are in the US, as shown by Bloomberg.
The Brazilian NOMINAL interest rates are flat!
Fitch Ratings has affirmed Brazil's long-term foreign and local currency sovereign Issuer Default Ratings (IDR) at 'BBB-'. The Rating Outlooks on the long-term IDRs are Stable. At the same time, the agency has affirmed Brazil's short-term foreign currency IDR at 'F3' and the country ceiling at 'BBB'.
"Those who run the show in the markets look at their graphs and see no reason why this rally should fizzle," said Helena Biasotto, who helps manage about 5 billion reais in stocks and bonds for Banrisul in the Brazilian city of Porto Alegre. "The 'buy' mode is switched on."
Brazilian Hedge Funds And Mutual Funds are net investors in 2009, after having lost clients in 2008 as everybody. Even Stocks only Funds are back to normal.
Até o dia 7 de maio, o patrimônio líquido total dos fundos de investimentos brasileiros era de R$ 1,205 trilhão, montante que representa um crescimento de 10,17% no acumulado do ano. Já a captação líquida, negativa em R$ 77,843 bilhões em 2008, é superavitária em 31,389 bilhões em 2009.
Delfim Netto is Brazil's leading economist's, ruled the country for nearly 10 years, and is by far the most knowleadge brazilian by far. He is predicting 4% growth in 2010, and he is know to be a pessimist, as most ex-Minister are.