Author: Antonio Guerrero

ROUNDUP: BRAZIL

By Antonio Guerrero

The Brazilian government is taking further measures to halt a currency rally that may dent the country's trade surplus, with the real having gained more than 40% against the dollar since the end of 2008.

300_February_Emerging-Markets-Roundup_Brazil

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The trade surplus fell 20% year-on-year to $21 billion in 2010, as strong economic growth also fueled imports. After tripling the tax levied on short-term capital inflows to 6% last year, in a move to weaken the real, authorities are now threatening to increase the government's currency market interventions. Finance minister Guido Mantega also announced that the government will begin trading in the dollar futures market on behalf of its sovereign wealth fund. Under new rules, banks with short dollar positions must also adhere to a reserve requirement equal to 60% of said positions above $3 billion beginning April 4.

Energy minister Edison Lobao announced government plans to approve construction of four additional nuclear power plants in 2011. Brazil already operates two nuclear power plants, Angra 1 and Angra 2, with a combined capacity of 2,007 MW. Construction of a third plant, Angra 3, began in 1984 but was halted in 1986 due to financing issues, though the BNDES national development bank has now approved $3.6 billion in financing for its completion.


China's SGIDL completed the acquisition of seven Brazilian power transmission projects from Spain's EPC consortium for $1.8 billion. The deal marks the largest Chinese investment in Brazil, as well as the largest Chinese acquisition of power transmission assets abroad.


The Brazilian economy is expected to expand by 4.5% this year, according to a central bank survey of the country's economists. However, the government is taking a more bullish tack, with the finance ministry last month predicting growth will be 5.5% in 2011.


The economists' survey also predicts industrial output will increase by 5.3%, while foreign direct investment will hit $39.5 billion. The benchmark Selic interest rate, which rose two percentage points last year, is now expected to end the year at 12.25%, up from a current 10.75%.