Another excellent post from Geert Noels in which he classifies countries based on their 2010 total gross public debt and fiscal deficit.
I added Brazil to the chart.
Brazil has a 3,35% fiscal deficit and a 61% gross public debt/GDP which ranks Brasil just outside of the Maastricht norm (to which nearly none European country applies to as the article of Noels points out).

Let’s also not forget Brazil’s 253 billion in foreign reserves, which brings Brazil’s net debt (total debt minus international reserves and other government cash) to 42,2%.  Nevertheless, I would have liked to see Brazil’s gross public debt sit below 50%, ranking the country amongst the absolute top performers like Korea and Switzerland.  The Brazilian treasury has all the power to be more aggressive in the debt profile; but like BNP Paribas’ Lintz pointed out: it’s an election year.

It goes without saying that Dilma Rousseff will be elected president in October.  Planninng Minister Paulo Bernardo revealed that a net debt to GDP of 30% is a target for 2014 and clearly, Dilma underwrites to understand the importance of this in many interviews.  This would mean her government would have to keep a primary budget surplus of 3,3% of GDP for the next 4 year.  Seems challenging for me.  If gross debt could fall below 55% and net debt below 38% by 2014, this would already be a major achievement.

Let’s keep a close eye to economical brains around Dilma.  I’d absolutely vote for Henrique Meirelles to remain president of the central bank.  He’ll be in the cabinet of Rousseff, yet it’s unclear who will be the next president of the Brasilian central bank. Antonio Paloci is also on the list, Pimco is rightfully a fan of him (despite the media-hunt that led to his resignation in 2002, read the 2007 book “Sobre Formigas e Cigarras” if you want to know all on this event).

Last week Dilma shot down media reports that she was planning to cut spending heavily and lower the government inflation target.  But that doesn’t let us look in her cards.  Nobody wins an election by saying the will cut spending, so her denials are totally expected.  Yet, let’s see what she will do at the beginning of her government.
If she wins the election, Rousseff’s choice of cabinet ministers will be the best early sign of whether she intends to run a leaner government.

Tags: Antonio Paloci, dilma rousseff, inflation target Brazil, Paulo Bernardo

Belgium economist Geert Noels highlights in his recent article that Belgium is now riskier than Brazil when one considers trhe spreads on bonds and CDS-premiums.

As below chart highlights, the Brazilian CDS premiums remained stable at 150 while the Belgian premiums almost trippled from 48 to 153 in the last year.
Noels concludes “We -Belgians- are now seen as more risky than Brazil.  And that is not so irrational if you compare both countries.”

Mr. Noels pointed publicized this report last week on the devastating effects of the industrial sector which is completely melting away in Belgium; leaving the country in a crippled position with ever increasing trade deficits.

Tags: CDS premium, geert noels

South Africa surprised last week with it’s interest rate cut, bringing it’s prime rate down to 10%.
Inflation is at 5,7%, which is just a tad under the maximal treshold of the SA Reserve Bank; stressing the boldness of the move, especially if one knows to which extent Eskom electricity rates will go up in April (and continue to raise it’s prices beyond April).  But the newly appointed South African Bank Governor Gill Marcus had to put a populistic stamp to please president Zuma, who is increasingly turning to the left.

In Brazil meanwhile Reserve Bank President Henrique Meirelles announced he will stay in post, despite the October elections ahead; only this announcement made the real increase further in value.  Meirelles also announced that the focus of the reserve Bank will remain on inflation control; somewhat in contrast to South Africa.  Inflation is at 5,17% and the SELIC intrest rate is currently at 8,75%.

Against the dollar the Real looks to end 2010 at a stable rate compared to end 2009; against the Euro though…

Tags: brazilian real 2011

Strong October retail figures were posted yesterday in Brasil.

Supermarket sales in Brazil went up 7,3% compared to the year before.  The sales rise resulted largely from the further inclusion of social classed D and E.  This social progress of this enormous slice of the population underlines the growth potential ahead.

Unemployment dropped in October to an all-time low of 7,5%, while average income rose 3,2% year-on-year to R$ 1.350 (770 USD)

Brazil will clock of 2009 with a positive GDP growth and growth for 2010 is expected to be between 4 and 5%.

Also important: the consumer price index is running at a 12 month rate of 4,27% as of October, comfortably beow the government’s official goal of 4,5%.  With inflation under control, the central bank keeps its Selic base interest rate at 8,75%, the lowest rate ever.

The CEO of supermarket chain Pao de Acucar, Abilio Diniz, announced a profit of 206,7 million Brazilian Reais, up 210,3% from the same period last year.

Tags: brazil retail

Bloomberg reported last Friday that Brazil’s retail sales rose again more than expected. Retail sales went up 1,7% from the previous month, significant stronger than the 1,2% which was forecasted.

Most surprising was the increase in the sale of computer equipment which went up 15,6% compared to last year. If you take the broader index which includes automobile and construction materials, the index went up 10,2%. On a monthly basis, the broader index went up 6,5%, the biggest increase since its launch in 2007.

Good news is that the central bank remains cautious. Which is good; central banks which keep a strong eye on future inflation targeting have our preference.