Brazil's Rousseff Gains Support in Bulgaria as European Tour Continues|
Oct. 6, 2011
Published by Minyanville
Brazilian president Dilma Rousseff is in Europe this week, as the debt crisis there hits her own nation already struggling to tame its economy. Rousseff and her government have criticized developed nations’ handling of the crisis in recent weeks as well as suggested that emerging nations -- such as Brazil -- were in a much better position than in 2008 to come to the aid of developed nations (see Brazil Economy Continues to Struggle in Wake of Eurozone Crisis).
To that end, Rousseff landed in Brussels earlier this week to meet European Union officials. “Brazil is ready to take on responsibilities in a cooperative spirit,” she told reporters. “You can rely on us… The international financial crisis has shown clearly we must forge a joint future.”
Rousseff added: “Taking only drastic fiscal measures will cause more difficulties and stagnation. Trying to solve the crisis without investment or without stimulating domestic demand is difficult.”
However, criticism of the visit has been rife. “What she didn’t do was take any questions,” writes Frances Robinson of the Wall Street Journal. “While she covered the economic crisis, trade links and science programs in her prepared speeches, when the usual time came to ask about pressing matters -- including whether Brazil can help Europe exit from its debt crisis -- the silence surrounded your correspondent like a quiet night of quiet stars, looking out across the Corcovado mountain.”
Rousseff is keen to seek more foreign investment from the continent. She has plans to offer tax breaks to investors looking toward Brazil’s telecommunications industry as well as air transport, ahead of the World Cup in 2014 and Olympics in 2016.
“Known for its bureaucracy and high taxes, any plans to remove barriers to investment in Brazil will be greeted with enthusiasm by European companies,” writes Joe Leahy for the Financial Times.
The president’s arrival in Bulgaria was met with a little more support. Her father fled the country in 1929 and many saw it as a homecoming for Rousseff, despite it being her first visit to the eastern European nation. Rousseff pledged to raise investment there.
Bulgaria is the European Union’s poorest country in terms of economic output per capita and so her pledge to boost bilateral trade will be welcomed. One of the country’s biggest papers proclaimed, “What Kind of Check Will Dilma Bring?” on its front page just as Rousseff arrived. “I am determined to turn around the negative trend and increase opportunities for joint projects between Brazilian and Bulgarian businesses,” Rousseff said. “There are many options for cooperation in agriculture, renewable energy, aviation and oil industries.”
Next up on Rousseff’s European tour is Turkey, where she arrives on Friday. In an interview with Turkish newspaper Zaman, Rousseff said that she sees many parallels between the two countries on the global stage.
There appears to be little substance to the visit, though, as the real continues to weaken against the US dollar, thanks to the European crisis. The currency fell 16% in September, impacting Brazilian companies’ third-quarter results heavily. However, there are slight gains in the currency as speculation that the Central Bank will act increases.
Those companies with large unhedged US dollar debts, such as state oil company Petrobras, are likely to suffer most. However, those companies that have struggled to export over recent months thanks to the real’s inflated value will be breathing a sigh of relief. “We believe that throughout September the real depreciation has turned export players' attention toward international markets, as it has made the business much more profitable when compared to past months,” read a Credit Suisse report this week.
More bad news for the economy comes with the announcement that industrial output was down in August for the third time in five months. Output fell 0.2% in August, down from 0.3% in July. The news comes despite tax cuts as well as raised import taxes designed to increase the competitiveness of domestic production. The sector has, however, seen production rise 2.3% in the year to August though is certainly slowing.
“Whichever way you look at it, Brazil industry looks to be headed for a recession defined in the technical sense as two quarters of falling output,” wrote Michael Henderson of London-based Capital Economics in a report this week.
Renault is planning to invest more than $270m in its Curitiba plant in Brazil, hoping to increase annual production by 100,000 vehicles by 2013. This comes on top of the $544 million already announced by the French auto maker in the run up to 2015. Nissan is also to announce plans to build a $1.5 billion plant near Rio de Janeiro.
The merger of Chilean airline LAN (LFL) with Brazil’s TAM (TAM) will form one of the world’s biggest airlines, with more than $10 billion in revenues. LAN has an excellent reputation in the region and its business is led by cargo, allowing it to better ride out economic crises. Minor problems with Chilean antitrust courts are unlikely to hamper the merger which should be completed by the end of the first quarter next year, according to the airlines.