Brazil: Credit Operations in the Financial System to Individuals

The total of credit operations in the financial system to individuals reached USD 644 billion in November, up 0.9% on the month of October and an increase of 17.2% over the same month last year. In relation to GDP, the volume of loans to individuals was 15.2%, repeating the same index in October, as we can see in the chart below.

After the rapid growth of credit / GDP ratio between 2003 and 2010, the data shows a flat behaviour in the last 2 years. The fast growth was mainly due to a very small base of credit, and in recent years the government have adopted measures to curb the rapid growth in loan volume. However, the credit level is still very low compared with other countries, and the area still have good potential of growth.



Source: Central Bank of Brazil



Brazil: Unemployment Rate November 2011

The unemployment rate, measured by the IBGE, reached 5.2% in November, and is the lowest of the series that began in 2002, as we see in the chart below.



Source: IBGE

Brazil: Current Account Nov.2011

Brazil had a current account deficit of USD 6.8 billion in October and in the last 12 months, the deficit was USD 49.3 billion, representing 2% of GDP. The chart below shows the evolution of current account balance to GDP in a recent period.

The deficit in current account have been financed by inflows of foreign direct investment, which reached USD 60 billion accumulated in 2011.

Source: Central Bank of Brazil

Brazil: Iron Ore Exports

Exports of iron ore reached USD 3.7 billion in November, with a slight drop of 3.4% compared to October, but an increase of 36% compared to November 2010.

Over the past 12 months, exports of iron ore reached the incredible mark of USD 41.6 billion, and is currently the main product of Brazilian exports.

The movement in the price of iron ore began in 2003. Before this, the average value of exports was around $ 2.6 billion a year. As we can see from the chart below, the iron ore export revenues were multiplied by 16 in the last 10 years.

Source: Central Bank of Brazil

Brazil Federal Government: Taxes Collection Growth

The federal government taxes collection rose 3.8% in October compared with the previous month and 14.7% compared to October 2010. In the past 12 months, the growth of federal revenues was 17.3% compared with 12 months immediately before. These data are available in the chart below.

Source :Brazilian Treausury and IBGE
Elaboration: the author

An important point to note about the growth of government revenues is that the growth was always above inflation between 2003 and 2011except in 2009, which was a year with negative performance of GDP. Another interesting point is in relation to the elasticity of revenue to GDP. In years of economic growth, revenues grew above the GDP and inflation, as opposed to years with economic recession. These factors suggest that if the international crisis was impacting on the growth of Brazil, the tax revenue may have a very low growth, with impact in public investments and in the evolution of public sector debt.

See more information about Brazilian Economy here.

Brazil: Gross Public Debt Oct.2011

Brazil's public debt reached 55.4% of GDP in October 2011. The domestic public debt accounted for 53% of GDP and external debt, 2.37%. As we can see in the chart below, the trend of gross debt to GDP is flat, with few variations over the recent period.

Source: Central Bank of Brazil

Brazil Inflation: Monitored and Non Monitored Prices

Inflation in Brazil, measured by the IPCA, reached 6.64% in the last 12 months. The behavior of prices of products monitored, which is about one-third of the index, had performance lower than the overall index in the recent past, but in recent months, which we note is that there is a convergence of prices of controlled items to the average inflation.

Source: IBGE

Brazil: Expenses with Interest Rate on Public Debt

For several years Brazil has maintained one of the highest interest rates in the world. This interest rate has a very high cost to Brazilian Treasury. Over the last 12 months ending in October, the payment of interest had a cost of 5.87% of GDP, despite the downward trend. The expenses with interest was almost 10% in 2003, as we see in the chart below.



Source: Central Bank of Brazil

Brazil: Activity Level - October 2011

The Central Bank of Brazil announced today the IBC-Br for October. The IBC-Br is an indicator of economic activity, calculated from figures of the industry, services and agriculture, and serves as a proxy for GDP performance in Brazil. In October, the IBC-br fell 0.32% compared to September, and rose 0.35% compared to October from the year before.. These data confirms that economic activity in Brazil is in a slow down process. The chart below shows the recent evolution of the IBC-Br.



Source: Central Bank of Brazil

Brazil: Retail Sales - October 2011

The retail sector did not vary in October compared with the previous month.The seasonally adjusted series for both sales volume and nominal revenue shows nulll variation. This breaks a sequence of 20 months of positive results in the series of nominal revenue. In other comparisons, obtained from the seasonally adjusted series, retailing recorded in terms of sales volume increases of 4.3% over October 2010 and 6.7% accumulated in the first ten months of the year.

The recent evolution of retail sales volume is showed on chart below.

The retail sales index was the only indicator that still was showing positive signs, mainly due to imports of consumer goods. This result is only a confirmation of the weak level of economic activity in Brazil.

Source: IBGE

Brazil: GDP Forecast for 2012

The Central Bank of Brazil performs a weekly survey of leading economic indicators in Brazil. In the latest survey, that was released today, forecasts for GDP growth in 2011 and 2012 were respectively 2.97% and 3.40%. In early 2011 these forecasts were both 4.5%, as we see in the chart below.

The level of accuracy of this survey is very poor. On the one hand, in 2011, the government will take measures to accelerate domestic consumption, on the other hand, the prices of the main Brazilian products exported is expected to fall, which should contribute to the reduction of GDP. It is very difficult to set a forecast for the Brazilian economy in 2012 with the high degree of uncertainty that exists today.

Source: Central Bank of Brazil

Brazil: International Reserves Dec.2011

The volume of international reserves reached USD 353 billion in early December, an increase of about USD 64 billion compared with the end of 2010.

As we can see from the chart below, we may extract two portions of the period of accumulation of international reserves. First, the period between September 2008 and March 2009, when there was a drop in the level of reserves by approximately USD 20 billion due to subprime crisis. During this period, the dollar reached its maximum value since 2008, almost 2.5. Another period is from September 2011 to today, when the Central Bank stopped accumulating reserves and the exchange rate changed the range levels, from an average of 1.60 to 1.70 ~ 1.80.

Source: Central Bank of Brazil

Brazil: Food Inflation

In November, food inflation reached 1.08%, and accumulated 7.2% over 12 months, higher than the inflation index, which is 6.64% over the past 12 months.

Analysis: Although the food component was still above the rate of inflation, he is on the decline, as we see in the chart below, mainly due to the behavior of commodities prices (click here). The fall in commodity prices is giving its contribution to the fall in domestic prices.

Source: IBGE

Brazil: Inflation in November.2011

The inflation rate (IPCA) in Brazil reached 0.52% in November, and acumulatted 6.64% over 12 months, with a reduction compared with the previous month, which was 6.97%, as shown in the chart below.

Source: IBGE

Opinion: The Brazilian economy is experiencing a paradox: the labor market is strong, with unemployment at historically low levels, but without growth in retail sales and industry. The current slump in activity level has not been enough to reduce inflation, and history shows that inflation in Brazil has a strong component of price indexation, which has not been considered by policymakers. The controll of inflation is still a big challenge for monetary authorities.

Brazil: Debt Securities Held by Foreign Investors

In October, purchases of fixed-income securities by foreign investors had reached an outflow of 30 million USD, and in the previous month, the flows were negative in USD 1.3 billion.

Analysis: The chart below shows the trend of foreign investments in debt securities in Brazil. One can observe a clear trend of decline in 2011. This trend can be explained by two reasons. First, the fall in interest rates, which makes the profitability of these assets less attractive. And second, because of international crisis, the funds seek safe places, such as U.S. securities.

Source: Central Bank of Brazil

Brazil: Commodities Prices and Internacional Crisis

The Brazilian commodities index was released today. This index expresses the commodities prices in BRL more relevant to the dynamics of inflation in Brazil. In November, this index fell 1.7% compared to October and increased 6.1% compared to November 2010. If we consider the average rate in 2011, the index is 24.6% higher than the average of 2010. The chart below also shows the index of terms of trade of Brazilian foreign trade, which also are at high levels.

Opinion: Up to third quarter of 2011, we can´t see the impact of the crisis of Europe in the prices of products exported by Brazil, despite the stability of GDP. This impact had been beginning to be felt only in October, with decrease of the index commodities for two consecutive months, and should impact more strongly to GDP in the 4th quarter. In other words, Brazil's economic growth should be weak in the fourth quarter, and if the trend of falling commodity prices persists, the economic growth in 2012 will be harmed.



Source: Funcex and Central Bank of Brazil

Brazil: GDP 3rd Quarter 2011

The Brazilian GDP was flat in the third quarter of 2011 compared to the previous quarter. On the demand side, gross fixed capital formation (GFCF), household and government expenditure had negative contribution, being offset by the positive contribution of the external sector. Regarding the third quarter of 2010, growth was 2.1%, and household consumption and GFCF rose by 2.8% and 2.5% respectively. In the chart below, we can see how the main accounts of the Brazilian GDP during recent period. In the period since December 2007, both household expenditure and GFCF grew up above GDP index. The negative contribution is due to foreign trade , where the appreciation of exchange rate led the contribution of imports in GDP to grow 48% in this period.

Opinion: The GDP growth in the third quarter was weak, which should reduce the forecast for growth in 2011. However, the impact of the crisis of Europe in the Brazilian growth is still very weak, because we do not see significant restrictions on foreign credit and also the prices of relevant commodities such as iron ore, are still high. I believe that if the crisis deepe in Europe, the scenario for the Brazilian economic growth will be very bad.



Source: IBGE

Brazil: Net External Liabilities - October 2011

The stock of foreign direct investment in Brazil, according to Central Bank data (most recent data of international investment position is October.2011) is USD 524 billion. The total investment in portfolio is USD 597 billion, of which USD 354 billion in equity securities and USD 242 billion in debt securities. The total of loans is USD 176 billion and other liabilities, USD 22 billion. Thus, Brazil's gross external liability is USD 1.3 trillion. The value of Brazilian assets abroad is USD 708 billion, as we can see from the chart below. Therefore, the Brazilian net external liabilities reached USD 610 billion.

Source: Central Bank of Brazil

Brazil: External Debt II

Currently, the gross external debt of Brazil is close to USD 300 billion. However, due to the high volume of international reserves, Brazil is a net creditor in USD 65 billion, as we see in the chart below. As we saw in the post of the day 03.Dec.2011, the volume of international reserves is higher than the gross debt, however, gross debt has been increasing, especially in the last five years, when it rose about USD 100 billion.



Source: Central Bank of Brazil

Brazil: External Debt I

The relationship between the volume of international reserves and external debt is above 100%. This ratio was very low during the 80's, when Brazil had problems with its external debt. From the 90's, and especially the last 10 years, the volume of international reserves rose sharply, and today is higher than the value of external debt, as we see in the chart below.

Source: Central Bank of Brazil

Brazil: Industrial Production in October 2011

IBGE reported today the industrial production statistics for October. In October, industrial production fell by 0.6% compared to September and decreased 2.2% compared to October of last year, as we see in the graphic below. The industrial production is still below the pre-crisis level in 2008. This poor performance is mainly explained by the appreciation of Brazilian real against the dollar, which has favored the entrance of imported goods in detriment of domestic production.

Source: IBGE

Brazil: Trade Balance Nov.2011

The trade balance surplus reached USD 583 million in November, down 75% from the previous month but an increase of 87.5% over the same month last year. The month of November has a trade surplus lower than other months of the year, as we can see from the chart below. In 2011 up to November, exports accumulated $ 234 billion and imports USD 208 billion, with a surplus of USD 26 billion.

Source: MDIC

Brazil: Interest Rate (Selic) - Meeting of 30.Nov

The Brazilian "FOMC" announced today the new basic interest rate (Selic). The Selic rate dropped from 11.5% to 11%, the third consecutive fall. The Central Bank has signaled that the process of falling interest rates would be "moderate", and therefore, the rate was in line with the market forecast. However, the worsening in international crisis and the slowdown of domestic activity is leading the market to predict further falls in interest rates. Today, the future yield curve is consistent with a fall of 1.5% divided between the three forthcoming meetings of Comittee of Monetary Policy.

Despite this fall, interest rates in Brazil are still among the highest in the world.

Source: Central Bank of Brazil

Brazil: Debt Securities Indexed by Selic Rate

The Brazilian federal public securities debt reached USD 1.733 billion in October. The cost of this debt is divided as follows: 35.8% of the debt securities are fixed-rate, 33% is in inflation-linked bonds and the 30.3% are valuated daily by the Selic rate. Debt valuated by the Selic rate is an important data, because its cost varies immediately with the interest rate set by the Monetary Policy Committee. In recent years, this proportion reached 60% in 2005 but is now at their lowest levels, as seen in the chart below.

Source: Central Bank of Brazil

Brazil: Current Account - Interest Expenses

The item "Interest Expense" Balance of Payment of Brazil showed a deficit of USD 784 million in October 2011, resulting from a gross expenditure of USD 1.276 billion and revenues of USD 492 million. Over the past 12 months, as we see in the chart below, the net interest payments amounted to USD 8.5 billion. It is interesting to note in the chart that the income from interest payments increased in the period 2007-2009. It´s a period related with accumulation of international reserves, which, of course, led to a higher revenue of interest. On the other hand, since 2009 interest revenue has decresead, mainly as a result of lower international interest rates, and consequently, lower remuneration of Brazilian assets abroad.

 See also:

Brazil: Current Account - Profit and Dividends

Brazil: International Reserves

Brazil and Exchange Rate Policy

Source: Central Bank of Brazil

Brazil: Credit Operations According to the Capital Control of Lenders

The balance of credit operations the Brazilian financial system reached USD 1,946 billion in October of 2011, equivalent to 48.5% of GDP. Government financial institutions accounted for 43% of the total. The national private institutions had 40% of the volume and foreign institutions, 17%.

The graph below illustrates this distribution of the credit according to capital control of institutions.

Source: Central Bank of Brazil

Brazil: Balance of Payments

In October, the current account balance had a deficit of $ 3.1 billion, and in the year, accumulated deficit of USD 39 billion. This balance was offset by the financial account, which amounted to USD 3 billion in the month.

In the year, the financial account was positive with a surplus of USD 95 billion, of which USD 68 billion in foreign direct nvestments and USD 24 billion in portfolio investment. The portfolio investiment includes debt securities and capital inflow to stock market. The result was an increase in the volume of international reserves by USD 57 billion in 2011.

The table below shows the main figures of Balance of Payments of Brazil.

Source: Central Bank of Brazil

Brazil: Gross Public Debt

The Brazilian gross public debt achieved 55.4% of GDP in October, according to data released today by the Central Bank. There was a fall of 0.4% compared to September 2011 and an increase of 0.69% compared to December 2010.

The main factors that contributed to the behavior of gross debt in 2011 was the effect of GDP growth, which reduced the debt at 4.7%. On the other hand, interest payments contributed to the increase of ratio gross debt to to GDP by 5.2% in the period.

The following chart shows the recent evolution of the gross debt over GDP.

Source: Central Bank of Brazil

Brazil: Unemployment Rate Between Genders

The unemployment rate, released by the IBGE (Brazilian Institute of Geography and Statistics), reached 5.8% in October. This rate varies significantly between genders. In the male population, the unemployment rate reached 4.5%, while the female population has a rate of 7.2%. Historically, the unemployment rate of the female population has been higher than the male, as seen in the graph below:

Source: IBGE

Brazil: Interest Rate for Credit Operation

Interest rates for loans to individuals rose in October to 47% per year, compared to 47.7% in September, despite the fall in basic interest rates. The rates for corporate entities showed a small drop, from 30% a.a. in September to 29.8% a.a. in October.

The chart below shows the recent evolution of interest rates for credit operations in Brazil.

Source: Central Bank of Brazil

Brazil: Volume of Exports

Although Brazilian exports show a tendency of increase, the export volume is flat, and even a small downward trend in recent months. The quantum index of exports grew by 3.8% in 2011, but it is only 10% higher than in 2006.

The chart below shows the recent evolution of the quantum index of Brazilian exports.

Source: Funcex

Brazil: Imports from China

Brazilian imports from China have been growing at a strong pace. In the early 90s, these imports were not significant, and represented less than 0.5% of total Brazilian imports. In October 2011, the latest available data, they reached USD 3.4 billion and represented 17% of total imports. The following chart shows the evolution of Brazilian imports from China.

Source: MDIC and IPEADATA

Brazil: Tax Collection

The gross taxes collection of the Brazilian Central Government was BRL 78.5 billion in September, with a nominal increase of 4.7% over the previous month and 21.8% over the same month last year.

Over the past 12 months, the total revenue to GDP ratio reached 24.2%, a substantial increase compared to recent period. In 1998, for example, this ratio was 17%, as we can see from the chart below.

These figures do not include taxes collection from the States and Municipalities.

Source: Central Bank and Brazilian Treasury
Elaboration: the author

Medium Term of Brazilian Federal Debt

The average term of the federal public debt was 40.9 months in September. In September 2010, the average term was 40.2 months. The chart below shows the evolution of the average term of federal debt in recent period.

Source: Central Bank of Brazil

Brazil: Job Creation

Today, the data from Caged (General Register of Employed and Unemployed) was released. The Caged is a data bank related of the Ministry of Labor with monthly survey on the behavior of the registered labor market. The survey data are obtained from information submitted by companies on admissions and dismissals of employees.

The Brazilian economy has created 126,143 jobs in October with a formal contract. Over he year, 2,241,574 jobs have been opened. In the previous month, fell by 39.7% in the creation of jobs (in September, the country recorded the formal creation of 209,078 jobs). In comparison with October of last year, the decrease recorded in the generation of jobs was 38.4%.

Among the sectors that generate employment are services (77,201), trade (60,878) and construction (10,298).

 The grafics below shows the tendency of job creation in Brazil in the recent period.

Source: Ministry of Labor

Brazil: Structure of Exports

The strong increase in commodity prices has changed the structure of Brazilian exports in the last decade. In 2000, the value of exports of commodities corresponded to 23% of total exports. In 2011, exports of primary products reached 49% of total exports, while the share of exports of manufactured and semi-manufactured goods accounted for 51%. The graph below illustrates this data.

Source: MDIC

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Brazil: Relief in Credit Tight

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Brazil :Net External Liabilities

Brazil: Inflation

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Is There Really a Bubble in Real Estate in Brazil?

            Impact of Global Crisis in Brazil

Brazilian Industry: Production vs Employment

Last week, IBGE (Brazilian Institute of Geography and Statistics) released data about employment in the industrial sector. The research is conducted in 18 major industrial activities and showed a decrease of 0.4% in September over the previous month. The following chart shows the relationship between output and employment growth in the industry. While the industry output had an annual average growth of 2% between December 2000 and September 2011, the employment grew by only 0.36% per year. Another important point is that industrial production recovered from the crisis of 2009 and it is just 1.5% below the maximum level, while the employment rate is still below 4%. Both industrial production and employment in the industry had a very poor performance in this period, and the main explanation for this performance was the appreciation of the Brazilian Real against the dollar, especially in the period after 2009, which meant that the industry suffered a very strong competition from imported goods.

Source: IBGE

Brazil: Relief in Credit Tight

On November 11, 2011, the government announced measures in order to ease the credit, reversing some of the measures adopted in late 2010. Among the measures adopted in late 2010, we can cite the increasing in capital requirements, and the increasing in compulsory deposits. The aim of these measures in 2010, was to discourage economic activity, because the government’ analysis at the moment was that the level of activity was being very strong and could jeopardize the control of inflation.

The following chart shows the evolution of compulsory deposits of the financial system. At the end of 2008, there was a reduction of reserve requirements due to the global crisis, which was reversed in early 2010. At the end of 2010, there was an increase in the reserves requeriments (about BRL 80 million, in a base of approximate BRL 300 million).

With the economy already in a slower pace, the Central Bank decided to dismantle partially of the "package" of 2010, with relief in capital requirements for banks. There was not, at least for now, the reversal of the rise in compulsory deposits requirements.

Source: Central Bank of Brazil

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Impact of Global Crisis in Brazil

Brazil: Exports to European Community

Despite the crisis in Europe, Brazilian exports to the countries of the European Community are not being affected. Exports to the European Community amounted USD 43.134 billion in 2010 and USD 39.74 billion in 2011 up to month of September. The growth was 29%, comparing the first nine months of 2011 with the same period in 2010 (USD 30.78 billion), very close to the global growth of Brazilian exports, which was 31% in the same period. The following chart shows the evolution of Brazilian exports to Europe in the period 2010-2011.

Source: MDIC

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Brazil: Gross External Debt

The gross external debt of Brazil is USD 396 billion and is composed as follows: the Brazilian government has debt of USD 60 million, the banks USD 134 million and the other economic sectors, including manufacturing and services, USD 93 billion. The inter-companies loans of international companies established in Brazil represent the amount of USD 105 billion. The chart below shows the gross external debt. The last data avaliable is of June.2011

Source: Central Bank of Brazil

Brazil: Net External Liabilities

The stock of foreign direct investment in Brazil, according to Central Bank data (most recent data of international investment position is June.2011) is USD 534 billion. The total investment in portfolio is USD 677 billion, of which USD 420 billion in equity securities and USD 257 billion in debt securities. The total of loans is USD 171 billion and other liabilities, USD 21 billion. Thus, Brazil's gross external liability is USD 1.4 trillion. The value of Brazilian assets abroad is USD 672 billion, as we can see from the chart below. Therefore, the Brazilian net external liabilities reached USD 731 billion.




Source: Central Bank of Brazil

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Brazil: Inflation

In October, the IPCA inflation reached 0.43% and 6.97% over the last 12 months. The inflation rate may be shared in three product categories: (i) supervised prices, which the government sets the rules for their adjustment, (ii) tradable, where prices are heavily influenced by international prices and (iii) non-tradable, composed mainly of services and products that are not subject to international prices. Each of these three components corresponds to approximately one third of IPCA index.

The prices of tradable and supervised goods rose, 5.9% and 6.3% over last 12 months, respectively. The non-tradable prices rose 8.4% over last 12 months, above inflation. The chart below shows the evolution of IPCA index, tradable and non-tradable prices.

The conclusion of these figures is that the inflationary pressure is occurring mainly in the prices of products that do not suffer from international competition. This is due to a favorable situation on the domestic market, with tight labor market pushing wages and strong activity level, though the slowdown in the recent period, which has allowed the increase in consumer prices.



Source: IBGE

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Brazil: Interventions on dollar market

Brazil: Market Expectations for Inflation

Brazil: Public Sector Borrowing Requirements