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