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JPMorgan: Brazil Is in Recession and Will Grow Mere 1.5% This Year

Curitiba, Brazil Another bank has cut the 2009 economic growth forecast for Brazil: this time, JPMorgan Chase & Co. lowered Latin America's largest economy expansion estimate for this year from 2% to 1.5%, as global recession takes its toll on industrial production and business confidence.

"We think the market is not taking into consideration the potential for continued disappointing surprises on the real economy front," JPMorgan said in a report.

"Not only is the market underestimating the potential degree of the economic slowdown in the Brazilian real economy, but also earnings growth expectations for 2009 remain too high, in our opinion".

Latin America's largest economy is now in a "technical recession," as defined by two negative consecutive quarters of negative growth, the report said.

The bank estimates that Brazil's economy may have shrunk 4.6% in the fourth quarter of 2008 from the previous quarter, and that policy makers will respond by cutting Brazil's overnight rate 2 percentage points this year to 11.75%.

JPMorgan joins other banks such as Morgan Stanley that in recent weeks have lowered their growth forecasts for Brazil amid a collapse in consumer spending and demand for commodity exports. Brazilian vehicle production plunged 54% in December from a year earlier to a nine-year low, the country's automakers said Friday, January 9.

Brazilian industrial production fell 6.2% in November compared to the same month a year ago, which is the most in seven years according to Brazil's national statistics agency.

"2009 will be a year of sacrifice," Sao Paulo Federation of Industries trade director Roberto Giannetti da Fonseca told the Estado de S. Paulo newspaper.

Brazil's currency has lost more than 45% of its value against the greenback since August, now trading at 2.2 reais to the US dollar. Exporters had hoped the sliding currency would boost demand for Brazilian goods, but a spreading recession has kept down sales in Brazil's two biggest markets, the European Union and the United States.

Exports are expected to drop 17.7% to 163 billion USD in 2009, the first decline since 2000, according to José Augusto de Castro, vice president of Brazil's Foreign Trade Association, known by its Portuguese acronym, AEB (Associação de Comércio Exterior do Brasil).

The decline will likely shrink Brazil's trade surplus 31% as the economic downturn deflates prices for Brazil's top commodity exports, including iron ore and soy, the AEB said.

Still, the surplus, US$ 24.7 billion in 2008 will hover around US$ 17 billion because domestic demand for imports is due to slide along with Brazil's own slowing economy, Castro said.

With expectations of declining exports and the need to bring in dollars, Brazil's government announced its plans to sell bonds in international markets, the first such action in eight months.

The weaker economic outlook will also give Brazilian policy makers room to begin lowering the central bank's benchmark rate from its current two-year high of 13.75% as soon as this month's meeting.

Policy makers will cut rates by a half-point to 13.25% this month and the benchmark rate will end the year at 12%, according to a central bank survey of 100 economists taken January 2.

Mercopress

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  • Show Comments (9)

  • João da Silva

    Ch.C
    [quote]As to your chicken exports, welll…. should the world eat brazilian chickens at breakfest ? Why doesnt Brazil starts implementing such an obligation to your 50 millions of poors ! smiles ! Or at least have your chickens prices affordable to them and why not
    to schools lunches ! Because empty bellies have never made good students or good workers !

    That would keep up your production. Why look only at exports and not internal consumption ? You would not have a currency problem ![/quote]

    I am not going to contest you on this issue since they are exactly my views. That does not make me too popular among some of my “friends” and “associates”. There again I am not running for any elected post. 😀

  • ch.c.

    Joao…bad news !!!!
    the latest Brazilian Central Bank Survey :
    ” Jan. 12 (Bloomberg) — BrazilÀ¢€™s economy will grow 2 percent in 2009, down from a forecast of 2.4 percent growth a week earlier, according to a central bank survey of about 100 economists. “

    It is coming down…down…down ! Smiles

    There was Nooooo 45 % Brazilian devaluation ! Sorry Joao !

    As to your chicken exports, welll…. should the world eat brazilian chickens at breakfest ? Why doesnt Brazil starts implementing such an obligation to your 50 millions of poors ! smiles ! Or at least have your chickens prices affordable to them and why not
    to schools lunches ! Because empty bellies have never made good students or good workers !

    That would keep up your production. Why look only at exports and not internal consumption ? You would not have a currency problem ! Why dont you ask Robbing Hook to free US$ 1 billion out of the 200 billion in reserves for such a good cause ?
    Both your producers and needy poors would be satisified.
    I could also add that even Robbing Hook would satisfy his own ego to defend the good cause he is supposed to defend : take care
    of the poors. Empty bellies in a large food exporting country is not acceptable.

  • João da Silva

    [quote]Ya, das isht total revisionism, the governmento has assured us that theese crisis will not affect O Brasil, one time that (sacou?)[/quote]

    Jawohl ,Mein Herr. Saque.

    On a serious note, how are things in Zona Franca de Manaus ? You must be keeping track of things. Funny I was reading today that the frozen chicken exporters from here are going to cut their production by 20% because of the drop in the exports. With the currency depreciation of 45%, one would expect at least to [i]maintain[/i] the current [i]volume [/i] of sales overseas. So I am a bit surprised.

  • ch.c.

    Ooops…typing error…
    Wether 2008 growth will be 1 or 4 %…!
    I meant 2009 of course.

  • ch.c.

    Furthermore……
    lets be very clear :
    Wether 2008 growth will be 1 or 4 %, this will be in Brazilian Currency Inflation Adjusted….NOT IN US$ !

    Why do I underline this ? Simple :

    The World CIA factbook or whatever sources, when they will publish their updated stats, will show A NICE BRAZILIAN GDP…. DECLINE for 2008 ! Because the stats will be published in US$…not in Brl, so that anyone can compare 2-3-4 countries using a
    common denominator the US$ is ! The same is just as true for all countries !

    And when updated this is where you will see that already in 2008, Brazil lost quite a lot of ” Comparative World Wealth” ….. from 2007 stats !

    Sorry…sorry…for Brazilians who continually caress their navel and chest…..instead of scratching their head !!!!
    Wether you like it or not, YOU will lose quite a lot even against…… Argentina….your loved & hated brother.

    Since of course when stats will be updated, the previous ones will be deleted and very hard to find again.
    Therefore I will do a list of some stats, for some countries, still using the 2007 stats and will come back in the future when the 2008 stats will be published !!!!!

    You better already prepare some kleenex for your tears and some anti-depressants for the sad truth.
    China is going to fill the GDP per capita gap against Brazil at a surprising…SPEED !!!!!!!!
    Same for many Asians emerging countries….against Brazil !

    And no doubt that the GDP per capita between Developed Nations and Brazil ….GREW NICELY IN THEIR FAVOR IN 2008…..due to your currency decline.

    Simple as that, wether you like or not, wont change anything.

    Last but not least, knowing that the the poverty percentage is based upon the daily per capita 2.- US DOLLARS is based upon, the
    Brazilian Poverty rate also had a BIG INCREASE !

    Hey hey !
    So much more to write about in the not too distant future.

    🙁 😮 😛 😥

  • ch.c.

    But…but……..dont worry
    the AVERAGE estimates of 100 Brazilians “experts” are ar 2,4 %….for the time being !

    Why look at Swiss or U.S. experts ? smiles

    Better yet, brazilians reporters are a bunch of junkies and idiots when they wrote “Brazil’s currency has lost more than 45% of its value against the greenback since August, now trading at 2.2 reais to the US dollar.”

    That is wrong ! Simply wrong ! Deadl Wrong ! The Brazilian currency did not went down by 45 %, it is the US$ that went UP against the Brl by 45 % ! Not the same….AT ALL !

    Because when the Brl goes fom 1,54 to 2,25 it lost 1/3 ! Assuming it goes from 1,54 to 3,08 the currency would not lose 100 %…by definition and very very very simple maths in the developed world…but may be not so in Brazil…as we all know !!!! Hmmmmmmm….smiles !

    From 1,54 to 3,08 the Brl would lose “only” 50 % ! Meaning the US$ would have gone UP by 100 % !

    I know, I know, Brazilians already have headaches like Lula and Mantega, to do these simple maths.

    Hey hey ! No doubt millions of educated brazilians, such as the reporter, got their SP University Economic Degree….in
    a candy bar ! Candy bar they have stolen…of course !

    😀 😉 😀 😉 😀 😉

  • jon

    Where is Goldman Sachs on these matters?? These “institutions” are leading prophets and the universe unfolds as they say 😉

  • Ric

    Absolutely.
    Ya, das isht total revisionism, the governmento has assured us that theese crisis will not affect O Brasil, one time that (sacou?) we will not allow such an event to occur.

  • João da Silva

    [quote]JPMorgan: Brazil Is in Recession and Will Grow Mere 1.5% This Year[/quote]

    JP Morgan is a Cheater,Lier and Fear monger. Our economic team lead by the President and Delfim Netto is not pessimistic like JP Morgan. Delfim is an expert in such matters and we trust his instincts. So ya all quit worrying.

    BTW, JP Morgan is about to be taken over by some Swiss investors.

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