Wednesday, April 24, 2013

Inflation in Brazil

Here is a good summary of how focused Dilma Rousseff is on curbing inflation. It is at 6.59%, which is higher than the government's stated upper limit of 6.5%.

The policy reaction is to help out domestic ethanol. Rousseff wants to ramp up ethanol production to get fuel prices down, so is providing tax breaks and expanded credit. Ethanol producers are annoyed that gas prices are artificially low, but raising them would also spur inflation.

After months of pressure and mounting losses at state oil giant Petrobras, the government agreed to allow a 6.6 percent increase in wholesale gasoline prices in January. However, analysts estimate local gasoline prices are still about 15 percent below international levels, allowing the petroleum-based fuel still to undercut ethanol's competitiveness.

The Brazilian government remembers the years of hyperinflation, as do many other Latin American governments. At the same time, though, research has shown that people are forgiving of moderate increases in inflation as long as they believe the government is encouraging growth.

It's funny, too, how fickle the media is. Just over a year ago there were all kinds of stories about how incredible the Brazilian economy was. Now the news is almost universally gloomy. Yes, the economy has slowed down, but there seems to be no middle reporting ground.


Vicente Duque 5:47 PM  

Standard & Poor’s "sovereign debt" credit ratings : Australia, Canada, Germany, Northern Europe, and United Kingdom AAA, United States and France AA+, China and Chile AA-, Russia, South Africa, Brazil, Mexico, Chile, Peru, Colombia, Panama are BBB

India and Spain are BBB-

Those already mentioned are graded as Investment Possibility and Not Speculative. The As are superb investments in "sovereign debt".

Zambia, Zimbabwe and Venezuela are B+ considered non investment grade and highly speculative. Only the Chinese are happy lending to Venezuela.

Argentina is a miserable B- , and is considered super speculative and most dangerous.

Perhaps that is the reason why the President Cristina Fernandez de Kirtchner is so Chavista and her nation owes many millions of dollars to oil rich Venezuela.

Other Venezuelan Clients : Cuba and Nicaragua are considered the worst of the worst for Sovereign debt. .... Bolivia and Ecuador are considered very poor and dangerous risks.

So you see how being chavista is not good for your credit ratings and your credit worthiness.

Note I corrected Colombia, a nation that was upgraded recently. I think that Turkey is going to become "investment grade" very soon or has already been upgraded. I will continue upgrading my list in my blogs.

Credit Ratings


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