Automakers, and the general industrial sector in Brazil may be in for hard times come 2013. The most recent industrial report showed a contraction of 1% over the previous month after a strong 3.2% expansion in August.
Brazil’s policy of weakening its currency to make exports more competitive has worked – maybe too well.
As the Eurozone debt crisis erupted in August 2011 and fears of a 2008 repeat took hold in investor psyches, central banks around the world began to aggressively reassess current policies. With several European countries now officially in recession, emerging economies have taken proactive steps to counter softer export demand and easing inflationary pressure by lowering interest rates.
Early in January, Brazil’s central bank cut its interest rates for the fourth time to 10.5%, with more room to keep cutting in an effort to soften the blow of a European economic slowdown. Investors in Brazil seem to be positioning aggressively for the idea that growth will pick up as a result.
Brazil’s leading retailer Pao de Acucar is so hot these days that the company has become the center of an international takeover fight. Tim took a fresh look at CBD on a recent Trading the Globe.
Brazil’s leading retailer Pao de Acucar, better known simply as CBD, failed to boost its profitability last quarter as merger synergies prove hard to come by. But look at its revenue curve for the long term.
The word in the investor press is that Brazil is dead money for awhile. Writing off an entire market seems a little dated when there is still plenty of value there.
Jim O’Neill, the man who invented the BRIC investment category, now says that the consumer sector in Brazil, Russia, India and China represents the “key investment of our lifetime.”