• 35 mins Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 18 hours Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 19 hours Oil Gains Spur Growth In Canada’s Oil Cities
  • 20 hours China To Take 5% Of Rosneft’s Output In New Deal
  • 20 hours UAE Oil Giant Seeks Partnership For Possible IPO
  • 21 hours Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 22 hours VW Fails To Secure Critical Commodity For EVs
  • 23 hours Enbridge Pipeline Expansion Finally Approved
  • 24 hours Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 1 day OPEC Oil Deal Compliance Falls To 86%
  • 2 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 2 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 2 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 2 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 2 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 2 days Aramco Says No Plans To Shelve IPO
  • 5 days Trump Passes Iran Nuclear Deal Back to Congress
  • 5 days Texas Shutters More Coal-Fired Plants
  • 5 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 5 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 5 days Chevron Quits Australian Deepwater Oil Exploration
  • 5 days Europe Braces For End Of Iran Nuclear Deal
  • 6 days Renewable Energy Startup Powering Native American Protest Camp
  • 6 days Husky Energy Set To Restart Pipeline
  • 6 days Russia, Morocco Sign String Of Energy And Military Deals
  • 6 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 6 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 6 days India Needs Help To Boost Oil Production
  • 6 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 6 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 6 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 6 days District Judge Rules Dakota Access Can Continue Operating
  • 7 days Surprise Oil Inventory Build Shocks Markets
  • 7 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 7 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 7 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 7 days Oil M&A Deals Set To Rise
  • 7 days South Sudan Tightens Oil Industry Security
  • 8 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 8 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
Alt Text

The Safest Way To Bet On The Bitcoin Boom

Often described as the backbone…

Alt Text

Could Low Oil Prices Cause A Global Recession?

The global economy is slipping…

Stuart Burns

Stuart Burns

Stuart is a writer for MetalMiner who operate the largest metals-related media site in the US according to third party ranking sites. With a preemptive…

More Info

Rough Seas Ahead for Brazil's Booming Economy

Brazil has fared better than most over the last year or two. True, the country does have a problem with inflation, which has proved stubbornly hard to contain, and a strong currency has caused severe problems for Brazil’s exporters. Yet the country has low unemployment (part of the reason they have strong wage inflation), robust growth, and a trade surplus of $20.3 billion in 2010.

All is not quite as solid as it seems though, according to an FT article. Except for the export revenues of one company, that surplus would have been a deficit. Not that Vale’s exports are likely to disappear, but such reliance on one firm’s fortunes and one single commodity underlines that for as far as Brazil has come, it’s still very much a commodity economy.

Much is currently happening in Brazil. Growth is slowing as the country’s main export markets continue to struggle. Although Brazil’s largest trading partner is now China, much of that depends on the export of commodities like iron ore that are slowing. Back to Vale, an FT article last week reported a plunge in net profits for the third quarter, largely due to a currency loss, but analysts noticed sales were also weak. China has been cutting back on purchases as iron ore spot prices have plummeted, and while Vale is bullish about future demand, others are suggesting the tightening process in China may have been overdone and anticipate a period of consolidation before Beijing decides to take the foot off the brake and allow the economy more credit next year. The move to greater spot sales of iron ore will also hurt Vale’s revenues from the 4th quarter onwards as spot prices continue to slide. With steel production depressed in Europe and the US, the 40 percent of the company’s exports to those markets are not likely to pick up anytime soon.

The government of Ms. Dilma Rousseff has not been standing idly by as the rest of the world has been focused on debt woes. The central bank has already cut central bank rates 0.5 percent to 12.0 percent, a move that is expected to be repeated later this year and next year down to a (still eye-wateringly high) 10.5 percent by mid-next year, according to the EIU Viewswire report. This in spite of consumer inflation running at 7.3 percent year-on-year in September, well above the target of 4.5 percent and with a 14-percent increase in the minimum wage in the pipeline for January.

The central bank is hoping, as are central banks in the UK and elsewhere, that falling commodity prices will feed through to reduce inflationary pressures next year. Whether they are correct remains to be seen, but what does seem certain is that Brazil will experience lower growth next year just as spending will need to ramp up to meet the cost of the 2014 Soccer World Cup and the 2016 Summer Olympics, not to mention the inevitable vote-buying spending spree that will accompany local elections next year.

Brazil can weather the current downturn better than most. Iron ore sales may slow and prices may drop, reducing revenues, but they will still make a substantial contribution to export earnings. The fall in the currency will benefit manufacturers looking to export, although it will heap further inflationary pressure on imports for domestic consumption.

Deep-water oil discoveries and the infrastructure investments needed for the above events will make significant contributions to Brazil’s economy in the years to come, further reducing the country’s reliance on low-value commodity exports towards a consumer-driven mature economy. The challenge will remain to control inflation and the incipient erosion of global competitiveness that high inflation brings.

By. Stuart Burns

(www.agmetalminer.com) MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends, strategies, and trade policies that will impact how you source and/or trade metals and related metals services, MetalMiner provides unique insight, analysis, and tools for buyers, purchasing professionals, and everyone else for whom metals and their related markets matter.




Back to homepage


Leave a comment
  • Anonymous on November 08 2011 said:
    I agree with you 100%, except the last paragraph. Deep water oil (the so called Pre-sal) is an expectation for several year ahead. Sure it will bring economic contribution, but there are more immediate problems to be concerned about.The investments for the 2014 world cup and 2016 Olympics will end up being too much more than the revenue they will bring. Greece also hosted an Olympics and see how's Greece situation now. I don't believe these events will bring any benefit to Brazil.Brazil is also experiencing a huge real estate bubble that is reaching its peak now. Needless to say what is going to happen next.With China slowing down and recession (or depression) knocking Europe's and USA's doors, Brazil exports cat take a big hit. It's not clear for me how it's going to be this transition from "reliance on low-value commodity" to "consumer-driven mature"

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News