Confident default swapping??

Another optimistic article highlighting the growth and anticipation of future growth in Brazil. In particular, it examines the lower price of credit default swaps in Brazil, which implies credit agencies are more confident they will receive payment.

Also the article contrasts the growth prospects of Brazil with the more mature markets of Europe.

April 30 (Bloomberg) -- Brazil’s credit rating, raised to investment grade two years ago, is poised to increase as the economy grows at the fastest pace since 2007, trading in credit- default swaps shows.

“If you look at the European economies, they’re clearly credits in decline and this is a credit on the rise,” Sebastian Briozzo, an S&P analyst, said in a phone interview from Boston.

Here is the full article

The Relatively stable history of the Real 1994-2003

The Real was instituted as a part of a broader economic plan which is largely credited for initiating the process for much of the relative strength in the economy which has extended until present. It was pegged to the Dollar at around 1:1 until January of 1999 when it was floated freely on the market. While there have been some significant swings in the value of The Real it has been the most stable currency for Brazil in recent history. Maintaining stability in the Real is a key component to the continued growth of Brazil (or fueling of the Bubble...).

My guess is if China ever floated the Renminbi (a huge if) there would the opposite immediate effect, ie. The Yuan would quickly jump in value.

Note: Graph of the Real Courtesy of: Camila Fontana of Bloomberg News.

Commodities, Currency and Corruption

These three C's are at the center of any current discussion of the Brazilian economy. The value of the commodities of this land has it's roots (bad pun intended) far back to the Pau-Brazil trees (commonly believed origin of name of the country) which were heavily harvested and expor(loi)ted during the early centuries of Portuguese colonial rule. Easily extractable commodities have formed the basis of the early brazilian economy and continue to provide much of the force to the economy. Commodities today principally: Oil, Sugar, Corn and Coffee.

A stable currency has eluded Brazil for most of it's history. Many currencies failed prior to the establishment of the modern brazilian 'real' in 1994. This currency has been a very stable currency with little inflation relative to past currencies. The past year has been quite an interesting one. This link shows the Brazilian Real the 30% gain the Brazilian Real has experienced over the past year and also compares this to the slightly over 20% gain with the Ruble and slightly below 20% gain for the Rupee. These BRIC nations are more and more gaining a sort of collective identity and their future is becoming more and more aligned. The Chinese Renminbi is a distinctly different currency in this case since it is not traded on the open markets as the others, and is mostly flat during this same period.

Corruption at all levels of Government and Business is an interwoven reality of life and of course investment in Brazil. Political corruption has in many ways restricted a good deal of productivity and influence on the international stage.

These three C's are essential to the story of Brazil.

Brazilian Bubble?

This blog is an aggregation of articles and ideas related to the growth and potential 'bubble' aspects of the brazilian economy. Since most bubbles are discovered after they have burst, this is an open discussion inviting informed or insightful analysis from whatever relevant source.