. October 6, 2008 SouthAmerica: John Wensink The Bovespa closed down 5.45 % today and you can see that Americans are bringing their money home to pay their bills. The Panic is happening here in the United States - the United States is at the center of the global financial collapse. Otherwise things are fine in Brazil and the United States financial collapse is affecting the Brazilian economy less than you guys realize. As you said: I mentioned on many of my articles that Wall Street is clueless about allocation of resources and they have another massive global meltdown to add to their long list of screw ups. On my article about China investing $ 200 billion dollars in Brazil in direct partnership with the Brazilian government I mentioned that they should leave out and avoid Wall Street because Wall Street is not reliable and that at the first sign of trouble the entire herd explode in a massive stampede - and that is what has been affecting this down turn in Brazil for a while. I hope the Brazilians have learned a lesson here - you can't trust Wall Street for anything. By the way, you are laughing at the wrong guy since I am the person who have been suggesting that the Brazilian government should close the door to foreign investment in companies such as Petrobras. .
I think it has something with a little thing called "risk". When it looks like good times, it's a good thing - and other times you rather keep it away with a broom-stick.
LOL SA lives and continues his self-deception. It's everyone elses fault he cries as he runs down the street naked. My sympathies to real Brazilians sufferering. The nature of markets is that the last group in are usually the most honest, innocent and naive. And the "we're insulated (got that in Aus too)" is just another variation of "it will be different this time."
Don't worry... The Bovespa has been volatile for many years, with +/-5% the norm for trading days. The currency has also normally been pretty volatile, however it has been very much the last couple of week. And the Brazilian economy has in fact shunted trade from the US gradually over the last years, with much more exports to the Middle East and Asia. If this hadn't been the case - the situation would have been very bad - and imagine if Brazil had not converted debt to national currency, or paid off so much debt. Therefore, Brazil is much better off than could have been the case if fiscal conservativeness had not prevailed. Also, internal growth is pretty strong - and most likely will give at least +3.5% next year. What happened during the last 12 months was that the entry level for investing on the Bovespa was reduced significantly, and you could get in for around USD 50... that meant that a lot of small investors were being added. In the long run, this is a good thing - but with the turmoil now - it surely has been bad for the "psychology." Last month, a lot of foreigners fled the Bovespa - and also so last year of June-July... so there were already -7% drops etc from time to time... Recently the BM&F commodity exchange and the Bovespa merged, and that certainly also exacerbate the current effects. I remember around 2002, when there were -80% drop in profits for companies YoY. Brazil is pretty used to wild volatility, although they have enjoyed very strong growth the last years. I think the overall situation in Brazil is fundamentally very good, as very large agricultural exporters and owners of the largest natural resources in the world. Growth is very good still.
To be fair to SA global markets have indeed suffered, pretty much on the same scale as Brazil. Now if one were foolish enough to believe that Brazil was somehow above the world economy, then I have no sympathy for you. Brazil is a developing nation, with all the associated risks. Usually (but not always) these end in losses for investors, particularly foriegn investors. Not sure if this posts supports SA or not, but IMO Brazil has not failed to the capability it has. I think much more trouble is in store for the land with the wonderous carnival. And boy, I gotta get down there for that some day! But everything says there's more trouble afoot. And ahand. And a-every other exterminity.
I have been telling SA for years that China screwed Brazil. They rigged the currency markets and exported goods to the u.s. in a short term violation of the "invisible hand"of economics. the u.s. got cheap goods, china got depreciating dollars and 1.5 trillion of toxic debt and brazil lost jobs in industries which would have been exporting to the U.S. I suspect the U.S. put up with the distorted markets for multiple reasons. But one of the reasons was clearly to bring China into the world community. They sad thing is that people like S.A. thought this all happened because the U.S. was stupid.
. SouthAmerica: Reply to Gringinho Your analysis is better than the other people who does not understand the Brazilian economy and the Brazilian market. A friend sent me an article published by the Financial Times on 10/5/08 and the article said that Brazil is one the countries that is going to come out of the current global financial crisis in better shape than most countries. It is hard for Americans to understand that Brazilians are not leveraged as the US economy is. The Brazilian government is in terrific shape regarding its foreign debt. The Brazilian Central Bank could pay all its foreign debt and reduce the government debt even further if they did choose to do so. The only problem with credit is that export credit might dry up as it is happening around the world, but even then the Brazilian government has a lot of resources and the government can guarantee these transactions to keep the export area of the Brazilian economy going. China has a lot of reserves in Confetti and China should continue importing from Brazil it does not matter what else is going on in the global financial markets. The Brazilian economy is insulated from the global fluctuations in the price of oil â the Brazilian economy is self-sufficient in that area since most cars use ethanol made from sugar cane. The farmers will continue their sugar cane business going â the ethanol refineries will continue to produce and distribute it around Brazil â this system also will continue to sell its extra production of electric power to the regular electric power grid. In the last few years as the value of the US dollar turned into Confetti â the US dollar is becoming worthless â the Brazilian currency has appreciated a lot making prices cheaper when converted into reals. As the average American is in debt up to their eyeballs in Brazil the population is not as deep in debt. Most people in Brazil try to stay out of credit card debt because in Brazil credit card companies always charge between 12 to 14 percent per month on your outstanding balance and at that rate debt can get out of hand very fast. The labor market is doing well in Brazil and in certain areas they even have a shortage of labor. Right now the Brazilian economy looks like the country with a economy of the first world and the United States looks like a country run like a âBanana Republic.â The US Congress just passed a bill âThe Largest Financial Swindle in World Historyâ the richest man in the land did a hard sell on behalf of the bill and requested that Congress pass this bill and also give a blank check to his friend the Treasury Secretary to spend the money as he saw fit. Before the richest man in the land agreed to be part of this dubious financial scheme he made an investment worth billions of US dollars in Goldman Sacks. (I wonder if the richest man in the land new in advance that one of the cronies of the Treasury Secretary was going to be in charge of distributing the goods to a select few.) If the problem in the US financial and global markets is a crisis of âTrustâ these guys really found out a way to inspire confidence in the US financial system around the world with its cronyism capitalism at its worst. Just like in any âBanana Republic. .
just wait unitil money flows out of Real carry trade, and oil gets cheap enough to make ethanol obsolete... we can talk about banana republics then...
Hey SA, what happened to the REAL yesterday? I guess, it ran against a cardboard favella wall I guess, the poor american bastards had to sell the Real and buy the dollar to pay their bills in the USA. Damn, the poor americans jumped at the opportunity to invest in Brazil and now they cannot afford it anymore. Of course, if the gov had closed foreign investment, as you wisely suggested somewhere you wrote in 1906, this would have never happened! But if so, who is going to invest and help you develop your future? Aha, The Metyktires I guess Hey, as the old saying wisely says, people living in glass houses or favellas for this matter should not throw stones at their neighbours ... One concept that you fail to absorb, is that no one can benefit from the fall of the most advanced societies. The developing world needs them to ... [think positively about it if you are able to] Unless of course, you get paid to be a groupie of these characters here: