The day after Brazil’s ousting Ms. Rousseff

Brazil’s currency, real, rose as Dilma Rousseff was impeached. This paved the way for a fundamental shift in economic policy after the country sank into its deepest recession in a century. However it is still in the air if the country will experience any improvements in the economy for the next few years.

The currency defied a slump in emerging markets Wednesday, climbing 0.4 percent to 3.2267 per dollar Wednesday in Sao Paulo after Senators found Rousseff guilty of bypassing Congress to finance government spending, paving the way for her vice president, Michel Temer, to serve out her term until general elections in 2018.

Brazil’s financial markets have rallied this year on prospects that Mr. Temer, once he formally takes over, will win support for legislation to cap a near-record budget deficit and overhaul the pension system. After plunging 33 percent in 2015 as the country lost its investment-grade credit rating, the real is the world’s best performing currency in 2016 after high interest rates attracted investors hunting for better yields and if history can tell anything the new President will keep interest rates high.

“Coming from a very attractive starting point, the real has been outperforming as a result of the change of president and government, which are important factors behind the rally this year,” said Per Hammarlund, the chief emerging-market strategist at SEB SA in Stockholm and one the top forecasters for the Brazilian currency.

Latin America’s largest economy contracted more than analysts forecast in the second quarter. Brazil’s gross domestic product declined 0.6 percent in the three months ended in June, after a revised 0.4 percent drop in the previous quarter, the national statistics institute said Wednesday. The figure was worse than the median estimate for a 0.5 percent decline from 46 economists previously expected. From a year earlier, GDP shrank 3.8 percent after a 5.4 percent drop in the previous quarter.

But the general idea among the economists surveyed is Mr. Temer government has a better potential. They believe it’s not Brazil’s underlying fundamentals that are driving the real, it’s the conviction among investors the new President has a better team and, contrary to Ms. Rousseff, will let them do their job. “If you combine Brazil’s enticingly high yields with a change of government, you have a winning combination despite the plethora of risks going forward”, said Hammarlund.

With information from bloomberg
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Dilma Rousseff ousted in impeachment vote won’t cure all country’s ills

The impeachment of Dilma Rousseff is both the story of a woman and a country. The woman who bravely fought dictatorship in her youth, rose to become president, has now been ushered from power in the middle of a corruption scandal. And the story of a nation, once applauded for its growing influence and fight against poverty, now struggling with political tensions that have up-ended the 13-year rule of its Workers’ party brought to power by Ms Rousseff’s charismatic predecessor and mentor, Luiz Inácio Lula da Silva. It is also a demonstration of today’s shifting global landscape, in which powers that just years ago were celebrated as “emerging” and likely to reshape the world find themselves confronted by difficulties rooted in economic downturns and flawed governance.

As soon as Brazil’s Senate screen displayed 61 to 20 votes for her removal, Brazilians celebrated like they during the Olympics, loudly. Her ousting had marks of a personal tragedy. There were tears and violent protests from supporters, as Ms Rousseff put up a fight against what she and her supporters have consistently called a “coup”. On the other side, her critics had plenty of fireworks, cheers of celebration in the streets and described the process as the logical outcome of a long, constitutional process aimed at clearing the graft and unaccountability that have too long dominated Brazilian politics. Emotions were high also as Ms Rousseff drew parallels of this process with the way she had endured torture under Brazil’s military dictatorship.

Senado

Brazilian Senate

Although the process followed all legal steps, it is hard to overlook a degree of unfairness in this downfall. Ms Rousseff was on trial for window-dressing state budget figures, she never stood accused of personally benefiting from corruption, unlike dozens of Brazilian officials and politicians – many of whom are Senators that voted for her removal. Brazil’s crisis in some ways resembles those of other “developing” countries. Like the anti-corruption campaigns waged by the autocratic Chinese leader. None of this can be a consolation for Ms Rousseff, nor will it erase the mistakes she made. But you can’t put all of Brazil’s problems to one woman, or think they will disappear with the impeachment or one election.

This has been a downwards slide for Brazil. In 2010, when Ms Rousseff was first elected, Brazil was the seventh-largest economy in the world and widely recognized as a power on the rise. It was set to display its accomplishments as host of the World Cup and Olympic Games. Its successes in reducing inequalities made it a model for the world. But the collapse of commodity prices stopped a decade-long export boom triggered protests in 2013. The country experienced social tensions, mass street demonstrations and popular discontent, including among the new emerging middle classes. The opposition to her Workers’ party tried to capitalize on these frustrations. But Brazil’s rightwing forces attempts to look “cleaner” than the government failed when financial dealings and nearly billion dollars political kickback schemes were uncovered.
Many of those happy to see Ms Rousseff thrown from office are corrupt politicians who hope that, as a result, they will be spared the attention of anti-corruption judges. At this moment Brazil is a highly polarized nation and its citizens are deeply divided. But they want a political class that can restore the public confidence needed to address the country’s many challenges. Whether the new president Michel Temer – who had led the attacks against Ms Rousseff – can deliver on those expectations is a tricky question.
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The Brazilian press isn’t mentioning Zika

Brazil is in the international media for various reasons. The most important current events attracting the media are President Dilma Rousseff’s impeachment, corruption scandals involving high authorities, the Olympics and zika virus. But, there is a not subtle difference between the domestic and the international press coverage, for the Brazilian press, zika virus nearly doesn’t exist.

The Brazilian press is fairly independent, but quality and competition are questionable. Globo is by far the biggest media network in Brazi. But apparently that doesn’t translate into quality and recently The New York Times released an interesting story about the lack of quality of Globo’s journalism on TV (read the NYT story). But the weird fact is the world press and authorities are intensely talking about the Zika virus, it reached a point where some Olympic athletes such as Michael Phelps were openly talking about not attending the games, not to mention airlines are reorganizing the roster if members of their crew decline traveling to the country.

There aren’t official numbers to rely on. But any viewer can attest the prevailing subject in the Brazilian press today is corruption in politics and the Olympics come second. Brazil has a long story of corruption, impunity for the wealthiest and for the first time in history politicians are actually afraid of law enforcement, historically it’s the other way around. This is relevant especially when you take into perspective the culture of the country where voting is mandatory and people show up mainly because they have to instead of being conscious about the importance of voting. Besides, law enforcement is doing a good job feeding the press by arresting big political figures every so often. So, to an extent is understandable that zika isn’t the main subject in the media.

The virus doesn’t have any visual symptoms. Consequently the lack of images with lots of sick people in a hospital certainly helps to keep it low profile. But especially with the Olympics around the corner, athletes of the caliber of Michael Phelps were openly talking about not attending the games and important world health scholars are stepping up against the Olympics at this moment or in Brazil as time passes and games approach. With all this facts, it has reached a point where it’s hard to understand the reasons the Brazilian press isn’t talking about zika.

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Brazilian President suffers impeachment

A very intense week in the capital of Brazil. Dilma Rousseff at least for now is officially an ex-president. And to increase the mess, technically there is no Vice-President today. To better explain this statement it’s important to provide a little explanation of the Constitution as well as what happened last week and it’s the subject of this article.

The Brazilian Constitution is clear, the President can’t be a defendant. The third in line for President of the Republic is the President of the Lower House, unfortunately, it’s not exactly clear right now who holds this position. Eduardo Cunha was the President of the Lower House, but Mr. Cunha became a defendant under corruption charges a few weeks ago. The catch is: it was eminent for the Vice-President Michel Temer to be in charge and, if anything happens to Mr. Temer, Mr. Cunha can’t be nominated President. Predicting a serious problem, the Supreme Court decided to remove Mr. Cunha from the presidency of the Lower House last Friday.

But removing Mr. Cunha doesn’t make matters easier. The bylaws of the Lower House clearly states the only possibility to declare vacant the Presidency before the term (currently February of 2017) is if the President resigns or dies. Mr. Cunha assures he won’t resign, experts say this is a loophole and it’s impossible to just force new elections. On the mean time the first secretariat, Congressman Eduardo Maranhão, was nominated temporary President of the Lower House. The amazing thing is that last Monday morning Mr. Maranhão declared invalid the Lower House’s session that voted for Ms. Rousseff’s impeachment. This is such an illegal act that President Maranhão faced a whole day of mockery from every legal expert the press could find and intense pressure from nearly everywhere to back off on his decision. So Mr. Maranhão decided to undo his act in the evening of the same day.

So, today – Senators voted at 7am – the Senate decided that Ms. Rousseff must temporarily leave office. For this temporary action it was necessary a mere 50%+1 of Senators. The next step is former President Rousseff has further opportunity for appeal and Senators will decide her final fate in up to 6 months. This next round requires 2/3 of the Senate voting for the impeachment and she looses her mandate permanently. The Problem for Ms. Rousseff is that 2/3 of the Senate mean 54 votes, and today 55 Senators voted for her temporary leave. Therefore, the odds aren’t on her side.

The future. The termination of the mandate via impeachment is almost certain and puts the citizen Dilma Rousseff in a dangerous legal position. She will answer many criminal charges – that likely to lead to jail – that it’s hard to understand why Ms. Rousseff insisted in the idea of coup. As the results in the Senate showed, today’s decision was very predictable and a resignation would make consequences much lighter. Now Michel Temer is the President of the country and is likely to make a better administration because, according to Former President Lula, Mr. Temer is choosing better staff. As a matter of act it’s nearly the same staff former President Lula insisted former President Rousseff nominate, but she was too stubborn to accept.

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Cheaper oil, but more expensive gas in Latin America

As the oil prices boomed, Latin America’s biggest national oil companies spent big in pursuit of new reserves and binged on debt to finance it. Now payments are coming due just as weak prices cripple cash flows. Government intervention, restructuring or even default are now likely.

The region’s three largest national oil companies – Brazil’s Petrobras, Venezuela’s PdV and Mexico’s Pemex – have a combined U$45 billion in debt repayments due over the next two years. With international oil benchmarks trading in the mid-$30s – or lower for Venezuela’s heavy crude grades – the cash crunch will stretch the companies’ finances and divert funds needed for investment.

In Brazil

President Dilma Rousseff said in in 2015 that she couldn’t rule out a bailout for Petrobras if oil prices didn’t recover. The company board is aware of the finances of the country and considers this bailout a “last resort”. But with close to $23 billion in debt payments due over the next two years, the firm’s new management team has slashed capital spending and says it is prioritizing the financial health over growth. Spending has been cut from U$130.3 billion to U$98.4 billion leaving the company’s other businesses running on bare-bones budgets.

Spending cuts will help, but honoring the debt payments will depend on Petrobras’s divestment plan. The firesale got off to a slow start in the company’s assets sold in 2015. That leaves more than U$14 billion to pay this year, at a time when sellers outnumber buyers. To pull in potential suitors Petrobras will probably have to sell some of former President Lula da Silva highly coveted pre-salt oilfields.

In Mexico

Pemex may need help from the government as losses mount and the company faces almost U$12 billion in debt payments in the next two years. After a third quarter loss, Mexico’s finance minister, Luis Videgaray, said that state oil company could get a capital injection if it cut costs and bring in more foreign partners.

The promise of a government backstop helped reassure jittery investors ahead in a successful bond sale last January. The offering was oversubscribed, suggesting demand for the company’s debt remains robust. Pemex plans to raise more so this year but plunging oil output will make recovery more difficult.

In Venezuela

The hardest hit and most vulnerable is Venezuela’s PdV. The company’s heavier crude slate means its oil price languished in the mid-$20s a barrel. In English, the operational cost is higher than selling price, to make matters worse, the government relies in oil for nearly all of its earnings.

A default in PdV is possible in 2016, unless the oil price recovers or China steps in with its own bailout. Besides, PdV’s 2016 bond, which matures in October, is trading very low and is a sure sign of widespread doubts about the company’s ability to pay.

All these companies are central to their countries’ energy strategy, so consequences of failure are unthinkable. The obvious solution is a raise in oil prices, but companies could use the situation to improve efficiency. On the bright side, the state run companies are a great source of money for the pockets of well known corrupt politicians. Lula da Silva in Brazil, Chavez in Venezuela and Calderon in Mexico are very popular for their wrong doings so as bad as this hurts now, it’s likely these countries will get future benefits with the crisis in the state companies.

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Energia solar no Oriente Médio e África

A primeira vista o deserto parece um lugar óbvio para explorar energia solar. Nesse contexto, é curioso saber porque essa não é uma atividade tão explorada em uma área desértica grande como cinturão desértico do Norte da África ao Golfo Pérsico. Até recentemente não era economicamente possível desenvolver essa fonte energética na região. Mas a situação está mudando, e rápido.

Você talvez já tenha se perguntado sobre os motivos que a faixa desértica da África ao Oriente Médio não ser famosa pela a produção de energia solar. Após algumas pesquisas sobre a região, descobri que, apenas recentemente, uma combinação de fatores favoreceu a exploração da energia solar na região. Os fatores são bastante variados, os principais são pressão demográfica, solo irregular, baixo preço do petróleo e tecnologia disponível a preços acessíveis. Para os países como Marrocos, a energia renovável pode oferecer o caminho a uma maior autonomia energética. Para outros, como Egito e Arábia Saudita, instabilidade política e exportar a tecnologia de produção de energia e financiar projetos no exterior são motivos primários. O resultado é que, atualmente, muitos países do Oriente Médio e África estão direcionando esforços para a energia solar e essa combinação de fatores, a energia solar deve aumentar sua relevância no médio prazo.

O fator que motivou a pesquisar e escrever esse texto, foi ler a respeito dos planos energéticos do Marrocos. O país é um reino relativamente estável politicamente em uma região instável, o Marrocos importa cerca de 90% de sua energia e está em busca de fontes renováveis para aumentar a segurança energética do pais. A questão é que o Marrocos levou a produção de energia limpa a um patamar superior.

O Marrocos esta construindo a maior usina de captação de energia solar do mundo. Uma usina de produção de energia, basicamente, usa espelhos (ou lentes) que focam nos raios solares para gerar calor e alimentar as turbinas de produção de energia. A primeira etapa do projeto em marroquino foi concluída no início de 2016 e as metas do país não são nada modestas. O Marrocos quer que metade da sua matriz energética seja de origem renovável até 2025, a energia solar responderá por metade dessa demanda, e um dos objetivos do país é exportar o excedente energético.

Em comparação com o Marrocos, o Egito tem mais problemas políticos e suas instituições, inclusive as financeiras, são mais instáveis. Mas a importância do país no contexto mundial, para a região e a vocação natural para a produção de energia solar praticamente obrigam uma menção ao país.

O Egito tem mercado consumidor que demanda bastante energia. Isso abre uma janela de oportunidades e abre caminho para investir em tecnologia que supre a demanda crescente. É surpreendente descobrir que esse país cheio de petróleo constantemente tem problemas energéticos devido a falta de investimento em produção e geração de energia oriundas do óleo e gás, os blackouts são comuns e o país enfrentou recentemente escassez de combustível para cozinhar. Naturalmente, a energia solar não vai resolver esses problemas, mas o governo recentemente fez parcerias com a Coréia do Sul para desenvolver energia solar, isso mostra que – embora pouco ortodoxas – o governo egípcio procura alternativas para resolver seus problemas.

Por último, o Oriente Médio, mais especificamente a Arábia Saudita. O consumo de energia no país esta alto e os preços do petróleo estão baixos, a elevada dependência dessa commodity coloca o governo em uma situação financeira bastante delicada. O consumo interno de petróleo na Arábia Saudita é bastante elevado, para ser mais específico, é o pais que mais usa petróleo no mundo para produção de energia elétrica. Sem novas fontes de geração, o consumo de petróleo será elevado a patamares ainda mais altos.

Em busca de novas fontes, a geração de energia solar faz parte da solução dos Sauditas. Se as metas forem alcançadas, as fontes renováveis responderão por 8% da produção de energia até 2020, 15% ate 2030 e – a pesar de não especificarem a quantidade – o governo assegura que a energia solar será a responsável pela maior parte disso. Além disso, a companhia energética estatal está envolvida em projetos na região, como o de Marrocos.

Em conclusão, a energia solar dificilmente vai substituir os hidrocarbonetos como fonte primaria de energia na região. Mas, a energia proveniente do sol tem um grande potencial de diversificar a matriz energética nos locais onde e viável construir a estrutura necessária. A pesar do petróleo continuar a ser a matriz energética regional predominante por mais algumas décadas, a energia solar já ganha importância. Com esse aumento, a tendência para a tecnologia de captação dos raios solares ficará mais barata e ajudará os países a diversificar sua matriz energética.

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Petróleo mais barato e gasolina mais cara

As maiores empresas da América Latina investiram pesado na busca de novas reservas na época de preços do petróleo elevados. Nesse contexto estatais como a Petrobras contraíram empréstimos para financiar esses investimentos. Agora, as prestações chegam no mesmo momento que o petróleo vale uma fração em relação ao preço de outrora. Nesse momento, intervenção do governo, reestruturação e concordata são medidas que não parecem muito longe da realidade.

Na América Latina existem três grandes petrolíferas estatais: a brasileira Petrobras, a venezuelana PdV e a mexicana Pemex, as prestações que vencem apenas nos próximos dois anos das três estatais juntas estão na ordem de U$45 bilhões. E, com os preços do barril de petróleo na faixa dos U$30, – ou ainda mais baratos, como o caso da Venezuela – essa dívida vai reduzir muito os fundos disponíveis para investimento.

O Brasil

A presidente Dilma Rousseff – ainda em 2015 – já alertava que o país não teria condições financeiras de assumir os empréstimos da Petrobras se os preços do petróleo não voltassem a subir. Os executivos da estatal avisaram que, no limite, nos próximos dois anos vão cortar todos investimentos e focar exclusivamente na saúde financeira da estatal.

Esses cortes vão ajudar. Mas o pagamento das prestações vai depender do plano de abertura de capital, que já esta a caminho, além do leilão das camadas do pré-sal. Naturalmente, um aumento nos preços dos combustíveis fará parte do pacote.

O México

A Pemex provavelmente vai precisar da ajuda do governo. Isso ocorrerá porque a estatal mexicana perderá muito valor devido ao atraso em parte dos pagamentos nos próximos dois anos. As perdas no último quadrimestre foram de U$10 bilhões e o Ministro da Fazenda mexicano, Luis Videgaray, anunciou que vai injetar capital na estatal se a empresa conseguir cortar custos e levar investidores externos.

A promessa do governo ajudou a restaurar a confiança dos investidores para o lote de ações vendido em Janeiro. A Pemex planeja outra injeção financeira esse ano, mas se o preço do petróleo não aumentar vai dificultar o processo.

A Venezuela

O pior cenário é o da venezuelana PdV. O tipo de petróleo que a estatal produz, mais pesado, é mais barato, o preço está na faixa de U$20 o barril. O custo operacional de extração do petróleo é mais caro que o preço de venda do produto e o governo é altamente dependente do petróleo para pagar suas contas. A concordata da PdV, e até da própria Venezuela, é provável ainda em 2016. Se a PdV entrar em concordata não terá qualquer forma de acesso a crédito, consequentemente seus planos de investimento serão paralisados por tempo indeterminado.

Importante ressaltar que Petrobras, PdV e Pemex são estratégicas no plano energético de seus respectivos governos. Logo, a concordata dessas empresas em qualquer cenário econômico e político seria desastroso para o curto e médio prazo de qualquer um dos países envolvidos. A solução mais óbvia para as três companhias é o preço do petróleo aumentar, mas aumentar a eficiência produtiva bem como melhorias gerenciais são igualmente importantes.

Mas nem tudo são lagrimas. Essa crise certamente trará seus dividendos a longo prazo porque essas estatais são geridas por governos reconhecidamente corruptos e geraram muitos dividendos políticos e financeiros oriundos da corrupção durante os governos Lula, no Brasil, Chaves, na Venezuela, e Calderón, no México. Portanto, o preço baixo do petróleo dói no bolso hoje, mas trará seus alívios no futuro.

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