The deal between Gafisa and Odebrecht is paying of: the profits of Gafisa's rose 89% last year and jumped to 143,8 million R$.
The underlaying dynamics:
1. Brazil's unemployment rate fell in December to the lowestsince 2002, spurring borrowing.
2. Contrary to the US and the US, the mortgage rates in Brazil were very low. In Belgium mortgages account to more than 113% of the GDP. In Brazil this is currently only 1% ! Gafisa expects mortgages to swell as much as 12% of Brazil's groos domestic product in five to seven years.
Gafisa is Brazil's second largest real estate company.
Disclaimer: my wife is related to Odebrecht.
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Mar 7 2008
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Mar 3 2008
Brazil raised the minimum wage by 9,2 percent to 415 Reais a month (163 EU) yesterday. Millions of salaries and pensions based on multiples of this base salary will now go up. The increase in salaries was more than twice the 2007 rate of inflation. Inflation in 2007 was 4,5%.
The good news is that at the same time, the Brazilian central bank announced that Brazil’s inflation index fell to a seven-month low in February. Brazil is probably one of the only countries where inflation is contained. The very good effect of this February inflation figure is that the central bank will not have to raise interest rates. Good news to support the GDP growth ambitions for this year. Actually, since 2006 the SELIC interest rate was lowered 14 times consecutively. The last three meetings the Brazilian Central Bank held the rates unchanged at 11,25%.
Reading the above, it won't come as a surprise that Brazil has become the world’s largest emerging market. The news was revealed last Friday, based on Figures of the Morgan Stanley Country Index. Brazilian free float stands at 509 billion US$ while China’s is at 482 billion US$. The chart below shows the country weightings in the MSCI Global Emerging Markets index. This news is absolutely impressive, given that the Chinese stock market is in a bubble phase while the Brazilian Bovespa isn’t. China’s key Shangai Composite Index is in the middle of a pullback, down 18% after rocketing 96,7% higher last year. Does this mean you should buy Brazilian stocks and hope for last year’s yields? No. Brazilian stocks are expensive and overbought. But everyone agrees that the Brazilian surge will last on a long-term basis. This is the time for entrepreneurs to get in and really work the market. The shortage will be local talent to develop the Brazilian opportunities, not the liquidity in the Brazilian markets.
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Mar 1 2008
After the denial on recession, the newest trend is denail of stagflation. Everyone will try to convince you that the (still increasing) inflation is due to disappear in the second half of 2008. The main two drivers behind the current inflation are supposedly the (1) rising energy prices and (2) the rising food prices.
When it comes to oil prices,you'll here the following claims "Unless you think oil is going to 150 US$ a barrel by the end of the year, energy inflation will be much lower."
As to the rising food prices, the solution also seems simple: "If you want lower food prices, just tell your Senator to take away ethanol subsidies and stop using corn to make ethanol, when we can buy ethanol made from sugarcane in Brazil miuch cheaper than we can make here".
On the ethanol level, I agree. What the US is doing is absurd. The dreams of the US of an energy-independent America is not more than a dream. The US currently has 60 ethanol plants under conrtsuction to add up to the already 140 plants in existence. Last year the US produced 6,6 billion gallons of ethanol from corn. This figure will rise to 8 billion in 2008. The US government spends 3 billion US$ a year subsidizing the ethanol production from corn. And we all know that US ethanol production from corn is a dead duck compared to the Brazilian ethanol proudtcion from sugar cane. Especially if you add the biomass ethanol production in the sugarcane-waste process.
The figures are there: according to the IMF, the US production of ethanol consumes 0,82 gallons of fossil fuels to create a gallon of ethanol. According to David Pimentel of Cornel, it even takes 29% more fossiel fuel to create a gallon of corn ethanol; a net energy loss !
Yet, the US will not turn it back to the ethanol business. And Brazil certainly won't, their yields on ethanol are contrary to the US impressive.
I expect food prices to go up by 4% next year. But you have to make the right picks to profit form the wave, forget lifestocks.
The real reason why we have inflation in Belgium is not only the increasing food and energy prices. I just received my Telenet (Internet & fixed phone bill); which mentions that my bill will go up 2,5% in April, due to 'higher cost of living'. Bullshit of course; the operationg costs of Telenet are decreasing. The real reason is that Telent need to obtain an organic growth of 5% in 2008, which it clearly cannot reach through selling more. So they decide to create inflation.
Just to say that the truth on inflation and growth is more complex than journalists wants us to believe it is. -
Feb 29 2008
Bush has the lowest approval rates ever, Lula has the highest approval rates ever.
The US is in its worst economical condition ever, Brazil is in its best economical condition ever. -
Feb 28 2008
Yesterday over dinner with a close friend we were talking about my fear of an unseen food crisis adding up to the current economical crisis. I've written before on my fears of the impact of a Global Food Crisis on Europe an specifically Belgium. My friend yesterday doesn't believe the storm can be that bad. He believes our governments in Europe can help with price controls.
Price controls are not a solution, they only lead to reduced supplies. There were price controls in the days of the Roman Empire and in ancient Egypt or Babylon. Price controls under the Roman Emperor Diocletian led to a decline in the supply of goods. The same thing happened under President Nixon's price controls in the 70s and the same is happening today in Venezuela. This lesson from Venezuela is an essential one for us.
It's one of the biggestopportunities for entrepeneurs these days: buy farmland in Brazil and start running a farm with a vision. More on that during our investors trip in May. -
Feb 28 2008
Brazil's real strengthened for an eighth straight day yesterday, alomst reaching a nine-year high, as a tumbling U.S. dollar and surging commodity prices boosted demand for the currency. The real has jumped up 4,8% since February 15, making it the biggest gainer against US dollar among the world's 16 most actively traded currencies during the period. The currency has strengthened 28 percent in the past 12 months, also the biggest gain among the major currencies against the dollar.
Brazil's real interest rate, calculated by subtracting annual inflation of 4.56 percent from the 11.25 percent Selic benchmark lending rate, is 6.79 percent.
Crude oil also rose above $102 a barrel today, the highest dollar level ever, as the weakening dollar led investors to buy commodities as a hedge against inflation. Brazil exports the crude oil it pumps from what are the deepest waters in the world, with recent discoveries in fields as deep as 6 kilometers. Commodity sales helped Brazilian exports rise to a record $160.6 billion in 2007. Brazil will export as much as $180 billion this year, according to Trade Ministry estimates. -
Feb 23 2008
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Feb 23 2008
Not, of course. I'm pulling you a leg here. Belgium will never have enough money to pay its external debt.
The news is on Brazil. The central bank just announced Brazil became a net external creditor by 4 billion US$. An unprecedent fact in the economic history of the country. -
Feb 22 2008
I just stumbled on this article, where Jonah Lehrer claims that Brazil and India are after the US the biggest releasers of greenhouse gasses. Absurd of course, the CEO emissions of Brazil are dwarfed by the size of CO2 emissions of the US.
And why do people keep nagging about the Amazon deforestation? Why doesn't the US pull out the figures of its own deforrestation of the last 2 centuries? And Europe?
Why would Brazil as a souvereign nation not have the right to the same percentage of deforrestation that the US and Europe once cleared? Why doesn't every Brazilian citizens has the same right of a CO2 emission per capital equal to that of a US citizens. Actually, the increase of CO2 emission per capita in the US is still 5 times as big as the increase of CO2 emissions per capita in Brazil. Read that again: the US CO2 emission per capita is growing 5 times as fast as that of Brazil. Before North Americans dare to utter the A of Amazon they should work on putting their yearly increase down to the Brazilian per capita norms. No, actually they should bring the emission per capita down to the nominal level of emissions per capita in Brazil. Only then we can start talking about deforrestation in the Amazon.
Read this excellent article on the matter.
"After all, why shouldn't Brazilians strive for a higher quality of life for themselves and their children? Further, the recent discovery of massive oil fields off the Brazilian coast show that the resources deemed necessary will be harvested, be they petroleum or tropical forest. Fortunately, there are better ways to develop the country than plowing over the Amazon for crop and grazing land, as the lands to the more developed south are far more productive over the medium- and long-term. Environmental policy advocates interested in really working to save the Amazon must acknowledge the validity of Brazil's economic ambitions and the urgency of creating good jobs and better living conditions for Brazilians, even those in cities as far-removed from the jungle as Rio de Janeiro and Sao Paulo." -
Feb 22 2008
340ml: 4 men from Maputo, Moçambique, making music in Johannesburg, South Africa. Their initial album, Moving, released in 2004, was a gem. But 3 years later, their second album, sorry for the delay, promises to be the true revelation. The album should be available by early March.
There is something appealing about the Mozambican attitude of these guys and their music. It's for sure one of the next countries I'll be visiting; especially now that I master Portuguese.
Below: video's from "Midnight" and "Shotgun" from the previous album.
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