2010 March | IndusLatin

Brazil’s crisis philosophy: Foreign currency reserves trump IMF credit lines

March 29th, 2010 Posted in Brazil, BRICs, Economics - Indicators, Policy and Trends

One reason for Brazil’s relative success at navigating the current economic crisis is that it maintains US $243 billion in foreign exchange reserves. These reserves have acted as a crisis fund, of sorts, for the Brazilian government. Brazil has been able to use the fund to avoid having to rely on credit lines from international institutions like the International Monetary Fund (IMF).

From MercoPress:

The reserves gave the central bank credibility when it deployed a number of mechanisms to help exporters, the financial system and the foreign exchange markets to deal with the sudden liquidity crisis, he said, adding that some have been removed and others can continue to be withdrawn.

Brazil’s National Development Bank, or BNDES, will end its extraordinary funding to the Brazilian economy in June, but the private sector should be ready to take over, he said. “I think it’s about time to exit all the crisis structures,” Meirelles said.

He added that while multilateral credit lines can be complementary, the crisis showed there are two major problems. First, the IMF would struggle to cope with the sheer volume of demand, and secondly, that the need during the crisis was proven to be higher than had been expected.

Brazil, Economics - Indicators, economy, imf, Policy and Trends

Brazil’s agricultural output expected to rise

March 10th, 2010 Posted in Agriculture, Brazil, Economics - Indicators, Policy and Trends

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Brazil is an agricultural powerhouse and a world leader in exports of soybeans, sugar, orange juice, and coffee. It is also one of the top producers and exporters of cotton, poultry, and beef. This trend of Brazilian dominance in agriculture seems poised to continue with an expected 8.5% increase in production for grains, legumes, and oilseeds, as well as a 1.5% increase in the amount of land currently under cultivation. Additionally, the coffee crop is expected to increase by 14.4% this year over last.

From MercoPress:

The production of grains, legumes and oil-seeds this year will be 8.5% greater than in 2009, according to the latest estimate. The previous estimate based on data from January indicated the total crop would reach 143.4 million tons.

Land under cultivation will grow by 1.5% compared with 2009, eventually reaching 47.9 million hectares, said IBGE.

The crop boost this year can be attributed mainly to the 17.4% increase in soybean production and 2.6% increase in corn.

Soybean is the chief crop production of Brazil, accounting for just under half of the total grain and oil seed output.

Soy, corn and rice, the three main crops, occupy 81.5% of all the cropland in the country.

Soybean production this year will reach 66.9 million tons, thanks to improved climatic conditions and the increase in the area under cultivation, while the corn harvest is forecasted in 52.4 million.

Brazil, the world’s top grower and exporter of coffee, will produce 2.8 million tons of beans this year which is 14.4% more by volume than last year.

These positive agricultural numbers bode well for Brazil’s overall economic output since agricultural revenues are a relatively high (compared to the Europe and the US) 6.5% of the country’s overall GDP.

Agriculture, Brazil, coffee, soy, sugar

Everyone Wants Security, As Farmland Prices Go Parabolic

March 9th, 2010 Posted in Agriculture, Latin America

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Latin America price arbitrage exists in hi-quality farmland – prices ranging from $2000 to $3000 per acre in Uruguay and Paraguay, for ready to farm properties. The problem of feeding Asia exists no matter if the USD and EUR ultimately become worthless over the next 2 decades with massive money printing. Farmland prices will likely skyrocket this decade as people realize the ultimate scam of paper money and rush into assets that “cannot be printed”.
via BusinessInsider

The price of high quality farmland is now generally in the rage of $5,500 – $7,000 per acre in Iowa and $6,200 – $7,500 in Illinois.

“There was a dramatic jump in the last 60 days,” says Loyd Brown, the president of Hertz Farm Management. He says land prices have been rising since 2009, but the biggest increase has occurred in the last 2 months.

Brown sells land to farmers, investors and investment firms. He noticed there was a steady and significant jump when, in a sequence of three auctions he held, land prices jumped up $500 per acre for top quality land.

Most of the buyers are farmers, around 60%-70% of the market, he says. The rest are investment firms and individuals. “Individual investors usually have a background in farming,” he says. He thinks prices are increasing because of low interest rates, the lack of good alternative investments and because a lot of people want tangible, conservative assets. “A lot of people just like buying something that produces food, fiber and fuel,” he said.

Technorati Tags: farmland, tangibe assets, latin america

Chile learns how trust its military, 20 years after Pinochet

March 5th, 2010 Posted in Chile, history, Latin America, Politics

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Chile has made great strides since the end of the Pinochet dictatorship in 1990. Under Pinochet there was extreme political repression, including at least 3,000 people who were “disappeared” and murdered because of their political opposition to the regime. In the last 20 years Chile has enjoyed rapid improvements in its economy and society, but mistrust of the military has remained strong.

With the recent earthquake and ongoing aftershocks, however, the Chilean military has begun to redeem itself in the eyes of the citizenry. Outgoing Chilean President Michelle Bachelet has deployed thousands of troops to the hardest hit areas, and they are doing a commendable job of orchestrating search and rescue missions and maintaing security. It is revealing, however, that distrust of the military was strong enough that it took two days of widespread looting and crumpled infrastructure after the quake before President Bachelet was willing to call upon the military for help.

The military’s history might be one of oppression and fear, but residents seem to be thankful for a military presence in this crisis. From the NY Times:

In Chile, the military clearly evokes mixed emotions because of the role it played in the torture and disappearance of some 3,000 Chileans during this country’s bloody 19-year dictatorship.

But in the five days since Chile was shaken by a magnitude 8.8 earthquake, one of the worst natural disasters in its history, the military’s relationship with the country’s people was turning a new page.

Tanks were stationed outside supermarkets that had been looted and vandalized for two days before the troops arrived. Soldiers organized lines for residents to enter banks, pharmacies and gasoline stations. And for the most part, emotional and exhausted residents like Mr. Ramírez embraced them.

…

“The military arrived so late here,” said Mrs. Henríquez, 49. “The looters took everything in this city, even the lights in the supermarkets. It was dreadful. And all because the president was worried about what happened in 1973. We don’t care about that now. We want order, not chaos.”

Chile, earthquake, michelle bachelet, military, pinochet