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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: THE ANT who wrote (61089)	2/16/2010 7:01:15 AM
From: elmatador	Read Replies (1) \| Respond to of 217617

Hi Klaser. In Brazil for a week. From now on we will witness talks about political risks, imagined or otherwise. That will provide a chance for BRL to drop from here to election time. Very unlikely Lula won't make his successor since the shirtless (now dressed on a shirt) will not consider changes from PT rule.

To: THE ANT who wrote (61089)	2/16/2010 7:03:04 AM
From: elmatador	Read Replies (1) \| Respond to of 217617

Key political risks to watch in Brazil Mon Feb 15, 2010 11:16am ESTStocks By Raymond Colitt Stocks \| Bonds \| Global Markets BRASILIA, Feb 15 (Reuters) - Brazil's presidential election in October looks less risky to investors than any other in the last quarter of a century and the economy has bounced back after a brief recession due to the global financial crisis, but there are still investment risks to watch in Brazil this year. PRESIDENTIAL ELECTION President Luiz Inacio Lula da Silva's chief of staff, Dilma Rousseff of the ruling Workers' Party, is his hand-picked candidate to succeed him, and polls show her narrowing the gap on her main rival, Sao Paulo state Governor Jose Serra of the opposition PSDB party. [ID:nN04179695] Unlike previous elections, there is no clear market favorite, though some investors prefer Serra for his party's more centrist stance and his managerial experience. But there are some investment risks as both Rousseff and Serra believe in a strong government role in the economy and they could tighten regulation in financial markets. They have also both called on the central bank to look at the broader economy and not just inflation in making its monetary policy decisions. Serra urged larger rate cuts instead of the incremental easing seen since the global financial crisis hit in 2008. Rousseff has said the bank should consider economic and job growth when setting policy. There is also some doubt about how firmly the candidates would push for a second generation of structural reforms to ensure Brazil's international competitiveness if elected. These include proposed reforms to tax, pension and labor laws. Rousseff is believed to favor an expanded role for state firms in the economy, a position that became more popular inside Brazilian politics during the global crisis. Such moves could reduce private sector participation in industries such as banking, oil and gas, and utilities. Serra is widely perceived to be the tougher of the two on fiscal discipline and may streamline the state apparatus, potentially paving the way for swifter interest rate and tax cuts. What to watch: -- Serra and Rousseff in coming weeks will name their economic advisors, giving some indication of future policy choices and who may take future cabinet posts. -- The candidates must step down from their current positions by April 3 and will then begin campaigning in earnest. GOVERNMENT SPENDING The government is expected to maintain a high level of spending before the election, putting pressure on the central bank to raise interest rates to keep a lid on inflation. Public spending rose sharply in 2009, eroding the primary budget surplus to an eight-year low of 2 percent of gross domestic product. Finance Minister Guido Mantega has pledged to pursue a surplus of 3.3 percent of GDP in 2010. What to watch: -- Weak monthly primary surplus figures would indicate worsening fiscal discipline and could push up interest rate futures. <0#DIJ:> -- Serra is likely to run on a platform of efficient government and could announce belt-tightening measures and an overhaul of the unwieldy state apparatus. OIL AND GAS Congress may approve government-proposed legislation that would increase state control over some of the world's biggest recent oil finds. The overhaul seeks to ensure proceeds from vast new fields flow to the state to help bankroll investments in areas like infrastructure, education and poverty reduction. The measures will likely reduce competition in the sector while boosting the role of state energy giant Petrobras (PETR4.SA)(PBR.N), offering fewer but still attractive opportunities for foreign investors. [ID:nN01485799] Critics say the laws threaten the efficiency of Brazil's successful oil sector by stifling investment and increasing the dangers of political interference and corruption. Brazil's Chamber of Deputies is expected to approve the proposal in March but it could be delayed in the Senate, where the government only has a narrow majority. Progress is likely to be particularly slow after the beginning of the World Cup soccer tournament in June and election campaigning by legislators in August. Analysts give the bill about a 50 percent chance of approval this year. What to watch: -- Amendments to a bill allowing the capitalization of Petrobras; if it falls short of the proposed $100 billion, it could take longer than expected to extract the oil reserves. -- Disagreement in the Senate over how to distribute oil revenue between the federal government and states could hold up the legislative proposal. POLICY STAGNATION By April 3, more than a dozen cabinet members are expected to resign to campaign for public office in the Oct. 3 election. The career civil servants who take over typically lack the political capital to push the government's agenda. Central bank chief Henrique Meirelles may also step down to run for office, opening the possibility of a change in monetary policy. What to watch: -- Meirelles will decide by late March whether to step down. A successor from the current board of directors would imply continuity; an outsider could raise investor concerns. -- If Lula's successor fails to win a clear majority in Congress, reforms needed to improve Brazil's long-term competitiveness may face difficulty getting approval. These include reforms to an unwieldy tax system, costly pension benefits, and rigid labor laws. CORRUPTION Mud-slinging and corruption scandals tend to surface during Brazil's election campaigns. They could paralyze Congress and hit the camp of either of the two leading candidates. Lula himself came close to facing impeachment proceedings in 2005 when his party was involved in an illegal campaign financing scandal. FOREIGN POLICY If elected, Serra may cool ties with some of Lula's left-wing allies in Latin America. That could affect energy investments in Bolivia and Venezuela, where Lula had prodded Petrobras to invest to foster regional integration. Some analysts think Serra could also take a harder line in trade disputes with Argentina and the South American trade block Mercosur. Rousseff is expected to continue current foreign policy and could name the current deputy foreign minister, Antonio Patriota, as the country's top diplomat. (Additional reporting by Brian Ellsworth; Editing by Kieran Murray)