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[NiccoBond]

Fitch Ratings Upgrades Brazil's Sovereign IDRs to 'BB'

Fitch Ratings-New York-28 June 2006: Fitch has upgraded the ratings for Brazil as follows:
--Long-term foreign currency Issuer Default Rating (IDR) to 'BB' from 'BB-';
--Long-term local currency Issuer Default Rating (IDR) to 'BB' from 'BB-';
--Country ceiling to 'BB' from 'BB-'.

Fitch also affirms Brazil's short-term rating at 'B'. The Rating Outlook is Stable.

The rating actions reflect the ongoing improvement in Brazil's public and private external finances and a macroeconomic policy framework that has proved robust in the face of political and financial market pressures. Fitch forecasts that public external debt will fall below 10% of GDP by the end of 2006, the lowest for more than a decade, while foreign currency denominated and indexed debt has fallen from 38% of GDP in 2002 to around 10% currently, as the authorities have engaged in buybacks of foreign debt and deepened domestic capital markets, significantly reducing the public sector vulnerability to exchange rate shocks. The current account surpluses since 2002 have also allowed the private sector to reduce its net external debt position. Moreover, due to progress on the inflation front, the central bank has been able to bring nominal and real interest rates down, even during the recent market turmoil, underpinning an economic recovery and easing fiscal pressures.

'It is a reflection of Brazil's much improved external balance sheet,' said Roger Scher, head of Latin American Sovereign Ratings at Fitch, 'that the country has weathered rather well the latest storm for emerging markets in the global capital markets. The central bank was able to continue its easing cycle, even though other emerging market central banks have had to tighten monetary policy due to sharply weaker currencies and rising inflationary pressures.'

Nevertheless, further improvement in sovereign creditworthiness would have to be driven by progress in public debt dynamics, notably, a higher trend rate of GDP growth and a further sustainable reduction in real interest rates that together with high primary budget surpluses would place the public debt to GDP ratio more firmly on a downward path. While some moderate easing of the fiscal stance is likely, in part due to general elections later this year, Fitch expects the current and future administration to maintain a primary surplus equivalent to at least 4.25% of GDP, consistent with a stable public debt burden.

Fitch expects Brazil to end 2006 with official foreign exchange reserves at over US$60 billion, up from US$53.8 billion in 2005, driven by a persistent current account surplus and robust capital inflows, resulting in an external liquidity ratio of 139.6% for 2007, versus the forecast 'BB' median of 145.4%. Net external debt to current external receipts (CXR), a key external solvency ratio, is expected to fall to 63% this year, down from nearly 128% just two years ago, but still above the forecast 'BB' median of 42.6%. This ratio is expected to continue to improve, underpinned by moderate export growth and continued rising foreign exchange reserves. More impressive is the fact that the external exposure of the public sector is forecast to fall dramatically, with net public external debt to CXR ending 2006 at 9.1%, nearly half the 'BB' median of 18.1%.

'While Brazil is not immune to further shocks to market confidence,' said Scher, 'the Brazilian authorities have largely financed this year's external debt amortizations and have engaged in an aggressive program of external debt paydown and buybacks, significantly reducing their exposure to sentiment in the international capital markets.'.
Nonetheless, the vulnerability of the public sector to shifts in market sentiment remains, given that 25%-30% of domestic debt matures each year. This fact was underscored in May when the Brazilian treasury suspended a domestic debt auction. The authorities got right back in the market, placing nearly R$30 billion by June 20, though the mix of debt offered represented, at the margin, a deterioration in the debt composition, as floating-rate securities were offered in place of fixed-rate and inflation-indexed notes.

The Stable Outlook reflects the balance of improvements in Brazil's external finances and more secure macroeconomic stability against still major structural impediments to sustaining lower real interest rates and boosting the economy's growth potential necessary to cement the long-term sustainability of public finances. It is Fitch's current judgment that the next administration is unlikely to pursue deep structural reforms, such as central bank autonomy and social security reform, despite maintaining prudent fiscal and monetary policies.

[NiccoBond]

Brazil Consumer Prices Post Biggest Drop Since 1998

July 7 (Bloomberg) -- Brazilian consumer prices had their biggest decline in eight years in June as the cost of fuel, fruit and meat dropped.

Consumer prices, as measured by the government's benchmark IPCA index, fell 0.21 percent, reversing an increase of 0.1 percent in May, the government said. The June decline, which was bigger than the 0.13 percent median drop forecast in a Bloomberg survey of 23 economists, brought Brazil's annual inflation rate down to 4.03 percent, the lowest since 1999.

``The numbers came in quite benign, more than anyone was expecting,'' Cristiane Quartaroli, an economist with Banco Santander Central Hispano SA's Brazilian unit, said in a telephone interview. ``This reinforces the view that the central bank will continue slashing rates for another couple of months.''

Central bankers will cut the benchmark lending rate a half- point to a record low of 14.75 percent at a July 19 meeting, taking advantage of the slowdown in inflation to help bolster the country's economic expansion, Quartaroli predicted. She expects policy makers to follow that rate cut up with a quarter- point reduction in August.

Yields on interest-rate futures fell after the consumer price report. The yield on the inter-bank deposit contract for Jan. 2, 2008 delivery, the most traded interest-rate futures contract in Sao Paulo, dropped 8 basis points, or 0.08 percentage point, to 14.86 percent at 8:50 a.m. New York time.

Ethanol, Gasoline

The currency was little changed, gaining 0.02 percent to 2.1765 reais to the dollar. The real has surged 48 percent since May 2004, helping curb inflation by driving down the cost of imported products.

Brazil's 4.03 percent annual inflation rate is below the central bank's 4.5 percent target for this year and for 2007 and 2008.

Ethanol fuel prices dropped 8.8 percent last month while gasoline prices fell 1.6 percent, the government's statistics agency said. Food prices fell 0.61 percent in June, the fifth straight month they've declined.

``We haven't reached an inflexion point yet with so many prices falling,'' Eulina dos Santos, the official at the statistics agency in charge of the consumer price report, said at a news conference in Rio de Janeiro.

[kwart]

Antwort auf Beitrag Nr.: 22.455.730 von NiccoBond am 07.07.06 18:24:54

Brazil Economists Cut Yr-End Rate Forecast to 14.25% (Update1)

July 10 (Bloomberg) -- Brazilian economists lowered their forecast for the benchmark interest rate at year-end for a second week as declines in the cost of fuel and food drive down consumer prices.

The economists cut their year-end forecast for Brazil's overnight rate to 14.25 percent from 14.38 percent, according to a weekly central bank survey of about 100 economists at financial institutions taken July 7 and published today.

The economists also lowered their forecast for 2006 inflation for a sixth week. They now expect inflation this year to end at 3.81 percent from 3.98 percent, the survey showed.

``The market is now expecting an additional cut in the benchmark lending rate as recent inflation numbers have positively surprised investors,'' Newton Rosa, chief economist at SulAmerica Investimentos, said in a phone interview from Sao Paulo. ``Going forward, nobody anticipates pressure on inflation by year-end.''

Brazil's consumer prices, as measured by the government's benchmark IPCA index, fell 0.21 percent in June, reversing an increase of 0.1 percent in May, according to Brazil's national statistics agency. Annual inflation slowed to a seven-year low, dropping to 4.03 percent for the 12 months ended in June from 4.23 percent through May.

The economists in the bank's survey also expect Brazil's currency to end 2006 stronger than previously forecast, trading at 2.23 per dollar at year- end compared with the previous forecast of 2.24 per dollar, the survey showed. The economists raised their forecast for inflation over the next 12- months to 4.41 percent from 4.34 percent, the survey showed.

``The economists raised this forecast for the 12-month inflation because the past cuts in the overnight rate by the central bank will likely quicken economic activity and inflation in the first half of 2007,'' Rosa said.

The central bank expects the Brazilian economy to expand 4 percent this year, according to the bank's quarterly inflation report published June 28.