3SOF

Rousseff Pledges to Guard Against Inflation in Brazil
January 03, 2011, 9:54 AM EST

Brazil's President Dilma Rousseff pledged to prevent the "plague" of inflation from undermining her plans to eradicate poverty in Latin America's biggest economy while fostering economic growth.

"To ensure the continuation of the current economic growth cycle we need to ensure stability, especially price stability," Rousseff said in her inaugural speech to Congress yesterday. "We won't allow under any hypothesis that this plague returns to eat away our economic tissue and hurt the poorest families."

Rousseff received the presidential sash from Luiz Inacio Lula da Silva, who exits as the most popular leader on record in Brazil after overseeing growth last year forecast to be the fastest since the mid-1980s. She vowed to contain spending and tackle obstacles to sustained growth such as a complex tax system.

Brazil's first female president said her "most obstinate fight" will be to eradicate poverty. She emphasized that only economic growth can generate the jobs necessary for coming generations and allow the country to overcome income inequality.

Some 70,000 Brazilians lined the streets of Brasilia to watch as Rousseff was driven from the Congress to the presidential palace. U.S. Secretary of State Hillary Clinton was followed by Venezuelan President Hugo Chavez in a line of foreign dignitaries who greeted Rousseff and Vice-President Michel Temer.

Key Posts

Rousseff met today in Brasilia with Spanish Prince Felipe, Uruguayan President Jose Mujica, South Korean Prime Minister Kim Hwang Sik, Portuguese Prime Minister Jose Socrates, Palestinian Authority President Mahmoud Abbas, Cuban First Vice President Jose Ramon Machado Ventura and former Japanese Prime Minister Taro Aso to discuss bilateral agendas.

With economists in key posts, Rousseff will give priority to modernizing the country's roads, ports and airports ahead of the 2014 World Cup and 2016 Olympics, said David Fleischer, a political analyst at the University of Brasilia. The government may raise tariffs and taxes on capital inflows as businesses struggle with a currency that has strengthened 39 percent against the U.S. dollar since the start of 2009, Fleischer said.

"We will act decisively in multilateral forums in defense of a healthy and balanced economic policy, protecting the country from unfair competition and from the indiscriminate flow of speculative capital," Rousseff said.

She also said measures to simplify the country's tax system can no longer be postponed.

Rousseff will implement a "fiscal adjustment" while preserving investments under the government's growth acceleration program, Paulo Bernardo, who will step in as communications minister after serving as budget minister under Lula, said to reporters yesterday.

Rousseff inherits from Lula inflation running at an annual pace of 5.79 percent. That's less than the 17.2 percent Lula faced his first year in office, though still the fastest in 23 months. Inflation will remain above the government's 4.5 percent target through the end of 2011, according to a central bank survey of economists published Dec. 27.

Higher Rates

Traders are betting incoming central bank President Alexandre Tombini will begin raising the overnight Selic rate 50 basis points to 11.25 percent at the bank's Jan. 18-19 meeting, according to Bloomberg estimates based on interest rate futures contracts. Brazil's rates are the second-highest in the Group of 20 nations after Argentina.

Rousseff, who served as Lula's cabinet chief and energy minister, had never run for public office before entering the presidential race. With her former boss's endorsement, she won 56 percent of the votes in an Oct. 31 runoff against Jose Serra, a former governor of Sao Paulo state.

Dozens of dignitaries attended the ceremony, including Bulgaria's Prime Minister Boiko Borissov. Rousseff's father immigrated to Brazil from the Eastern European nation in the 1940s.

Rousseff also invited 11 women with whom she shared a prison cell after being arrested in 1970 for fighting Brazil's military dictatorship as a member of the underground VAR Palmares group.

Prison Years

After three years in prison, where she was tortured, Rousseff studied economics and settled in the state of Rio Grande do Sul with her second husband, Carlos Araujo, an underground leader. They separated in 1994.

Rousseff joined Lula's Workers' Party before his 2002 election. After serving as energy minister, she replaced longtime Lula ally Jose Dirceu as Cabinet chief in 2005, when he and several party stalwarts resigned over allegations they knew about payments made to lawmakers in exchange for votes.

Her candidacy was put in doubt when she announced in April 2009 that she was being treated for lymphoma. Five months later, her doctors pronounced her in "excellent health."

High Expectations

Brazilians have high expectations for Rousseff. Her government will be as good, or better, than Lula's according to 83 percent of those surveyed in a Datafolha poll published Dec. 22.

Lula, who is banned by the constitution from seeking a third consecutive term, leaves office with a record 83 percent approval rating, the same survey showed, after he helped lift 21 million people from poverty and cut unemployment in November to a record low 5.7 percent.

Investors are more cautious. The Bovespa index of most- traded stocks has fallen 1.9 percent since Rousseff's election, reducing last year's gains to 1 percent compared with average annual returns of 29 percent during Lula's first seven years in office. Last year's performance was the worst-ever when measured against the MSCI Emerging Markets index, which rose 17 percent.

Yields on interest-rate futures contracts have also risen, as investors step up bets she'll fail to contain spending that rose 25 percent last year and helped the economy grow 7.3 percent, according to central bank estimates.

Overvalued Currency

The higher rates are attracting capital that has made the real the most overvalued currency in the world according to Goldman Sachs Group Inc. Under Lula the currency more than doubled in value to 1.66 per U.S. dollar from 3.54.

Economists expect foreign investment to develop deep-water oil discoveries by state-controlled Petroleo Brasileiro SA to bolster the currency.

Finance Minister Guido Mantega, one of 13 Lula ministers who will also serve in Rousseff's cabinet, tripled to 6 percent in October a tax on capital inflows in a bid to stem the rally. Rousseff will probably take measures to contain gains in the real, Mantega said Dec. 30.

Petrobras Jumps to Six-Week High on Record Brazilian Production
December 29, 2010, 5:56 AM EST

Petroleo Brasileiro SA, Brazil's state-controlled oil company, advanced to a six-week high after the country's oil output climbed to a record in November and crude traded near a two-year high.

Petrobras jumped 1.7 percent to 26.49 reais at 10:11 a.m. in New York, the biggest gain in more than a week. OGX Petroleo e Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, jumped 2.3 percent to 19.48 reais, the biggest gain since Dec. 1. The Bovespa stock index climbed 0.1 percent.

"Petrobras' production release was strong," said Diana Litewski, an equity analyst at Oren Investimentos in Rio de Janeiro, which manages 290 million reais ($172 million). For OGX, "elevated oil prices and positive news flow may be a new trigger for the stock."

Brazil's production of oil rose to a record 2.089 million barrels a day last month, the agency known as ANP said on its website yesterday. Petrobras' total November oil and gas production was 2.6 million barrels a day, of which 2.03 million barrels was in Brazil, according to an e-mailed statement.

Crude for February delivery gained 46 cents, or 0.5 percent, to $91.46 a barrel on the New York Mercantile Exchange. It touched $91.67, 21 cents below the two-year intraday high of $91.88 reached yesterday. Futures have advanced 15 percent this year.

Separately, Brazil found more evidence of oil at the government's Libra offshore field, which may be the largest oil discovery in the Americas in more than three decades.

ANP found a second layer of hydrocarbons at Libra, according to records on its website dated Dec. 27. The regulator first reported oil at the field in late October.

Libra is estimated to hold as much as 15 billion barrels of recoverable oil, which would eclipse Brazil's total current reserve base and make it the biggest find in the Americas since Mexico discovered Cantarell in 1976.

BVSP (Brazilian Bovespa Stock Index)

Brazil...
The Bovespa Index is headed for a test of 73000. Breakout would signal an advance to 79000*. Rising Twiggs Money Flow (13-week) indicates buying pressure.

* Target calculation: 73000 + ( 73000 - 670000 ) = 79000

Tks for updating - I'm currently invested in EWZ and trading in about three day cycle
LBJ.

Cheers & GLTA

EMERGING MARKETS SHOWING WEAKNESS...
While the US markets power towards higher highs ? although in a weak manner we might add, we've begun to see outflows of funds from the Emerging Markets. Ostensibly, this is due in large part to the Egypt uprising, but there are other issues the emerging markets are facing such rising inflationary pressures and rising food prices. Many believe these circumstances to be transitory, but perhaps they shall be with us longer than anyone anticipates, and the impact upon the emerging market stock markets should not be dismissed so easily.

To this end, we find it instructive to look at the monthly charts of various emerging markets, and Brazil in particular. What we see is that the rally off the 2009 low is rather sharp at over 100%, and we find that Brazil's BOVESPA follows its 16-month moving average rather nicely. What concerns, is that prices have now broken through sufficiently to call this a new bear market, but we need to see whether prices shall remain below it and close below it by month's end. If not, then it shall prove support and new highs would be forthcoming. But when one looks at the 5-month RSI divergence, then one gets the sense prices are indeed going into a bear market.
Therefore, if a bear market is indeed underway, then we would be naive to believe that the US can escape significant weakness in the face of emerging market weakness since it was the emerging markets that led the US out of its bear market.

Good luck and good trading!

BVSP (Brazilian Bovespa Stock Index) INDX...

The Bovespa Index below 67000 indicates a primary reversal. Twiggs Money Flow (13-week) below zero confirms the signal. Expect a test of the 2010 low at 60000.

* Target calculation: 67000 + ( 72000 - 67000 ) = 62000

BVSP (Brazilian Bovespa Stock Index) INDX...

The Bovespa Index is retracing to test resistance at 67000, but remains in a primary down-trend. Twiggs Money Flow (13-week) recovery above zero would weaken the signal. Target for the decline is 62000*.

* Target calculation: 67000 + ( 72000 - 67000 ) = 62000

BVSP (Brazilian Bovespa Stock Index) INDX...
The Bovespa Index remains in a primary down-trend, but recovery above 67000 and bullish divergence on Twiggs Money Flow (21-day) suggest that a bottom is forming.

* Target calculation: 67000 + ( 72000 - 67000 ) = 62000

BVSP (Brazilian Bovespa Stock Index)...
The Bovespa Index is in a primary down-trend, but Twiggs Money Flow (21-day) oscillating around zero signals uncertainty. Follow-through below 67000 would indicate another test of primary support at 64000; failure offering a target of 60000*.

* Target calculation: 64000 - ( 68000 - 64000 ) = 60000

BVSP (Brazilian Bovespa Stock Index)...
The Bovespa Index is in a primary down-trend, but bullish divergence on 21-day Twiggs Money Flow indicates buying pressure, suggesting that the down-trend is likely to be short-lived. Reversal below 67000 would indicate another test of primary support at 64000; and failure would offer a target of 60000*.

* Target calculation: 64000 - ( 68000 - 64000 ) = 60000

Brazil: Bovespa...
The Bovespa Index ranging between 66000 and 68000 is a bullish sign. Upward breakout would signal another test of 72000, while failure of support would test primary support at 64000. Rising 13-week Twiggs Money Flow indicates strong buying pressure, favoring an upward breakout.

* Target calculation: 64000 - ( 68000 - 64000 ) = 60000

Let's see how this story pans out...

10 Brazilian Stocks With Upside
06/16/11 - 02:56 PM EDT

1. Petroleo Brasileiro (PBR)
2. Embraer (ERJ)
3. Gol Linhas Aereas Inteligentes (GOL)
4. Gerdau (GGB)
5. Companhia Siderurgica Nacional (SID)
6. Banco Bradesco (BBD)
7. Companhia Energetica de Minas Gerais (CEMIG)
8. Itau Unibanco Holding (ITUB)
9. Banco Santander Brasil (BSBR)
10. Vale (VALE)

Have an upside potential of up to 60%, based on analysts' consensus estimates of 12-month price targets.

Brazilian stocks plunged to their lowest levels in the past year. Brazil's Bovespa has shed around 8% during the last six months. Brazil's inflation rose to 6.55%, topping the central bank's annual upper limit of 6.5% for the second straight month. The central bank raised the benchmark Selic rate by 25 basis points (bps) to 12.25 % on June 8; overall Selic was raised by 1.5% year-to-date.
We have identified 10 stocks across sectors like banking, commodities and airlines, which investors can consider for long-term growth. The selected stocks have an average market capitalization of $64 billion, delivered average gains of 5%, compared to Bovespa's negative 5% during the past year. These stocks could generate 40% gains during 2011, according to analysts' consensus estimates with a mean buy rating of 65%.

Embraer (ERJ) manufactures commercial and defense aircraft with the defense business contributing around 10% toward revenues.
First-quarter revenue stood at around $1.06 billion when compared to $992 million in the first 2010 quarter. Gross margins stood at 24.3%, up 2.2% from 2010 March quarter. Higher margins resulted from better product mix and efforts to maximize operational efficiency.
Net income jumped 105 million in the quarter compared to 24 million in the prior year quarter. Cash position improved to $505 million from $440 million in the first quarter of 2010
Management indicated an order backlog of $16 billion at the end of March, up $ 400 million at the end of 2010, representing approximately three times 2011 revenue guidance. The stock is trading at 15.3 times its estimated 2011 earnings.


Banco Bradesco (BBD) is a private sector commercial bank and among the top five banks in Brazil, in terms of assets.
The stock has gained 24% during the past year and 55% of analysts covering it rate it a buy.
Total loan growth grew 22% year-over-year, as corporate and auto loans, accounting for two-thirds of total loans, were robust. Corporate loans expanded 26%, while personal loans were lower at 16.4%.
Improved asset quality is a positive. The bank's non-performing loans improved 4.4% compared to 5.3% in the same period last year. Provision coverage stands at 159%, up from 151% in the June quarter of 2010.
Capital adequacy ratio was 15%. Banco expects its loan book to grow at 15% to 19% for 2011, backed by higher demand from small and medium enterprises (SMEs). The stock is trading at 11.1 times its 2011 earnings.


Itau Unibanco Holding (ITUB) is one of the largest private banks in Brazil.
During the first quarter, Itau's buoyant credit growth boosted net income to $2.25 billion, up 9.3% year-over-year. However, profits declined as provisions grew 15% compared to the same period last year.
Total loans expanded 22%, higher than the Brazilian central bank's mandated range of 10% to 15% through March. Nevertheless, credit growth could be slower on interest rate hikes and the central bank's monetary curbs.
Non-performing loans were flat quarter-on-quarter at 4.2% nevertheless, some deterioration was observed from smaller companies during the quarter.
The bank's return on equity stood at around 22.7%. The stock is trading at 11 times its estimated 2011 earnings with an upside potential of 33% in the next one year. Of the 12 analysts covering the stock, 10 rate it a buy, as per a Bloomberg consensus.


Banco Santander Brasil (BSBR) is a Brazilian full-service bank having the fourth-largest asset base in the country. The bank operates in three business segments: commercial banking, wholesale banking, and asset management.
Lower loan loss provisions boosted net income to 18% during 2011 first quarter. Aided by individual loans and SMEs, the bank's loan portfolio grew at a robust 17.6% year-over-year at the end of March. Nearly 50% of the bank's lending supports the retail segment. Net interest income was up 11.5% over the same period in 2010.
Non-performing loans dipped 6.4% during the March quarter, narrowing 140 basis points year-over-year. The coverage ratio is comfortable at 98.1%.
BSBR's return on equity improved to 11.7% during the latest first quarter, compared to 10.5% in the same period last year. Return on assets stood at 2.2% during the quarter, flat versus the first quarter of 2010. Analysts expect the stock to deliver an upside of 34% with buy ratings of 55%. The stock is trading at 10.4 times its 2011 earnings.


Vale (VALE) is a metals and mining giant producing iron ore and iron ore pellets.
During the first quarter of 2011, the company reported operating revenue of $13.5 billion, increasing 98% year-over-year, while operating income and net profit surged over 250% each to $8 billion and $6.8 billion, respectively. Operating margin increased to 48.9% from 31.2% in the prior year's March quarter.
The proportion of bulk material sales, comprising of iron ore, pellets, manganese ore, ferroalloy, and metallurgical and thermal coal represented 70.3% of the first quarter operating revenues, in line with 71.5% realized during the fourth quarter of 2010. Sales to Asia contributed 49.6% toward total first-quarter revenue, down from 54.5% in the fourth quarter of 2010.
The stock has analysts' buy rating of 84% and an upside potential of 41% over the next one year. Vale is currently trading at 5.9 times its estimated 2012 earnings.


Gerdau (GGB) is an integrated steel player operating in Brazil, North America and Latin America.
On average, analysts expect the company to deliver net profit growth of around 10% in 2011, riding on the back of improving fundamentals.
Net revenue increased 18% year-over-year during the latest first quarter, backed by improved sales. However, higher production costs dented profitability year-over-year, while margins increased sequentially. Gross margin stood at 13.9% and EBITDA margin increased to 13.2% for the quarter.
To consolidate its growth plans, Gerdau recently announced the acquisition of Acos Villares, a company engaged in the production of long steel. The proportion of North American sales increased to 35% in overall sales during the quarter, while domestic sales declined.
The stock is trading at 13.5 times its 2011 earnings and analysts expect an upside of 42%, with a buy rating of 56%.


Companhia Energetica de Minas Gerais (CEMIG)(CIG) engages in electricity generation, transmission and distribution. Operating through its subsidiaries Gasmig and Infovias, the company distributes natural gas and is a telecommunications service provider.
CEMIG's power plants have total installed capacity of around 7,000MW --making it one of Brazil's top electricity generators. In distribution, CEMIG operates the largest electricity distribution network in the region, spanning across 300,000 miles.
During 2011 first quarter, sales were 17,981 gigawatt hours, up 16% from the year-ago period. Net revenue and EBITDA for the first quarter rose 18% and 11%, respectively. Higher operational efficiency improved EBITDA margins. The stock has gained around 38% in the last one-year and is currently trading at 9.9 times its estimated 2011 earnings.


Petroleo Brasileiro (PBR) is an integrated Brazilian oil and gas company operating in segments like exploration and production, refining, transportation, and marketing of gas and power.
Higher crude oil prices and volumes during the year buoyed the company's exploration and production segments, while downstream was negatively affected. For the first quarter of 2011, net income increased 42%, boosted by a 7% uptick in domestic sales, led by jet fuel, natural gas, and diesel.
Petrobras' estimated oil reserves stand at about 11 billion to 12 billion barrels of oil equivalent (boe) with a production output of more than 2 million boe per day. The recent acquisition of Libra oil field in the Santos Basin would sustain a higher replacement ratio of 144%, in comparison to peers.
Exploration and production capex stood at $9.2 billion for the quarter, primarily expanding oil and natural gas capacity in the pre-salt areas.
The stock is currently trading at 9.6 times its estimated 2011 earnings. Going forward, on average, analysts expect the stock to deliver 47% during the next one year.


Companhia Siderurgica Nacional (SID) is an integrated steel producer in Brazil with interests in mining and logistics.
The company's efficient cost-containment strategy and lower selling and administrative expenses improved operating margins. EBITDA margin stood at 40% during the first quarter of 2011, while net margin escalated 16% from 14% in the first quarter of 2010.
Net sales for the first quarter grew 19%, due to higher iron ore prices and sales volume. Exports grew faster than domestic sales. Net income was up 37% for the quarter on improved operating performance from its steel and mining segments and lower operating expenses.
The stock is trading at 8.8 times its estimated 2011 earnings. Analysts estimate an upside of 51% in the next one year


Gol Linhas Aereas Inteligentes (GOL) is a budget airline operating in Brazil and on routes to South America and the Caribbean.
Net revenue came in at around $1.2 billion, up 10% year-over-year. The company's yield was flat year-over-year, although declining 2.9% sequentially, while load factor increased to 72.3% from 70.2% in the same quarter of the prior year. Domestic load factor increased 73.5%, while international market demand grew at a robust 16% year-on-year.
Higher wages and fuel costs saw operating costs edge up 11% during the quarter. Net income, excluding forex gains, rose 34% during the quarter. The company closed the quarter with an operational fleet of 111 B737-700, 800 NG aircraft and a total fleet of 125 aircraft, identical to the December quarter.
However, firm crude oil prices could damp margins, going ahead. The stock is trading at 14.3 times its estimated 2011 earnings with an upside of 60%.

UPDATE 1-Brazil's Gerdau mulls $240 mln Chile investment
Tue Aug 16, 2011

* Company studying investing around $240 million in Chile * Looks to boost output capacity and steel production * Steel production capacity could rise to 800,000 tonnes
(Adds production details, CEO quote, background) By Felipe Iturrieta and Antonio de la Jara SANTIAGO, Aug 16 (Reuters) - Brazilian steelmaker Gerdau
(GGBR4.SA)(GGB.N) said on Tuesday it was studying investing
around $240 million in Chile to boost output capacity and steel
production. The Porto Alegre, Brazil-based company, the world's
second-biggest maker of steel products for the construction
industry, was looking to invest in raising its steel ingot
production capacity and in a rolled-steel plant, said Hermann
von Muhlenbrock, chief executive of Gerdau's Chilean unit. "This project was ready in 2008, but the (global economic)
crisis delayed it," von Muhlenbrock said. "Now the situation
has normalized. So we've reactivated it." The project, planned for 2012-2015, must be approved by
Gerdau's executive board at the end of the year to begin
implementation in January 2012, von Muhlenbrock said. The company's investment will focus primarily on replacing
its 60-tonne-capacity furnace with a 90-tonne one, which could
increase annual steel production capacity to 800,000 tonnes
from the current 520,000. Additionally, the company plans to construct a rolled-steel
plant with an annual production capacity of 400,000 tonnes. The company already has a rolled-steel plant on the
outskirts of Santiago with a 370,000-tonne annual production
capacity and another plant with a 100,000-tonne annual
production capacity. Gerdau is pushing forward with investments in Chile and the
United States as conditions in Brazil remain challenging. The South American giant's surging currency has exacerbated
rising wages and other costs for Brazilian steel mills, whose
profit margins are evaporating. [ID:nN1E7791G9] The company is diversifying away from its core long steel
focus and plans to enter flat products. Gerdau this month posted a quarterly profit of $320
million, down 41 percent from the same period last year, with
rising raw materials and wage costs weighing on mill
operations. [ID:nN1E7730BY] Gerdau's main sector competitor in Chile is local
steelmaker CAP (CAP.SN).

UPDATE 1-Bunge $2.5 bln Brazil investment to raise crush

Thu Aug 18, 2011 6:07pm EDT

* Brazil ethanol sector has been investment target

* Investment will focus on bioenergy, mainly ethanol (Adds details, quote, context)

SAO PAULO Aug 18 (Reuters) - Bunge (BG.N) will invest $2.5 billion to boost its sugar and bioenergy capacity in Brazil through 2016, the company said in a statement on Thursday.

The investments will go into eight of the group's mills and will expand crushing capacity by 50 percent from present levels to 30 million tonnes a year of cane.

The investment "will be primarily focused on the bioenergy sector, mainly ethanol," said Adalgiso Telles, Bunge's director of corporate affairs.

Telles spoke before a meeting ended between Brazil's president, Dilma Rousseff, Energy Minister Edison Lobao and Bunge executives.

Brazil's government has been concerned over the failure of the cane sector to meet growing domestic demand for ethanol.

Bad weather and a lack of investment have hit the country's cane output, leading to the first fall in a decade this season.

Demand for ethanol has outpaced production as a growing middle class buys more flex fuel cars. The jump in ethanol prices earlier this year saw many car owners opting instead for gasoline -- leaving state-controlled energy giant Petrobras (PETR4.SA) scrambling to buy gasoline abroad at a loss due to government caps on local fuel prices.

Bunge's investment follows an announcement in the previous day that Petrobras and sugar and ethanol group Sao Martinho SMT03.SA will invest 520.7 million reais ($326 million) to quadruple ethanol output at their joint Boa Vista mill. [ID:nN1E77G227]

Brazil's ethanol and sugar industry has been a target for acquisitions for several oil giants over the last few years, including BP (BP.L). Royal Dutch Shell (RDSa.L) has also teamed with sugar and ethanol group Cosan (CZZ.N).

($1=1.5980 reais)