Shaw Capital Management: Brazil's Economy

Brazils economy emerged from a deep but short recession in the second half of last year. The economy is expected to grow by at least 5.5% this year. But along with economic growth, expectations of higher inflation have also returned.

Shaw Capital Management Korea: Brazils Economy - The governments target for annual consumer price inflation is 4.5%. To contain inflation Brazils central bank has raised banking reserve requirements on term deposits from 13% to 15%. In addition to the increase in reserve requirements, the bank also restored additional charges on cash and term deposits to 8% from 5% and 4%, respectively.

According to the Central Bank President Henrique Meirelles, the changes were necessary to neutralize the impact of excess liquidity brought by reserve requirement reductions made in 2008, amid the onslaught of the global financial crisis.

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Brazil provides us with an example of a rapidly developing, energy-hungry economy in the Western Hemisphere, where biofuel is a fact of life. Biofuel is also an investment imperative for energy investors and companies that want to make money in Brazil. As an important part of the #3 economy in the Americas, ethanol can't be ignored by the United States.

However, for the central bank it would be a politically difficult task to raise interest rates in the run up to Brazils presidential, congressional and other elections in October.

Shaw Capital Management Korea: Brazils Economy - The government has launched a new investment trust to invest in the domestic Brazilian economy. BM&F Bovespa, the So Paulo equities and derivatives exchange is to raise its stake in the CME Group of Chicago, the

worlds biggest exchange group, to 5% in an attempt to attract more institutional and retail investors to Brazil.

Shaw Capital Management Korea: Brazils Economy - The plan for the two exchanges is to work together to develop a new multiasset electronic trading platform based on the CMEs Globex system.

President Lula da Silva, the most popular President in Brazilian history, would like to see Octobers presidential election as a plebiscite on his eight years in power.

He is asking voters to transfer his success to Ms Dilma Rousseff, his chief minister, whose candidacy has been endorsed by his Workers party (PT).

Shaw Capital Management Korea: Brazils Economy - Ms Rousseff is further to the left than the present administration, but she has pledged not to make a sudden change of direction. The investors andvoters believe her so far.

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Our goal is to provide consistent quality investment advice to our clients. Although the stock market provides many facets of opportunity for today's investor, there are always just a few stellar markets or niche companies at any given time. It is true that in a healthy market, investments yield favourable returns in a given growth area. The key is to pick those investments that are driving the trends and will become tomorrow's brightest stars.

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