Dear readers,

GetBrazil is in… Brazil! Taking some time off… We´ll be back soon with fresh insights on Latin America´s largest country…

Feliz ano novo!

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Eike Batista: life is not so easy anymore

Crisis made a bubble blow up in Brazil. In the last three years, due to high prices of iron ore, a lot of investors decided to buy some mines which were not so interesting before. Prices raised almost 400% since 2003, due to strong economic growth in China. The high prices made financially feasible to explore mines with not so high pureness (as Vale’s mines) and not so large amounts. Even when prices reached the higest level ever seen, experts still predicted prices would not accomodate until 2011. As demand grew, the world was getting hunger and hunger for iron ore – any ore, even the less pure one. So, for the investors, it was obvious that it would be a great business. In addition, steelmakers started buying their own mines, in order to get away from Vale’s negotiation power (we can not forget that demand was very, very high and perspectives were of even higher demand).

The ones that first foresaw that made a lot of money. They were the ones who bought very cheap assets and sold them some months before the peak. Eike Batista, who appears in the world’s richest men list published by Forbes, was the most representative example. He spent less than 500 million dollars to build a project of mines and, less than two years ago (January 2008), he sold some of these assets by astonishing 5.5 billion dollars (and I am not reckoning the money he raised in the stock market) to Anglo American Mining Company. Another company created by a group of foreing investors bought a mine for 100 million dollars and sold it a year later for 800 million dollars to ArcelorMittal, the biggest steemaking group in the world.

So making money seemed to be very easy. I reckon that, only this year, investors and steelmakers spent 15 billion dollars buying the “not so good” mines (comparing to Vale’s mines). But, as every bubble, it blew. The crisis came, the iron ore prices fell almost 30% in less than two months. Now there are a lot of projects that appear to be financially unfeasible. Imagine: if even Vale is in trouble, what to think about these projects, which in the past could “stand up” just because of high prices.

There is a lot of uncertainty and investors are very unconfortable with that situation, naturally. Experts think that many of them will just quit. The answer will be known when Vale finishes negotiations wich their clients, which should happen in February or March. Since Vale is the biggest iron ore producer, its negotiations set the trends.

Eike Batista, the protagonist of the best deal in the mining sector this year, had to stop producing in one of his mines (the one he was not succesful in selling) and doesn’t know when production will return. And Anglo American, the mining company which bought Batista’s mines, announced today that will stop the project for at least one year. Attention: they will stop the project in which they invested 5.5 BILLION DOLLARS…

Not even the financial crisis seems to affect the online market in Brazil. According to Google, the advertising market on the web should keep growing strongly in the country next year.

Google executives in Brazil believe that Internet access should also continue to expand, which, of course, leads to more ads.

By the way, Google just announced a new functionality on its Google Maps. A partnership with local public companies in Brazil will let users access information on public transportation, subway routes, buses itineraries etc.

The tool will be available initially in São Paulo and Belo Horizonte, the only cities in the world – outside the US and Europe – where this service is offered.

 

Nice, but sad, video produced my Getbrazil’s friend Jimmy Greer. Here, we always talk about the economy, the crisis, the dollar, the big cities etc., but sometimes forget that this country is so big and diverse… This story shows the sad reality of some kids in Brazil. Hard to believe that in 2008 they still have to deal with some basic health problems.

Thanks, Jimmy!

Obama’s election is making Brazilians look inward, with some arguing that an American-style struggle is exactly what Brazil is missing. Read the full very interesting article from Associated Press here.

I’d like to add, though, that, sure, there is still racism in Brazil… However, it cannot compare to the one that exists in the US. And you understand that ONLY if you lived in both countries.

It seems that not only UN secretary-general Ban Ki-moon is talking about Brazil’s green initiatives. Today, former US Vice-president and Nobel award winner Al Gore classified as “impressive” the country’s plan to fight deforestation.

He was referring to the “Climate Change National Plan” – announced in Brasilia last week – that intends to reduce the Amazon deforestation by 73% until 2017.

Gore is also attending the annual UN climate conference, in Poznan, Poland.

During his speech at the annual UN climate conference, in Poznan, Poland, UN secretary-general Ban Ki-moon mentioned Brazil as an example of “green economy”. According to Mr. Ban, “Brazil has developed one of the greenest economies in the world, having created millions of jobs”.

I might be wrong, but that sounds too optimistic for me…

The UN secretary-general also said that the fight against climate change is deteriorating as the world battles the financial crisis.

“Oh, God, what should I do?”

One of the most important Comittee of Monetary Politics meetings of the year started today. There is still a lot of uncertainty in the landscape – specially regarding to risk of inflation. But the government pressures for cutting the interest rate. Henrique Meirelles of Banco Central and his team will have to be very strong if they decide to keep the rate. That is what economists expect from them, but some say that Lula wants to see interests down. The new rate will be announced tomorrow. Markets expect that Copom Will keep it by 13.75%. The pressure on inflation caused by the valuation of dollar will be compensated by the deceleration of world economy.

It could have been worse, in my opinion.  Transparency International’s 2008 Bribe Payers Index released today shows Brazil on the 17th position. At first, it looks bad… But, then, you look down and you see BRIC friends India, China and Russia along with Mexico. Not to mention that we tied with Italy…

Please, see full report here.

Nothing less than $ 7 billion left Brazil in November only. The last time that happened was in 1999, when the country went through a maxidevaluation of its currency, the Real.

Well, would you keep your investments in Brazil or Latin America in general when your losing money in the U.S and Europe?