BRASIL: State Bank Feeds Credit Boom...While Fighting Inflation And Raising The Benchmark.

WSJ / P. Prada / An excellent primer on state-owned BNDES bank
Free front page link

Brasil's National Development Bank/BNDES is spurring the economy with interest rates... as low as 6% for big businesses...even while it's central bank...has just raised the benchmark rate...for the 4th time in 2011...to 12.25%...one of the highest in the world.

"The government is trying to heat and cool the economy at the same time," said an economist. "Monetary officials have few options but to remain strict when the government keeps pouring money into vehicles like the BNDES."

The housing market is under assault by speculators...with double-digit increases in Rio and other cities...while rice and beans have almost doubled in price in three years.
 The currency...the REAL has increased 40% vs usd...in just two years.

BRASIL: Debate Over A "Supercurrency" REAL...Roils Dilma's Cabinet.

REUTERS/ B. Winter

   The continuing rise of the REAL vs the usd is revealing a rift in President Dilma Rousseff's government.
   Some officials want more action NOW to curb its growth and protect local industry.
   The REAL is trading near a 12-year high...$1.57...after gaining almost 4% this month.
   "I don't know what we're waiting for," an official told REUTERS. "Everybody knows the real is going to $1.50 unless we do something to stop it. The consequences of having a supercurrency like that would be terrible."
    Even worse for Rousseff, a Morgan Stanley economist predicts the REAL could approach the $1.40 level in the near-term.

BRASIL: Real Blasts Thru $1.62 Usd Level; Is The Currency Fight Over?

BLOOMBERG/

   Has the government given-up trying to contain the real's value vs the usd?
   The real just saw its biggest weekly gain since 2009...blasting thru the $1.65 level...and landing at $1.6070 per usd...a 1.5% advance.
   The real has risen 3.4 percent against the U.S. dollar since 28 March, the biggest weekly jump since 17 July, 2009.
    The market speculates that the government would rather slow inflation than fight against a stronger currency.
    On 29 March, the c. bank said the cost is “too high” to cut inflation to its 4.5 percent goal this year from the two-year high of 6.13 percent.
    “Rumors have been circulating that the government abandoned the floor of 1.65 reais, and that now the value would be 1.60 reais” said an analyst.
    However, FM Guido Mantega is said to be seeking ways to lessen capital inflows from outside investors...without hurting infrastructure and industrial investments.

BRASIL: How Fake Money Saved The Nation From Inflation Psychology.

NPR/ Transcript of Planet Money Report/ Audio is 7:50/ A fascinating report/

Ever wonder what happened to Brasil's cruzeiros? I do. I still have more than 3,000 of them from living in Rio and elsewhere in Brasil in 1985.
Now, Planet Money's Chana Joffe-Walt reports on how four grad students saved Brasil's inflation obsessed populace in 1990 and helped kill the cruzeiro and introduce the REAL.
This is the first time I have ever seen this story told in the English language media.

BRASIL: Foreign Investors Betting $14 Billion That The Real Will Rise Vs UDS.

BLOOMBERG/
      Finance Minister Guido Mantega’s failure to jaw bone foreign investors with threats of usd purchases and slow a 4-month REAL rally has investors betting $14 billion that the REAL will grow in value. Mantega vowed in Sept.that Brasil would “not lose this game,” saying the government might join the central bank in buying dollars to shore up exports. The central bank bought $5.9 billion usd in the first 12 days of September, the most in 11 months.
One analyst observes that “The search for yield is still in place.” Another observes that “Brazil has billions of reais to buy dollars. But the world has trillions of dollars to invest.”