Brazil’s GDP contracted 2.6% in Q2 2015 from a year earlier, worse than expected

The Brazilian GDP (Gross Domestic Product) fell by 1.9% in the second quarter of 2015 compared to the first quarter of 2015, according to IBGE (Brazilian Institute of Geography and Statistics) announced on Friday (28). On an year-over-year basis, the decline was 2.6%. The GDP in the 1st half of 2015 decreased by 2.1% compared to the same period 2014, following the negative growth of 0.4% in the six months ended in December 2014.

Analysts estimated a decline of 1.7% in the second quarter 2015 compared to the first quarter, taking into account the average of Bloomberg survey estimates. In the annual comparison basis, it was expected a drop of 2.1%.

Accumulated in the four quarters ending in the second quarter of 2015, GDP decreased by 1.2% compared to the immediately previous four quarters, also the number recorded in the accumulated result of the year until the month of June was 2.1% over the same period of 2014. In absolute number, GDP in the second quarter of 2015 reached R$ 1.43 trillion (Aprox. US$ 400 billion).

In the quarterly contraction, agriculture had contraction of 2.7%, while the industry fell by 4.3% and services showed 0.7% contraction. In industry, the largest decrease occurred in construction: a decrease of 8.4%. The manufacturing industry, with (-3.7%) and electricity activities and gas, water, sewage and urban cleaning (-1.5%) also fell in the second quarter. On the other hand, mining registered a positive variation of 0.3%.

In services; administration, health and public education (1.9%) and real estate activities (0.3%) showed positive results. The other activities suffered retraction compared to the previous quarter: trade (-3.3%), transport, storage and postal services (-2.0%), information services (-1.3%), other services (-1,0%) and financial intermediation and insurance (-0.2%).

From the perspective of expenditure, gross fixed capital formation recorded the eighth consecutive quarter of decline in this comparison: 8.1%. The households’ consumption expenditure (-2.1%) fell for the second straight quarter. However the government consumption expenditure grew by 0.7% compared to the previous quarter. In regards to the external sector, exports of goods and services increased by 3.4%, while imports of goods and services fell 8.8% in the first quarter 2015.

All components of domestic demand fell, comparing the second quarter of 2015 against the same period in 2014. The households’ consumption expenditure (-2.7%) registered the second consecutive decrease. This result can be explained by the deterioration in the inflation indicators, interest rates, credit, employment and income over the period.

The gross fixed capital formation suffered contraction of 11.9% in the second quarter of 2015, the highest since the first quarter of 1996 (-12.7%). This decline is explained mainly by the fall in imports and domestic production of capital goods, and also by the negative performance in construction, says the IBGE. The government consumption expenditure, in turn, fell 1.1% in the second quarter of 2014. In the external sector, exports of goods and services expanded by 7.5%, while imports of goods and services fell by 11.7%, both influenced by the currency devaluation of 38% in the period.

The investment rate in the second quarter 2015 was 17.8% of GDP, lower than in the same period last year (19.5%). The savings rate was 14.4% in the second quarter of 2015 (compared to 16.0% in the same period of 2014).

JBS S.A. Announces the Successful Syndication of the Financing (Term Loan) for the Acquisition of Cargill Pork Business in the United States

JBS S.A. (BM&FBOVESPA: JBSS3, OTCQX: JBSAY, “JBS” or “Company”) communicates to its shareholders and to the market in general, pursuant to CVM Instruction 358 of January 3, 2002, as amended, that on August 18, 2015, through its indirectly controlled subsidiary, JBS USA, LLC, it has successfully syndicated to the market US$1.2 billion aggregate principal amount of borrowings in the form of incremental term loans to JBS USA, LLC’s existing credit agreement (the “Incremental Term Loans”).  The Incremental Term Loans will have a final maturity of seven years from the date of the Cargill Acquisition (as defined below) and bear interest at a rate equal to the LIBOR rate plus 3.0% (with a minimum LIBOR rate of 1.0%).

The proceeds from the Incremental Term Loans will be used, together with cash on hand, to pay the consideration for the previously announced acquisition of certain assets, properties, and rights of Cargill Meats ownership in Cargill Pork LLC (the “Cargill Acquisition”).  The consummation of the Cargill Acquisition is subject to customary closing conditions, including receipt of requisite antitrust approvals.

The joint bookrunners for the financing were Credit Suisse Securities (USA) LLC, Bank of America Merrill Lynch, Pierce, Fenner & Smith Incorporated and Rabobank, New York branch.

TOTVS to acquire Bematech and create largest IT provider for retail in Latin America

TOTVS, one of the largest Brazilian IT companies, will pay R$ 467.4 million (US$ 130 million) in cash and R$ 82.5 million (US$ 24 million) in stock to buy 100% of Bematech, which specializes in automation for retailers. The operation should be voted on at a meeting of shareholders, on September 3. CADE, Brazil’s anti-trust authority has been notified. The deal is being called corporate restructuring. If it was a classic acquisition, a public offering would have to be done, explained the director of investor relations at Totvs, Douglas Furlan. Totvs already operates in retail automation, but focused on a few areas such as large discount retailers and car dealerships, for example. Now, with Bematech, the scope increases for food outside the home, hotels and building materials, among other sectors.

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Moody’s reduce Brazilian sovereign rating but stable outlook reduces chance of losing investment grade

Moody’s rating agency announced on Tuesday the downgrade of Brazil’s sovereign risk rating from ‘Baa2’ to ‘Baa3’, the lowest in the investment grade scale. Moody’s also changed the outlook from “negative” to “stable”. The market was expecting the reduction in the Brazilian rating, but there was a concern that the agency would maintain a negative outlook, which would increase the risk of the country losing its investment grade. In a report, Moody’s assessed that weaker economic performance than expected, the upward trend of government spending and the lack of political consensus on fiscal reforms will prevent the authorities to achieve high primary surpluses enough to contain and reverse the trend of debt increase this and next year.

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Bradesco confirms favoritism and acquires HSBC Brazil for US$ 5.2 Billion

Bradesco has confirmed its favoritism and, in the early hours of Monday, has formalized the acquisition of HSBC’s Brazilian operations, as highlighted by HSBC in its earnings report. The purchase was made for US$ 5.2 billion, or R$ 17.6 billion. The Brazilian central bank was notified last night of the transaction outcome. Thus, the amount to be paid by the national operation of the bank was well above the already rumored, US$ 4 billion. In recent weeks, the estimates for the business ranged between R$ 10 and R$ 12 billion.

Bradesco shares were down up to 3% on the São Paulo stock exchange today on the news.

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