Brazilian IGPM shows second month of deflation

The General Market Price Index – (IGP-M) recorded deflation of 0.93% in May, after falling 1.10% a month earlier, according to the Getulio Vargas Foundation (FGV). It is the lowest rate for May months since the beginning of the indicator series in 1989. It is also the third lowest variation for all months of the series, with June 2003 and April 2017 being the lowest ones. In May 2016, the indicator, which serves as a reference for the readjustment of contracts such as rent, rose 0.82%.The fall in the fifth month of 2017 was driven by wholesale deflation, especially industrial products, and by the slowdown in consumer price hikes. The decline of 0.93% was higher than the 0.82%, on average, estimated by economists. The range of estimates was for a decline between 0.74% and 0.89%.

In the year, the IGP-M decreased by 1.29%. In 12 months, it rises only 1.57%, compared to analysts’ forecast of 1.69%.

How to make sense of Brazilian inflation indexes?

Foreign direct investment in infrastructure grew more than 500%

Foreign capital inflows into infrastructure activities in Brazil grew more than 500% in the first four months of this year compared to the same period in 2016, reaching a mark of US$ 11.4 billion. The flow represents more than 50% of direct investment in the country for capital participation operations registered by the Central Bank (BC) from January to April, a total of US$ 21.5 billion.

Market analysts are projecting, however, that this performance may decline sharply as a result of the new political crisis directly involving President Michel Temer, although this reaction does not mean that investors and infrastructure operators are giving up on the country.

“Basically when an investor is going to put money into a project, he considers risks and returns, both are measurable,” said economist Cláudio Frischtak. “As long as this veil of uncertainty is not lifted, investors will wait,” he said. “That does not mean giving up, I do not know anyone who has given up the country.” Frischtak specializes in the infrastructure area of ​​Inter.B consulting.

Itaú pays US$1.8 billion for 49.9% of XP Investmentos

After two months of discreet talks, Itaú Unibanco closed on Thursday (May, 11th) the purchase of 49.9% of the total capital of XP Investimentos for R$ 6.3 Billion, which includes R$ 600 million in resources that the bank will inject into the company. With the transaction, the country’s largest private bank reserves its space in the process of “de-banking” in progress, in which people are leaving traditional banks for brokerage accounts with banking services. “I believe this transaction will take Itaú and other banks out of the comfort zone, as it will strengthen XP and increase its ability to compete in the investment market,” said Roberto Setubal, co-chairman of Itaú Unibanco’s board of directors.