Brazil, India, China May Be Overheating, Roubini Says (Update4)
May 31, 2010, 7:04 PM EDT
By Andre Soliani and Matthew Bristow
May 31 (Bloomberg) -- Nouriel Roubini, the New York University professor who predicted the global financial crisis before markets peaked, said the Brazilian, Chinese and Indian economies may be overheating and developing asset bubbles.
The outlook for Brazil's economy is "very positive," though the debt crisis in the euro zone countries and a slow "u-shaped" recovery globally could dent the country's growth, Roubini said today at an event in Sao Paulo.
"In Brazil, like in many other emerging market economies, there is now evidence of overheating of the economy," Roubini said. "Expected and actual inflation is starting to rise, and that implies that over the next few quarters there has to be a tightening of monetary policy, gradually but progressively, in order to make sure that inflation expectations remain anchored."
Roubini, 52, recommended that Brazilian policy makers take steps to limit the appreciation of the real, including the "judicious" use of capital controls. The currency has gained 8.2 percent against the dollar over the past 12 months, the best performer among 16 major currencies tracked by Bloomberg.
The stronger real has made the country's exports more expensive in dollar terms, and the economy could also be hit by a fall in commodity prices, which are likely to decline over the next 6 months to 12 months because of a possible double-dip recession in Europe and a U.S. slowdown, Roubini said.
Housing Bubble
The euro zone economies are likely to stagnate this year, and Greece is growing closer to insolvency and may be forced to restructure its debt, Roubini added.
Euro-area ministers agreed on May 2 to provide 110 billion euros ($135 billion) of aid to Greece as the country struggled to control a deficit that reached 13.6 percent of GDP last year, more than four times the EU limit. When that failed to stop the euro's slide, the EU and International Monetary Fund offered a financial lifeline of almost $1 trillion to member states.
Europe's currency has dropped 14 percent against the dollar this year, the biggest loss among its 16 most-active counterparts, according to data compiled by Bloomberg. It traded at $1.2308 as of 5:58 p.m. in New York.
Chinese Growth
Chinese economic growth may slow to an annual rate of 7 percent to 8 percent by the end of the year or early 2011, Roubini said today in Sao Paulo. U.S. economic growth may slow to less than 2 percent in the second half of the year, Roubini said.
China's challenge is to boost domestic demand to sustain an economic expansion that has been based so far on investments and exports, he said.
Brazil and India are in a "better shape" than China regarding the strength of domestic demand, Roubini said. Emerging markets can grow between 5 percent and 8 percent during the global economic recovery compared to between 2 percent and 3 percent for rich nations, he said.
He didn't provide further details about his growth outlook for India or China.
China's economic growth accelerated to the fastest pace in almost three years in the first quarter, rising 11.9 percent from a year earlier. India's GDP rose 8.6 percent in the three months ending March 31 from a year earlier, following a revised 6.5 percent gain in the previous quarter, the statistics office in New Dehli said today.
Brazil's GDP may have expanded 8.5 percent on an annual basis in the first quarter, according the median estimate in a Bloomberg survey of five analysts. If maintained throughout the year, that would be the fastest growth rate in two decades. Brazil reports first quarter GDP on June 8.
The professor, who is also chairman and co-founder of Roubini Global Economics LLC in New York, failed to predict the market rebound that sent shares across the globe soaring last year. The S&P 500 Index surged 80 percent from a March 2009 low to a peak in April this year.
UPDATE 1-Brazil economists see 2010 inflation steadying
SAO PAULO, May 31 (Reuters) - Economists in a weekly central bank survey kept their forecasts for Brazil's benchmark inflation index steady for the first time in almost five months in a sign that inflation expectations are leveling off.
Economists kept their forecast for the benchmark IPCA inflation index steady at 5.67 percent in 2010, after 18 straight weeks of raising projections, the central bank said on Monday.
Building inflation expectations was part of the reason the central bank aggressively hiked its main interest rate in April, which took borrowing costs to 9.5 percent. The bank is expected to continue to raise rates, with the benchmark Selic rate closing the year at 11.75 percent, according to the survey.
Economists raised their expectations for growth in Latin America's largest economy only slightly, betting on an expansion of 6.47 percent against a forecast of 6.46 percent a week ago.
Brazil was among the first countries to emerge from the global financial crisis last year, and many fear its economy could overheat.
For 2011, the inflation estimates were kept at 4.8 percent for a seventh straight week.
The central bank has a 4.5 percent inflation target for 2010 and 2011, plus or minus 2 percentage points. (Reporting by Elzio Barreto and Ana Nicolaci da Costa; Editing by Padraic Cassidy)
Brazil stocks gain on thin volume; real stronger
May 31 (Reuters) - Brazilian stocks rose early on Monday as commodity-related shares advanced, with holidays in the United States and the UK thinning trading.
The benchmark Bovespa stock index .BVSP put on 0.84 percent to 62,470.10, after slipping in the previous session on the heels of a choppy week.
"Things are getting attractive again," said Debora Morsch, chief executive of Solidus brokerage. "Foreign investors will be coming back."
Brazilian stocks have suffered as a sovereign debt crisis in Europe led jittery investors to dump riskier assets around the world. The Bovespa index lost almost 14 percent from its close on April 8 through its close on Friday.
Brazil's currency, the real (BRBY), firmed 0.22 percent to 1.806 per dollar, as the greenback crept up against a basket of major currencies .DXY.
On the Bovespa index, heavyweights Vale and Petrobras led gains.
Mining giant Vale (VALE5.SA), the world's largest producer of iron ore, put on 1.55 percent to 42.60 reais. The company will raise iron ore prices about 35 percent to as much as $145 per tonne in July as part of a switch to quarterly pricing, a Brazilian newspaper reported on Sunday. [ID:nN30230578]
Shares of state-controlled energy company Petrobras (PETR4.SA), the most active stock in the index, rose 1.56 percent to 28.64 reais as crude oil CLc1 gained 0.69 percent.
Rival oil and gas company OGX (OGXP3.SA) climbed 0.4 percent to 16.12 reais.
Trade in shares of steelmaker CSN (CSNA3.SA) was suspended in the morning after the exchange asked the company for more information about a debt dispute.
Rival steelmaker Gerdau (GGBR4.SA) advanced 2 percent to 24.91 reais. Usiminas (USIM5.SA) traded up 0.29 percent to 45.43. Technical problems at the Sao Paulo exchange kept interest rate futures contracts <0#DIJ:> from trading early in the session.
The yield on the contract due January 2011 DIJF1 edged down to 10.98 percent from 10.99 percent shortly after opening.
A weekly central bank survey showed that inflation expectations in Brazil could be leveling off.
Local economists kept their forecasts for the year-end benchmark IPCA consumer price index steady, at 5.67 percent, for the first time after 18 weeks of raising their forecasts. [ID:nN31137396]
Nevertheless, that forecast is still above the central bank's 2010 inflation target of 4.5 percent, plus or minus 2 percentage points.
Roubini voices caution about Brazil's speedy growth
May 31, 2010 4:12pm | by Jonathan Wheatley
Nouriel Roubini has become the latest economist to call for fresh capital controls in Brazil to prevent further appreciation of the country's currency, the real, which is widely regarded as overvalued.
Roubini - famous for being one of the few economists to foresee the global financial crisis - told a conference in São Paulo today the high value of the real was damaging Brazil's export competitiveness. "If capital controls were used intelligently, it would be possible to avoid a greater evil," he said. Brazil most recently imposed capital controls last October when it put a 2 per cent tax on short-term capital flows to try to slow the floods of foreign capital entering the country to take advantage of its high interest rates and strong domestic growth story.
There has been speculation that fresh measures could be in preparation but, so far, the government has resisted anything that could undermine investor confidence.
Roubini also joined those saying Brazil is growing too quickly and will need politically difficult structural reforms to raise its potential or non-inflationary growth rate above 4 or 5 per cent a year. Economists have been arguing for years that Brazil needs to trim its bloated public sector and direct spending to investment, reduce its high tax burden and tackle other issues such as its rigid labour regime.
He said current growth of about 7 per cent a year was unsustainable but would be possible for a decade if reforms were enacted. He also pointed to the need for investment in social goods. "The best investments for the poor are in education and health," he told the conference.
Raid Jeopardizes Turkey Relations
By SABRINA TAVERNISE | Published: May 31, 2010
Prime Minister Benjamin Netanyahu on Monday cut short a trip to Canada after the Israeli raid on a Gaza-bound aid flotilla.
ISTANBUL — The Israeli commando raid on Monday on an aid flotilla, which left at least nine people dead, has dragged relations between Israel and Turkey to a new low, political experts here say, threatening to derail diplomatic relations between two close American allies.
Turkey, a NATO member, has long been Israel's closest friend in the Muslim world, with $2.5 billion in trade in 2009 and strong ties between the countries' militaries and governments. But relations began to deteriorate during Israel's war in Gaza, when Turkey's prime minister, Recep Tayyip Erdogan, publicly sparred with Israel's president, Shimon Peres, at the World Economic Forum in Davos, Switzerland.
Monday's raid on the Gaza-bound aid flotilla, which was sponsored in part by a Turkish organization, prompted street protests in Turkey and a strong official reaction, with Ankara recalling its ambassador from Israel, summoning Israel's ambassador and canceling planned joint military exercises. That was enough to raise alarms among analysts here, who said it could seriously jeopardize already battered diplomatic relations between the countries.
"This will be perceived as a kind of declaration of war on Turkey," said Cengiz Candar, a columnist for Radikal, a Turkish daily. "Political dialogue will cease. It's not possible to contain the deterioration in relations anymore."
But it was not yet clear how broad the implications would be. As of Monday evening, Israel's ambassador to Turkey had not been asked to leave the country, and Turkey's foreign minister spoke by phone to Israel's defense minister — evidence that, at least at some level, diplomatic channels remained open. The leaders of the two countries' militaries also spoke by telephone, the Turkish military said.
A senior Turkish official, speaking on the condition of anonymity because he was not authorized to speak publicly on the matter, said it was possible that Turkey would cut off diplomatic relations, but that such a move would depend on Israel's next steps. Turkey expects the immediate release of the activists on board the ships, the official said, as well as a strong apology from the Israeli government. Neither has been forthcoming, and there were reports late Monday that Israel had arrested some people from the ship.
A senior Israeli official said that Israel had tried for two weeks to persuade Turkey to stop the flotilla's voyage, but that Turkey said it was a nongovernmental action that it was powerless to stop. Israel's ambassador in Turkey, Gabi Levy, did not return a call for comment.
One wild card is Mr. Erdogan, a strong-willed former Islamist who is the driving force behind Turkey's criticism of Israel and its policy toward the Palestinians. He has pushed a foreign policy that has taken a more active role in the region, serving as mediator between Israel and Syria. But the United States has not appreciated all his efforts, like his recent attempt with Brazil to broker a nuclear deal with Iran.
In a news conference in Santiago, Chile, where he cut short a trip to return to Turkey, he called the raid "inhumane state terrorism," and said that Israel's contentions that there had been weapons on the ships were "lies."
"This attack has clearly shown that the Israeli government has no desire for peace in the region," he said in remarks that were broadcast on Turkish television. But he also called for calm, saying that Jews in Turkey "are our citizens," and adding that "I want my people to be very sensitive about this."
The situation is difficult for the United States, which has close relations with both countries and is now in the awkward position of devising a reaction that avoids alienating either side. Both the United States and Israel use Turkish airspace for military exercises. The United States transports the majority of supplies for Iraq from a military base in southern Turkey.
Asli Aydintasbas, a columnist at the Turkish daily Milliyet, argues that the episode was a striking failure in diplomacy, for both the United States and Turkey. The new foreign policy pursued by Turkey's government has given it a confidence that sometimes results in overreaching. For example, Turkey believed it could change Israeli policies toward Gaza.
"This was a disaster waiting to happen," Ms. Aydintasbas said. "Both Turkish and American officials could have stopped the boats from moving forward. It's clear they didn't try hard enough."
Mr. Erdogan is seen favorably by many in Turkey's small Jewish community. He encouraged the relationship with Israel, visiting in 2005 with a group of Turkish businessmen. He was the first Turkish prime minister to visit the office of Turkey's chief rabbi, after a synagogue was bombed in 2003.
But when it comes to Hamas, which controls Gaza, they disagree. Israel views Hamas as a terrorist group and focuses on its doctrinal commitment to destroy the Zionist state. Mr. Erdogan sees other aspects: Hamas began as a grass-roots Islamic movement, and like his own Justice and Development Party, also Islamic-inspired, it was democratically elected against overwhelming odds.
One Turkish tactic will be to try to garner international condemnation in order to change Israeli policies toward Gaza, namely its blockade, Turkish analysts said. Turkey's foreign minister, Ahmet Davutoglu, flew to New York to spearhead Turkey's efforts to call for a vote on the matter in the United Nations. Turkey became a member of the Security Council last year.
Mr. Candar, the columnist, views the future of relations grimly. The raid provoked outrage among the Turkish public — in Istanbul, crowds thronged Taksim Square and tried to storm the Israeli Consulate — sentiment that Mr. Erdogan could capitalize on in national elections next year.
The current governments in Israel and Turkey seem stuck in a cycle of hostility, and Mr. Candar does not see that changing. "As long as this government is in power and the one in Israel is in power," he said, "it will be a hostile relationship, not even a neutral one."
Sebnem Arsu contributed reporting from Istanbul, and Ethan Bronner from Washington.
El proteccionismo del Gobierno huele a viejo
Las marchas y contramarchas sobre la importación de alimentos delatan un sistema anacrónico que sólo puede acarrear perjuicios y represalias.
01/06/10
Pese a que la prohibición de importar alimentos , concretada por la Secretaría de Comercio sin una norma nacional clara y en violación de normas internacionales como las del Mercosur y de la Organización Mundial del Comercio (OMC), fue desmentida por la Presidenta de la Nación en Madrid, subsisten algunos interrogantes.
¿Se mantendrá la prohibición al menos de manera parcial? ¿Se retomará más adelante? Es deseable que esto no ocurra, porque puede traernos severos perjuicios . Si hubiera represalias , como anunciaron varios países, la Argentina resultaría muy dañada, ya que, por caso, a Brasil exportamos más de cuatro veces lo que importamos. Si ese país cerrara las importaciones de la Argentina, como pidió la candidata presidencial oficialista Dilma Rousseff, el resultado sería como en una pelea en la que nosotros tirásemos con una gomera y nos respondieran con un cañonazo.
Al margen de lo que finalmente ocurra, la cuestión lleva al tema de fondo sobre el proteccionismo que fue invocado por los funcionarios al defender la medida . Sin duda una noción anacrónica del proteccionismo, ya que ha pasado mucha agua bajo los puentes desde el clásico debate entre protección y libre cambio, que la Argentina dirimió erróneamente en el siglo XIX y nos hizo perder el tren que en cambio tomó Estados Unidos que protegió su industria. Lo mismo respecto del proteccionismo de mediados del siglo XX que condujo no al desarrollo sino a una sustitución de importaciones que finalmente entró en crisis por la necesidad de importar bienes intermedios, equipos y otros insumos.
A mi juicio, es necesario proteger a la industria nacional y los resultados negativos del neoliberalismo del noventa refuerzan esa convicción. Pero no hay que ignorar el dato de los cambios producidos en la escena mundial a partir del multilateralismo y la globalización , que han generado un mundo sumamente intercomunicado y abierto . Ya los cierres de importaciones o los aranceles fuera de las reglas de la OMC han devenido anacrónicos, son inviables y no traen otra cosa que perjuicios a la industria y al país.
Para proteger el trabajo argentino hacen falta mecanismos más sofisticados, en especial medidas internas que impulsen la competitividad de las empresas. Pero yendo más al fondo de la cuestión, cabe decir que el proteccionismo en sí, sea del viejo o del nuevo cuño, es un aspecto muy limitado .
Sólo una política de desarrollo genuinamente protege a la industria .
La protección es sólo un punto y no el más importante, junto a las políticas activas de inversión, la generación de polos de desarrollo y la integración de los sectores productivos y las regiones. Sólo con una economía desarrollada la industria tendrá una protección que hoy no tiene, ya que la incorporación de tecnologías, una infraestructura eficiente y producción en escala son los factores que elevarán la competitividad industrial del país.
A partir de ello serán innecesarias las medidas defensivas y estaremos en condiciones de que nuestra industria salga agresivamente al mundo para afirmarse y crecer.
