TheEconomist

Brazilian president of Senate, Renan Calheiros, will keep his mandate, as 81 senators just decided, a few minutes ago.

Calheiros was judged by his pairs under the charge of corruption and he received 40 votes of supporters, against 35 votes for impeachment and six senators that haven´t voted.

These six votes may have came from the 12 senators of Partido dos Trabalhadores-PT (Workers Party). showing the participation of president Lula da Silva´s party in this process.

Public opinion favors Calheiros resigning.

 He´s under fire in other three charges, all of them related to corruption (business with contractors and so on).  The scandal became public his affair with a young journalist (they have a child 4 years ago), whose pension he was paying with money comming from Mendes Junior S/A, a large engineering and road construction company.

The political crisis in Brazil goes on.

Brazil is ok, I´m ok and you are ok - that´s more or less what some people in Europe heared from president Lula da Silva today or yesterday, don´t know for sure why.

The story is about the trend in short terms for basic  interest rates reduction in Brazilian economy - Lula didn´t showed any interest in stopping his own plans with a bit of basic economics.

-People is willing, mister, to invest in Brazil, you know? Alcohol, yeaj, ethanol and all that.

Inflation acceleration:

-Oh no, forget it , if what you want is to keep on making money on me, man, forget about it…

-?

Stock markets in Sao Paulo closed today in good shape, following this other story wiring all over, about the very true futurology by the  Federal Reserve´s decision already taken: to reduce basic interest rates by some 0,25 pp next Thursday (18).

Lula wants to keep on going. His plans before global finance crisis are to be taken seriously, about  promoting domestic economic growth in order to answer the main national problem here - create jobs for millions.

Next Tuesday (18) there will be another meeting at Brazilian Central Banco´s committee on monetary policy, probably to annouce a cutting by 0,25 pp instead of 0,5 pp on basic interest rates.

Here, like there.

Diference is that United States faces the challenge of recesion next year and Brazil is on the good part of the curve, with his alcohol driven  million of cars and now the ethanol run - basides strong economic fundamentals that could help to atract direct investments.

But in order to atract foreing capital that Brazil needs the “invest grade” by JP Morgan - so get it, just with low interest rates.

Brazil´s Central Bank just announced a reduction of 0,25% in the basic interest rate, as expected by everyone sice last week.

Before the US mortgage market crisis started last month, there was a perception that Central Bank´s Monetary Policy Committe (Copom) would cut basic rates by half a point, keeping the trend to reduce interest rates in order to estimulate economic growth (and get the so-called investment grade).

Besides the external crisis centered on the US mortage market, Compom looke also to internal aspects of the recent figures - they found out GNP is running at 6% a year at this moment, although the expectation for this year was around 5%.

There are price pressures in the internal front, comming specially from food, as well as the whole uncertainity outside.

Tonight decision shows, as former Finance Minister Antonio Palocci just told us, that there´s a perception of the external turbulence and its risks but up to now the perspetives for Brazilian economy are as good as the economic fundamentals.

Market observers say taht could be the last cut in Brazil´s basic rates, which annual percent in present 11,25%.

Dolar went up by the end of business day, but not that much, closign at US$ 1,00 = R$ 1,97.

Sao Paulo stock exchange closed follwing the downward trend observed in New York and closed with a loss of 1,5% after five consecutive days above the line.

Senator Renan Calheiros, president of Brazil´s Federal Senate and of the National Congress, will probably loose his mandate as senator by the State of Alagoas, under charges of corruption acts discovered after the accusation of pension payments to jornalist Monica Veloso, mother of Renan 4 year old daughter.

The senator is still married to Veronica Calheiros.

As a distinguished member of the strong PMDB (Party of the Brazilian Democratic Movement), who defeated the military rule in 1985 and now is allied to president Luis Inacio Lula da Silva´s Workers PArty (PT).

Lula tried to save his friend and may still have success in doing so tru the majority Government coalition has in Senate.

But the charges were so evident and the scandal lasted so long that Lula told people to let it go and try to solve the crisis as soon as possible because he - and the country - needs Senate being full opeational.

Senate has been paralized for the last quarter by Renan´s struggle to keep his job anyway.

It looks he won´t succeed and will have the same fate of former president Fernando Collor, also from Alagoas state, who resigned and lost his political rights for eight years under charges of corruption.

Last year Collor was elected senator after the 8-year period of punishment, but his role now is so ofuscated by his past that he decided to take a 4-months vacation, starting last week.

The main reason: not to be obliged to vote in Renan´s impeachment next week.

On the economic front, it´s expected for tonight the Central Bank announce about the basic interest rate, which the market wants to be cutted by 0,25 percent points.

Sao Paulo and Rio stock markets are on red now, following Dow Jones after bad news in US house financing market.

Dollar is woth R$ 1,94 which means everything is normal in Brazil at this moment.

Finance Minister Guido Mantega gave in Brasilia a few cues to the decision Central Bank´s monetary policy committee (copom) is taking at this exact moment on what to do with basic intereste rates in Brazil.

We are divided: most os our economists were betting on a hardstop on rates falling curves planned before.

Even they stop it tomorrow, decidion is annouced, it would be simply a break to breath and unerstand better what the hell is going on in Uncle´s Sam banks…

Central BC committe was working for many months to give a help to economic growth, in order to make sure Brazil´s GDP would keep on a sustained goodwill path starting from something more than 5% in 2007, 6% in 2087 (municipal elections in Oct 5th), 6,5% 2009 and the magic 7% exactly in presidential elections year!

Now, no-payers in the States are shaking things around the overfinacerized global capitalism.
There is an spectre rounding not only Europe like in 19th century but the wole blogal village now.

Woukd there be a recession in the States, following the present credit crisis in the mortgage system spreading sub-porimes roten papers around banks all over.

Is there gonna be a world recession?

We don´t think so, but you better take your precautions… like not believing anibody, not even the economist next door.

Or next blog.

I say there won´t be a recession, but an adjustment all over the globalized economies.

It´s ridiculous to expect that a people like the Americans, modern Romans leading manking to the stars, has won all the batlles against all the socioeconomic engeneering challenges, to begin with American Revolution and going over The Great Depression and…

Well, I know very well the Amnericans, my son is one of them. I´ve been covering Insternational Monetary Fund (IM) annual meetings for over two decades.

As a Finance minsiter´s press officer during the Real Plan implantion and consolidation, I got insede the monster - it´s nice the building from inside, the general-manager rooms, the women around… well-dressed female PhDs

I used to jave a fried there, who´s retired now, that introduced me to the  IMF building at 19th street undergrounds - it´s sort of mindblowing, my friends from Berkeley would say.

At a time, around the end of 1998, I even accepted to participate of the Brazilian small delegation headed by Finance Minister Pedro Malan - well, I thought I still was a Marxist, but I also had to help the nation overcome the foreing crisis and we´ve got to save the new and stable Real…

After IMF agreement in 1998 we decidend to leave the Executive. In early 199 we quited Government, toghether with Gustavo Franco, replaced by Henrique Meirelles at Banco Central (where companheiro Lula kept him up to now).

Read all that, then you already know what I think about tomorrow´s annouce by Brazilian Central Bank´s monetary policy committe - don´t you?

All my friends on the economic midia sage believe the  basic interest rates (selic rates) will b cutted by 0,25% only (modifying the downward trend followed in the last  months to get advantage of good fundamentals.

Market operators expected a cut by 0.5% before the mortgange crisis in the US.

May I tell you my game?

They won´t do anything but stay where they are: watching tv to see what´s going on around with the US and European banks, the credit and, last but not least, inflation expctations outside and specially inside Brazil.

Finance Minister Guido Mantega said we´re going tru some consumer pressure on prices. “I don´t see any major inflation pressures, but consumer is high at this moment, whic is good”, he saida few hours ago.

To good unerderstanders, half a word is enough.

I´d keep basic rates where they are,  for two more weeks or so  -  and then see what happens,  wait to see what goes on with inflation and economic growth at home.

Operators are the same all over - it changes only the email, I suppose.

Since Wall Street is quiet because there´s the beggining of Fall holiday for the re-opening of schools in America, early morning news have a lot of people telling the Fed (and national central banks like Brazil´s ) to do this or that.

Are they economists? Most of them, but they are is market operators when expressing such a thing distorted by what are market wishes nowadays.

It´s like soccer in Brazil: there´s a bunch a 190 millions sport technicians on that matter when it ccomes to World Cup.

It includes companheiro Lula, the president who came from the people -  tru  Workers Party  (Partido dos Trabalhadores-PT) born in old automobile plants in Sao Paulo in early 80s, just after the returning of exiled activists allowed by the military (since they had defeated the guerrilla movement in the 70s and was movimg to pass  powerover  to civilians before economic crisis exploded as it did in middle 80s ultil 1994, when the Real plan ended a 30 year period of hight inflation and its use by ruling class as a virtual way to take advantage from people who ain´t nothing but his/her own work tosell in the blogalized markets.

In Japan  US dollar gained position compared to the iene; dollar rates are expected to have one or two meangful reavaluantion from now up to the end of year.

From this point of view, many economists working for the market expressed their wishful thinking that there will be at least one small basic interested rate movement - something like a 0,25% cut next meeting on next  8th.

More: they´ll bet there will be a second chance by the end of year -the end os 2007.

Also for Brazil, operators express this same wishful thinking when they say that Brazilian  central bank (BC) would follow the Fed would-be decision…

Yeah, we all want lower  interest rates all over.

Corporate economists said they´d bet  Brazil´s Central Bank decision next Monetary Political Committe´s meeting day after tomorrow will follow the americans fellows: they keep on saying Selic rates is to be cutted by 0,25% at least, to give a positive sinalization to the markets.

We´d rather tell friends today they should pay atention on inflation and economic activities figures this week, before telling monetary authorities what to do in times of global credit crisis.

Let it be…we never get what we want but hope we´ll get what we need, like former minister Pedro Malan used to teach us when we the Real staff was to face foreing crisis outside our control, like this one now. 

Anyway, Brazil is much better today - we´ve got US$ 160 bi in foreing reserves - nothing bad for a trillion US dollar total GDP.

What do you think?