Brazil & Southern Cone - March 2013 (ISSN 1741-4431)

Dock workers on 22 March called off a national strike scheduled for next week after a successful round of talks with the government over its new reform plans for the sector, which includes a public-private plan to attract US$27.6bn in investment and the concession of some ports to private sector companies. The workers had particularly objected to plans under the new law to shift management responsibilities to the central government and away from the port authorities. Proposals would also allow new (privately-run) terminals to directly recruit workers, ending an obligation to source them through a central agency, Órgão Gestor de Mão de Obra (Ogmo).

The workers, grouped under Força Sindical, have now agreed to that provision in exchange for government promises to ban the use of temporary labour, set up a guaranteed minimum income scheme for dockers in times of low port activity and establish a new port guard specifically for Brazil’s ports, among other provisions. Shipments of soya and iron ore to China have been at risk because of the labour unrest in the ports sector.

Formal employment creation dips sharply

The number of new formal (i.e. payroll registered and tax-paying) jobs created in February fell 18% year-on-year to 123,446, according to the latest data from the labour ministry. It was the weakest result for the month since 2009. However, there was an increase on a monthly basis over January, when just 28,900 new formal jobs were registered. The labour ministry said the latest results were “within the average” and expressed confidence that its annual target for 2013 of 2.0m jobs would be reached.

In 2012, the economy created 1.3m new formal jobs. Most new jobs are still being created in the services sector, followed by industry and civil construction. Jobs were lost in the retail and agriculture sectors in February. President Dilma Rousseff’s record high approval ratings (79% on latest polls) are directly linked to Brazil’s nigh-on full employment and steady wage growth, according to pollsters.

• Moody’s cuts Brazil banks

The ratings agency Moody’s Investors Service lowered its long-term issuer ratings on the Brazilian state banks, Banco Nacional de Desenvolvimiento (BNDES) and Caixa Econômica Federal, citing their eroding capital position after several years of rapid credit expansion. Moody’s cut its ratings on the two to "Baa2" from "A3," with a positive outlook, according to a statement. This lower rating is still within investment-grade ratings. Caixa Econômica Federal is Brazil’s largest mortgage lender. Likewise, Moody’s downgraded the foreign currency senior unsecured debt ratings of both banks to "Baa2" from "Baa1," with a positive outlook, "in line with the positive outlook on Brazil's government bond rating," ran the statement.

• Abav expects 30% fewer Argentine tourists

Brazil’s association of travel agencies (Abav) expects a drop of 30% in the numbers of Argentine tourists coming to Brazil because of the latest currency and credit card controls imposed by the Buenos Aires government. Argentina is the Brazilian tourist industry’s biggest source market, providing 1.6m of the total 5.7m tourists that visited the country in 2012, or almost 30%. Abav expects the states of São Paulo, Rio de Janeiro, Bahia, Rio Grande do Sul, Santa Catarina and Paraná to be worst affected. Rio’s state tourist secretariat estimates the potential total loss to Brazil at US$285m.

• Supreme court rules against ICMS on imports

On 20 March Brazil’s federal supreme court unanimously ruled unconstitutional the inclusion (by the federal government, or União) of the state–level valued added tax (ICMS) in the base of calculation for the PIS/Cofins social contribution taxes on imports. The ruling is a blow to the federal government, which earned an estimated R$34bn (US$17bn) between 2006 and 2010 by way of that methodology. The federal tax office said it would move for a temporary stay until it understands more about the ruling, which could force the União to reimburse affected companies.