Brazil | Federal Home and SME Loans Survive Budget Cuts

Underlying the battle in the Congress this week over the increase in the minimum wage — the opposition leader in the Senate, Aécio Neves, has just announced he supports the lower rise, silencing loud noises from the former presidential candidate of his party as well as disappointing the major trade union conferderations —  is a project to cut the federal budget this year while maintaining development subsidies.

The local press, except for the leftist Carta Maior — the editoriographic above is from the cheerfully pelego DComércio — makes no mention of this linkage, but the factoid of the hour is that each additional real committed to the wage adjustment is R$15 billion unavailable for social and economic development programs.

As at home, the tactic of the opposition is Starve the Beast, as we saw in the purely symbolic defeat of a meaningless tax o financial transactions, the CPMF, that was simply made up for with the increase of the IOF.

With the deal now closed at the lower wage increase, the Estadao is able to report that

… the Caixa Econômica Federal and the National Social and Economic Development Bank (BNDES) will have an additional R$ 130 billion in capital for loans this year . The  Caixa will receive R$ 2.2 in  Petrobrás and Eletrobras, raise to some R$ 30 billion its loan reserve;  BNDES will get an additional R$ 6.4 billion, raising its loan capacity to R$ 100 billion.

With the increase in assets, the Caixa’s Basel Index will rise from 15.4% to 16.0% or so, but should settle at about 15% by year’s end due to a 30% increase in loan volume planned for this year.

A VP of the CEF says … 

Bancoop Prosecutor: “ABA Rule 3.6 My Ass!”

"The House Fell In on the Treasurer of the PT: The man who will handle the campaign finances of Dilma is pointed out as the pivotal figure in a swindle that embezzled millions and fed the campaign coffers of Lula in 2002" Nasty.

Caiu a casa … do “patrocinador” da Veja: Partisan bloggers, responding to the Veja magazine cover story linking the campaign treasurer of their candidate to dirty dealings, note that the online edition is sponsored by the state government of São Paulo.

See my previous post.

It turns out that Bancoop really was more than a little screwed up, as the petistas themselves explain.

The striking thing is the extent of blogging on the Veja exposé on the supposed corruption of the campaign manager for the party of the situation.

To give you a rough idea, a search at 7:00 p.m. tonight on blogsearch.google.com.br turned up

1. my post in English, which no one here can really read all that well, and then
2. page upon page upon page upon page of blogging results reinforcing the notion that the Veja article is resounding proof of corruption in the PT.

On maybe the seventh or eighth page, a lonely voice of dissent from a partisan blog, which is actually fairly forthcoming about the fact that Bancoop was perhaps not the best-managed real estate venture ever.

First, however, the post refers to a screenshot showing that the page is sponsored by official advertising paid for by the state of São Paulo — whose governor of the Opposition will oppose Dilma of the Situation in October.

State advertising endorsing the cover story. The irony is genuine, but kind of boring and predictable, from a bullshit detection standpoint. (I like to pretend that I am the Dr. House of this inexact science.)

I am actually more interested in the true crime story about a real estate development with some utopian pretensions running up against the hard truths of the Hobbesian state of nature that is the São Paulo real estate market.

And the story of a prosecutor running amok in a way that would shock even the bar association of New Jersey.

And most amazing of all, the story of how Veja used a source to found its accusation that in the past it had done everything possible to discredit.

SEC On “The Issuer Pays”: Ratings Agency Facelift Falls?

SEC Staff Report on Credit Rating Agencies, July 2008

Rating agencies do not appear to take steps to prevent considerations of market share and other business interests from the possibility that they could influence ratings or ratings criteria.

The SEC (PDF) report on the ratings agencies classified as NRSROs — nationally recognized statistical ratings agencies — tells a pretty simple story.

1. The major rating agencies — Fitch, Moody’s and Standard & Poor’s — were told to develop and enforce policies to prevent conflicts of interest from potentially throwing a bias into analyst rating reports.
2. The major ratings agencies developed those polices.
3. But they do not enforce them.

The issue acquires particular poignancy at a time when the public is looking carefully at the performance of these agencies to determine their “failed prognostication rate” (FPR) — which is actualy just a piece of pseudoterminology I made up myself, but you get what I mean, right?

Freedonia sovereign debt is as solid as the Rock of Groucho, they say.

The Rock of Groucho turns out to have feet of clay. Citibank fires 20,000 employees. Goldman Sachs ponders vacating its Death Star building on Pearl Street and decamping for Tony Sopranoland.  The mayor of New York City — who is in the information and numbers business himself, and is actually quite good at it — looks at his tax revenue projections for the next five years and contemplates jumping out the window.

Each of the NRSROs examined uses the “issuer pays” model, in which the arranger or other entity that  issues the security is also seeking the rating, and pays the rating agency for the rating. The conflict of interest inherent in this model is that rating agencies have an interest in generating business from the firms that seek the rating, which could conflict with providing ratings of integrity. The Commission’s rules specify that it is a conflict of interest for an NRSRO being paid by issuers or underwriters to determine credit ratings with respect to securities they issue or underwrite. They are required to establish, maintain and enforce policies and procedures reasonably designed to address and manage conflicts of interest.35 Such policies and procedures are intended to maintain the integrity of the NRSRO’s judgment, and to prevent an NRSRO from being influenced to issue or maintain a more favorable credit rating in order to obtain or retain business of the issuer or underwriter

Rio: “Title Insurance Comes From the Barrel of a Gun”?

Bat macumba oba: The Batman shield marks militia-protected homes and businesses in Rio’s Western District — and appears on the campaign advertising of two local candidates. See Rio: “Armed Groups Interfere With Freedom of Association” for the paramilitary element in local politics … in regions where you either watch Rede Globo on GatoNet or somebody shoots you.

Associação de Moradores fazia o registro irregular de terrenos em loteamento clandestino de milicia: O Globo reports on an alleged scheme to falsify title to public property misappropriated by armed “vigilante” groups in the Western Zone of Rio de Janeiro.

A follow-up to

• Rio Militias: Hybrid Governance Solution to State Failure Props Up Informal Real Estate Market

And you thought New York real estate was a cutthroat market?

The black-market in real estate is a central motif in Globo’s current prime-time soap opera, weirdly.

The scheme was reportedly denounced by a rivial militia leader who is also a political rival of the current (alleged) militia leader.

RIO – A Associação de Moradores de Rio das Pedras (Amarp) está envolvida na ocupação de áreas públicas loteadas por integrantes da milícia que controla a favela, de acordo com reportagem publicada no jornal “O Globo” desta quinta-feira. Lotes vendidos pela imobiliária Betel foram registrados na entidade mediante o pagamento de uma taxa de R$ 150. A descoberta foi feita nesta quarta-feira durante uma operação da Coordenadoria Integrada de Combate aos Crimes Ambientais (Cicca), da Secretaria estadual do Ambiente, que demoliu nove casas construídas na faixa marginal de proteção da Lagoa da Tijuca, na localidade da Areinha. As invasões começaram há dois meses, após outra intervenção do estado que retirou os chiqueiros que ocupavam a área e terrenos vizinhos.

The Rio das Pedras Residents’ Association (AMARP) is involved in the occupation of public land squatted by members of the militia that controls the community, according to a report in O Globo on Thursday. Lots sold by a real estate brokerage known as Betel were registered with AMARP in return for a payment of R$150. The discovery was made during a raid by the environmental crimes unit of the state secretary of the environment, which demolished nine residences constructed on the banks of the Lagoa da Tijuca inn Areinha. The invasions began two months ago, after another state intervention dislodged squatters that were occupying that area and neighboring tracts of lands.