MacroScope

Firing up Brazil’s economy

A hot, dry spell in southeastern Brazil has pushed up energy prices, stretched government finances and raised the threat of water rationing in its largest city, Sao Paulo, just months before it hosts one of the world’s largest sport events, the soccer World Cup.

It looks like the last thing Brazil needed as it scrambles to woo investors and avoid a credit downgrade.

But if the scattered rains that started to pour down over the past few days bring in continued relief through March, the heat could actually prove to be a much-needed boost for Brazil’s economy, research firm LCA found.

The Sao Paulo-based firm calculated the net impact of above-average temperatures on gross domestic product. It found that the rush to buy air conditioners, combined with other reasons like the energy those air conditioners will consume, might push up Brazil’s quarterly growth in the first three months of 2014 by half a point to 1.0 percent.

Some retailers have reported an increase of 500 percent in air conditioner sales as many in Brazil’s rising middle-class got tired of sleepless, warm nights.

Four yardsticks for sovereign wealth funds

Sovereign wealth funds, a $3 trillion industry managing windfall revenues for future generations, arguably need a set of benchmarks different from those used by other private investors as they are state-owned. Andrew Ang, an associate at U.S. National Bureau of Economics and a professor at Columbia Business School, proposes the following four benchmarks in a recent paper distributed to SWFs.

ECONOMY CHINA MEASURES

The Benchmark of Legitimacy. Whatever the source of wealth, the SWF exists to transfer the benefits of that wealth from the present to the future. Without this benchmark, the money in the SWF is at risk of being immediately depleted. A necessary condition to maintain legitimacy is to have well-developed legal institutions in place.

The Benchmark of Integrated Policy and Liabilities. A critical part of this benchmark is detailing how and under what conditions the money can be distributed from the fund. Clear, yet flexible, spending rules must be set to meet well-defined liabilities.

from Davos Notebook:

Davos Man turns 40

Davos Man2 Many happy returns or midlife crisis?

The annual talkfest in the Alps records its 40th birthday this year but the rich and powerful will hardly be in celebratory mood as problems pile up in the post-crisis world.

How to withdraw the trillions of dollars in stimulus that helped the world avoid a rerun of the Great Depression, without spooking markets all over again?

What to do in the face of the world's lukewarm response to the hot topic of climate change?

G20 live blog from Pittsburgh

Reuters will be live-blogging the G20 summit in Pittsburgh on Thursday and Friday. Our army of correspondents, equipped with Twitterberries and Flip cams, will be bringing you the latest on the economy, climate change and bank regulation.

Click on “Make a comment” below to leave us your thoughts on what the world leaders in Pittsburgh should accomplish. And visit our G20 page for full coverage of the event.

from Global Investing:

Deflation to jump the shark?

The recent spate of shark attacks on Australian beaches could mark a turning point in global deflation and signal a change in fortunes for some beleaguered emerging economies, if Nomura strategist Sean Darby is to be believed.

Speaking at a Nomura investors forum, Darby said a chance sighting of a shark on Sydney's famed Bondi Beach three weeks ago made him realise that prices of grain and other soft commodities -- punished of late by global recession fears -- could be due for a rebound.

"I actually saw a shark on Bondi Beach and that made me wonder about the impact of La Nina and how there's a severe drought around the world at a time when many farmers are finding it hard to access credit," said the Hong Kong-based analyst.