Sunday, October 11, 2009

Brazil To Receive Record New Investments: Currency to Appreciate Further; Airline Trips Have Best Results in 40 Years

Bovespa, Sao Paulo's Stock Exchange

Newspaper O Estado de Sao Paulo reports that the country should receive further heavy investment in virtually all areas in which investment banks operate: Brazilian mergers and acquisitions, stock market, fixed income and private equity (funds that buy shares of companies). According to testimonies collected by the paper, it will not take long for Brazil to re-issue debt in Real currency.

If the perception that the country will receive a flood of capital is confirmed, the headache of the government's appreciation of the Real will become a permanent migraine.

This week, several authorities, such as Finance minister Guido, expressed concern at the high of the Brazilian currency. The real has gained 34% against the dollar in 2009. On Friday, the U.S. currency closed at R$ 1.737, lowest of the year. On the other hand, the index of the Bolsa de Valores de Sao Paulo (Bovespa) is up 70.6% in the year (plus the currency apreciation for those who invested there in USD!).

Last week the central bank intervened by buying more U.S. dollars.

According to bankers, the sectors of the economy favored by investors are directed to the internal market, as retailers and banks, infrastructure and energy (oil and gas). "I'm 14 years on the market and never seen anything like it," said co-president of investment bank JP Morgan in Brazil, Patrícia Moraes. A major difference she sees today in the past is the fact that Brazilian assets are being snapped up by global investment funds, not only by the funds dedicated exclusively to emerging markets. "This is good for the country because these investors are less concerned about the short term."

Jean-Marc Etlin, Executive Vice-President of Itaú BBA, attributes the optimism with Brazil to three factors:

1. The strength of the internal market, which makes the country less susceptible to swings of the still ailing global economy.
2. The fact that Brazil is "a factory of natural resources." "As the developed countries out of the recession, will demand more of these products, which will make prices go up," he said.
3. Investments are expected in the Olympics, World Cup and operation of the pre-salt oil reserves.

This year, with still two months left, Brazil has already recorded a record number of airline trips. Even with the crisis and the falling dollar, domestic travel are expected to grow 10% this year, while the international travel will fall 5%, projections by the Brazilian Association of Travel Agencies (Abav). Data from the Ministry of Tourism show that the number of transported Brazilians this year is a record. From January to August, 35 million travelled within the country, 20% more than the same period of 2008 and the best result in 40 years.

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