Positive news about Brazil’s economy is hard to find these days. In fact the bad news is piling up. A recent report by the Financial Times of London, quoting Brazil Central bank figures, suggests the country has entered technical recession more than 7 months ago by shrinking slightly for two consecutive quarters in 2013. So how serious should you take these reports and what can you do to protect your business in Brazil? Read our editor’s column at Rotterdam Week.
Brazil might be heading for a recession, according to the emerging markets Americas research team at Nomura Securities in New York. Tony Volpon, a managing director at Nomura, said in a note Thursday that thanks to increasing interest rates in 2013, the economic growth in the first half of 2014 should disappoint Brazilian investors. He lowered his GDP forecast target to 1.3% from 1.5% and expects the Central Bank to stop the hiking cycle this month, pushing interest rates to 10.75% (Forbes).
Brazil has promised to cut $18.5bn in public spending, as a former star of emerging markets struggles to win back investors’ trust. After cancelling his trip to the Group of 20 meeting in Australia this weekend, in order to finalise the country’s fiscal policy, Guido Mantega, Brazil’s finance minister, announced a new primary surplus goal of 1.9 per cent (Financial Times).
Private equity and venture capital groups have slashed fundraising for Brazil by more than 70 per cent over the past two years as the country’s gloomier economic outlook drives away larger companies such as London-based 3i. About $2.3bn was raised last year to invest in Brazil, down from $3.6bn in 2012 and $8.1bn in 2011, according to the Latin American Private Equity and Venture Capital Association (Lavca) (Financial Times).
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Not everyone has been put off by the Eike Batista’s corporate failure, The Economist reports. This week, as OGX filed its recovery plan with a court in Rio de Janeiro, Cerberus, an American private-equity firm, was reported to be sizing up Mr Batista’s shipbuilder, OSX. It is said to be ready to give a large cash injection to the operation, currently in bankruptcy protection.
Telecoms company Grupo Oi SA plans to raise about 14 billion reais ($5.9 billion) in a share offering. The capital raising will be part of Oi’s merger process with Portugal Telecom, which will subscribe at least 7 billion reais in Oi shares in the operation, Reuters reported.
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The BNDES and Finep – Innovation and Research – are launching a public call-to-submission for business plans aimed at agricultural-technological innovation in the sugar-based ethanol sector (PAISS Agriculture). Together, the two institutions will allocate R$ 1.48 billion for the 2014-2018 period. The budget will allocate R$ 1.4 billion in reimbursable financing, which includes all the credit lines offered by the BNDES and Finep, as well as the variable-income instruments of both institutions (BNDES).
Air France-KLM SA will invest $100 million in Brazilian airline Gol Linhas Aereas Inteligentes SA. Both companies expect to obtain regulatory approval within the next three months, in time for the start of the World Cup in June. The transaction, which involves an exclusivity agreement for Gol and Air France-KLM in European and Brazilian markets, will allow both companies to increase their reach to up to 318 destinations and more than 115 countries (Reuters).
International airlines are worried the Brazilian government may hit them with a flurry of fines during the World Cup over delayed flights and lost bags at already overcrowded airports, the head of a global airline association said. Less than four months before kickoff, Brazil’s busiest airport, in Sao Paulo, is still racing to finish a new terminal and other airports are preparing temporary tents to receive the influx of passengers (Reuters).
BANKING & FINANCE
Wealthy Brazilians are increasing their holdings outside the country as the real weakens, with Consenso Investimentos’s clients almost doubling international purchases in the past year, the investment firm said. Families with assets managed by the Sao Paulo-based company boosted assets abroad to 26 percent of their total from 14 percent at the start of 2013, according to Luiz Alberto Hess Borges, a founding partner at Consenso. The firm, which manages about 11.6 billion reais ($4.8 billion), is the biggest multifamily office owned entirely by Brazilians (Bloomberg).
Grupo BTG Pactual SA , Latin America’s largest independent investment bank, posted fourth-quarter net income that missed analyst estimates in a Reuters poll. The São Paulo-based bank, controlled by billionaire financier André Esteves, earned 768 million reais ($320 million) in the quarter, compared with 746 million reais in the third quarter, according to a securities filing. A Reuters poll of three analysts expected profit at 792 million reais.
The Brazilian Development Bank (BNDES) approved a R$ 1.8 billion bridge loan for the project to implement the Port of Açu, controlled by the company Prumo, of the EIG Group. The US group took control of the Port of Açu during the restructuring process of the EBX Group. The bridge loan is for a set of investments that will allow port works to continue in the municipality of São João da Barra, in Rio de Janeiro.
OIL & GAS
Petrobras has announced that well 9-SPS-77, in the Santos Basin pre-salt Sapinhoá Field, came on-stream last Tuesday, February 18th, 2014 at 5:15 pm. The well, producing 33,000 barrels per day (bpd), is connected to FPSO Cidade de São Paulo by a pioneering system in which the output pipeline riser is supported by a submerged buoy, anchored to the seabed and located at a depth of 240 meters. The well is at a water depth of 2,118 meters.
IHC Merwede has launched the pipelaying vessel Sapura Topázio in a ceremony at the company’s shipyard near Rotterdam. is the second in a series of five fully integrated offshore vessels, which will be completely designed, engineered and built by IHC Merwede. After delivery, the Sapura Topázio is – like her sister vessel, the Sapura Diamante – destined to go to Brazilian waters to develop deep-sea oilfields of up to 2,500 metres on behalf of Petrobras.