increased global integration has lead to cross-border investment, say brazilian financial heads
Cross-border integration leading to investment – especially in the real estate market – was one of the topics for discussion at the 1st Annual Brazil Conference, held in Dubai International Financial Centre today.
FDI flows into Brazil are on the rise again after a plunge in the mid-1990s, while Brazilian direct investment abroad has rocketed in the last couple of years. The figures were presented by Itau Securities, part of Banco Itau, which is Brazil’s largest bank by market cap.
“After the disastrous 1980s, productivity in Brazil is rising again as macro stability takes root,” said Guilherme da Nobrega, chief economist of Itau Securities. “Investment is back after a long period of macro crisis, volatility and low growth.”
With real GDP growth tipped to hit 5.5 per cent by the end of 2008, investment levels are predicted to remain some way above GDP growth levels, and registering steady but significant increases.
Brazil’s well-developed political-institutional environment promotes high social mobility and an “upgrade economy” according to da Nobrega. “Brazil has joined the top tier in the human development index, in line with Russia. Since democratisation, policy has moved towards the poor and low inflation is a popular political objective.”
Joining the debate was Ted Helms, global head of investor relations for the oil company Petrobras. Just over two months ago, the company announced its discovery of between 5 billion and 8 billion barrels of light oil and gas at its Tupi field, making it the largest oil find in the world since 2000.
Petrobras will continue to expand its operations in the ethanol business as well as spearheading the production of biodiesel to meet the demans of the Brazilian market. The country is predominantly powered by water-generated energy, with 83 per cent coming from renewable energy sources.
Brazil’s natural commodities have also seen the country become a global supplier, with 41 per cent share of the global oil-related commodity trade, and 21 per cent of metals.
Thomas Decoene, President of Itau Securities, said: “Inflation in Brazil continues its downward trend which started in the early 1990s. In 2007 it was 4.5 per cent and should remain at that level for 2008. This low rate of inflation has generated stability and attracted foreign capital.
“Brazil’s IPO market in 2007 represented 11 per cent of the world’s IPO market. Spending power has increased, and attractive interest rates (11.25 per cent in 2007) create sizeable returns on invested capital.”
He continued: “The Gulf has not had the same exposure to investment opportunities as other global centres, and Brazilian securities represent fresh investment potential for investors.
“The country’s growth potential and favourable economic conditions have stimulated foreign direct investment, to the extent that it is one of the largest single markets for attracting FDI in the world, with 2 per cent of the total global allocation.”
The conference presented a full economic picture of investing in Brazilian securities, and featured presentations from senior global executives from publicly held companies including:
• Petrobras, the Brazilian oil company headquartered in Brazil, and one of Fortune’s Global 500 companies. (Bovespa: PETR3/PETR4, NYSE: PBR/PBRA, Latibex: XPBR/XPBRA, BCBA: APBR/APBRA)
• BR Malls, the retail property company headquartered in Rio de Janeiro and owner / manager of shopping malls across Brazil. BR Malls completed its IPO on the Sao Paulo stock exchange (BOVESPA) in April 2007 (BZ: BRML3).
• Gafisa, the leading homebuilding company headquartered in Sao Paolo, with more than 800 developments in its portfolio. The Company completed its initial public offering on BOVESPA in February 2006 (BZ: GFSA3) and its fully-registered listing on the New York Stock Exchange in March 2007 (NYSE:GFA).
Alongside these speakers, there were also presentations from the chief economist and strategist of Itau Securities Brazil.
