Chile’s central bank opted to keep interest rates unchanged 8.25% Thursday. The decision to keep the TPM at its current rate was widely expected by economists. In a statement accompanying the decision, the central bank indicated it would lower rates in 2009, though it will keep an eye on inflation as it does so.
Yearly Archives: 2008
Posted inDaily Brief
Brazil, Peru to Cut Rates in 2009
Brazil and Peru are expected to start easing rates next year. Credit Suisse believes there is room for a monetary easing cycle in Brazil starting at the next Copom meeting on January 20-21, 2009. Goldman Sachs forecasts six consecutive cuts of 25bp per meeting beginning in January, reducing the Selic to 12.25% by September 2009. The rate should remain unchanged at 12.25% until 2010, says Goldman. On December 10 the rate was kept unchanged at 13.75%. On the same date, Peru also opted to keep rates unchanged at 6.50% for the third straight month. But the country’s central bank should also begin cutting rates in 2009, says analysts. “In our assessment, the [Peruvian] central bank might initiate a monetary easing cycle sometime during the first quarter of 2009, as inflation pressures are starting to alleviate on the back of lower commodity prices and, while still strong, the activity momentum is starting to soften,” says Goldman Sachs.
Posted inDaily Brief
IDB Funnels Funds into Argentine Wineries
The IDB has approved a $50m loan to Argentina’s government so it can help small-scale grape growers boost income and carry out investment plans. The program will be carried out by the Argentine Agriculture Department and Coviar, a public-private corporation that promotes Argentina’s wine and grape industry. The loan, which was approved on December 10 by the IDB’s board, has a 25 year tenor, with a five-year grace period and an adjustable interest rate. Local counterpart funds for the program total $25m.
Posted inDaily Brief
Brazil Telecom Clinches BNDES Funds
GVT Holdings, the Brazilian telecom company, has secured BRL616m in funds from the BNDES. The average annual interest rate of the facility is equivalent to approximately 85% of CDI, or 11.37%, says GVT, which says the calculation is based on present day CDI and TJLP levels. The loan has an 8.5 year term and a grace period of 2.5 years for amortization of the principal with interest payments only, and additional 6 years of principal amortization and interest payments. The final payment is due June 2017. Of the total approved amount, BRL200m is to be disbursed by year-end with the remainder being fed to the company through 2011, according to GVT.
Posted inDaily Brief
Gran Tierra Eyes Argentine, Andean Investments
Oil exploration and production company Gran Tierra Energy says it plans to make capital expenditures of $198m in Colombia, Argentina and Peru in 2009. The company, which has about $140m in cash and no debt, says the investments will be made using cash on hand and cash flow from operations, assuming the price of WTI oil stays above $22 per barrel next year. The company also expects its production to grow to about 20,000 barrels per day in the second half of 2009, up from previous expectations of about 15,000 barrels.
Posted inDaily Brief
Brazil’s Bonsucesso Downgraded
Moody’s has downgraded Brazilian midcap bank Bonsucesso to Ba3 from Ba2. The move follows the agency’s downgrading of Cruzeiro do Sul on Wednesday. The move is driven by the bank’s lack of access to financing which may drive a further shrinking of the bank’s lending operations and in turn its balance sheet. Mid-sized banks have been among the worst hit financial institutions in LatAm in the wake Lehman Brothers’ collapse in September. The outlook for 2009 for the sector remains grim, say Moody’s analysts.
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Peru’s BCP Targets $150m in DPR Bonds
Banco de Credito del Peru is looking to place $150m in notes backed by diversified payment rights (DPR), say people close to the deal. The Series 2008-B bonds, which have received a preliminary A minus rating from Fitch, are being placed by Sumitomo Mitsui. They are a follow up to the bank’s 2008-A series, of which another $150m were issued in July. The bonds will have a floating interest rate and will bring BCP’s total outstanding DPR stock to $1.1bn, according to Fitch. BCP executives declined to comment on the private deal, saying it has not yet closed. The offering is likely to be done through a private placement with banks or vehicles controlled by financial institutions, speculates one structured finance specialist who is not involved in the deal. While MT-100, or DPR sales tend to be private, illiquid deals, they have accounted for a substantial portion of the total bond issuance done in LatAm this year. The structure is reserved for high quality issuers and proceeds can be used for general corporate purposes. In Brazil alone this year, the total issuance of DPR notes has topped $2bn, according to one DPR expert’s calculations.
Posted inDaily Brief
Brazil Sugar Specialist Draws Suitors
Several companies have recently shown interest in acquiring Brazilian sugarcane grower and ethanol producer Nova America, according to two sugar industry experts who asked not to be identified. One of the companies rumored to be interested in Nova America, a subsidiary of Sao Paulo-based holdco Rezende Barbosa, is ETH Bioenergia, a subsidiary of Odebrecht Group. ETH executives did not return calls seeking comment, though the company has said publicly that it is looking at acquisition opportunities. Other potential bidders for Nova America, which reported total assets of BRL1.7bn in its most recent quarter, could include large non-Brazilian oil and biofuel companies, says one Brazil-based executive who in the sector. The ethanol and biofuels industry has seen substantial consolidation this year. This month, Monsanto completed its purchase of sugarcane biotech company Aly Participacoes, the parent of CanaVialis and Alellyx, for $287m. More acquisition opportunities exist in Brazil, especially as smaller companies continue face difficulties in obtaining financing, say the executives.
Posted inDaily Brief
Citi’s Boord Returns to Region
Veteran investment banker John Boord is returning to Citi’s LatAm unit where he will co-head regional investment banking starting January, Manuel Medina-Mora, chairman and CEO Citigroup Latin America and Mexico tells LatinFinance. The Venezuelan national will run LatAm investment banking ex-Brazil and be based in Mexico. Boord, a former head of Mexican and regional investment banking at the firm, replaces Carlos Vara who left Citi in early December. Boord is currently in Citi’s New York-based US consumer and retail investment banking group. He wanted to return to the region, Medina Mora adds. The investment banking business that Vara helped run covers advisory, M&A and equity. Ricardo Lacerda, Vara’s former co-head based in Sao Paulo, will continue to lead Citi’s Brazil investment banking efforts. Separately, former LatAm DCM co-head John Hartzell left the firm in a pre-Thanksgiving round of redundancies. Hartzell departed the DCM group in early 2007 to head LatAm trading and was latterly involved in finding derivatives solutions for corporate clients.
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Citi Rules Out More LatAm Cuts
Citi does not plan to exit any LatAm banking businesses and has completed is headcount reduction, according to the bank’s regional head. “The Latin America network has been performing very well, it’s a very solid network and we consider it to be key to our future success,” Manuel Medina-Mora, chairman and CEO Citigroup Latin America and Mexico tells LatinFinance. “Those are key parts of our strategy,” adds the banker, referring to Citi’s LatAm units and the aim of being a global universal bank with global access and capabilities. According to Medina-Mora, LatAm will produce 20%-25% of global Citi revenue this year, up from around 15%-16% in a typical 12 months, using just 6%-7% of total assets. Asia produces similar net income, the banker adds. Since Citi ran into significant subprime problems that led to its bailout by the US government, there has been persistent speculation about a sale of Citi’s operations in Brazil, Central America and Mexico. But the bank’s regional head, who oversaw the integration of Banamex into the global institution, rejects this. Medina-Mora adds that no further staff reductions are likely. “We’ve been doing that throughout this year, but we are basically done,” says Medina-Mora. “What I would anticipate is just some small divestments of business that are not necessarily linked to banking,” he adds. Medina-Mora refers to the sale of a small pension fund firm in Uruguay and a similar divestment in Peru. “Those are the types of things that you will see but the reduction of headcount in the region was a natural one, a significant part already happened with the integration of three units in Central America,” says Medina-Mora.