Investment banks in Brazil are downsizing fast as boom turns to bust, and up to half the workforce is at risk. Fees are evaporating and exits are possible.
Yearly Archives: 2008
Posted inMagazine
A Bridge Too Far?
Hefty government spending guarantees a solid pipeline
of infrastructure deals despite financial crisis and economic slump. Financing lags, but Banobras hopes to pick up slack.
Posted inMagazine
Last Nail in Coffin
Nationalization of the country’s private pension funds is the final nail in the coffin of Argentine capital markets. And efforts to normalize external creditor relations are stalled.
Posted inMagazine
Consolidation Calling
Brazil’s larger telecom players will have continued opportunity to acquire smaller assets, says Luiz Eduardo Falco, CEO of Telemar, also known as Oi. In mid-November, the company neared approval for its 13 billion reais purchase of Brasil Telecom.
Posted inDaily Brief
Kirchner Targets Foreign Funds
Argentina president Cristina Kirchner has announced a number of measures she hopes will improve the country’s ailing economy. Among ideas being included in a bill to be sent to congress today is the repatriation of funds held abroad, which an Argentine economist – who asked not to be identified – says amount to around $150bn. Kirchner has said that funds declared but not brought back to Argentina will pay an 8% tax. Funds that are declared and brought back will pay a 6% tax and funds that are brought back and invested in local debt will pay a 3% tax. “It’s very strange, it’s a puzzling proposition,” says a Wall Street analyst covering the credit. Also, infrastructure, real estate, agricultural or industrial investments made with repatriated funds will be taxed 1%. Other measures announced include payroll tax reductions for businesses employing 10 people or fewer, and the creation of a ministry of production, which according to media reports will be headed by Debora Giorgi, who leads ministry of production of Buenos Aires province. “The measures announced by the president are likely to be largely ineffective to attract any significant amounts of investment or mitigate the effects of the global financial crisis on the local economy,” says Goldman Sachs. It adds that local and foreign investors remain concerned about macro stability, respect for property rights and the rule of law. “Instead of providing tax incentives, we believe the government should focus on strengthening all the latter to successfully attract meaningful amounts of investment by either local or foreign investors into the country,” says the shop.
Posted inDaily Brief
Chavez Expected to Devalue Bolivar
After having lost a few key regions in the recent sub-national level, and facing the effects of low oil prices on government revenue, Chavez is expected to focus on managing Venezuela’s economy. Alejandro Grisanti, LatAm research director at Barclays believes he will be forced to devalue the bolivar at the beginning of 2009 to balance the country’s fiscal accounts. HSBC estimates that the Bolivar is some 40% overvalued and expects a managed devaluation to a level close to VEB3.00 from a current VEB2.15/USD.
Posted inDaily Brief
JPMorgan Positive on CentAm
The economies of Costa Rica, Guatemala and Panama are keeping the effects of the global slowdown at bay, JPMorgan believes. Costa Rica’s year-to-date surplus stands at 0.8% of estimated GDP and although the Arias administration is warning that by the end of the year there will be a budget deficit equal to 0.5% of GDP, JPMorgan says risks are skewed toward fiscal outperformance. Guatemala’s accumulation of international reserves, which total $4.7bn or 10% of GDP, combined with its low external public debt, equal to 9.1% of estimated GDP, render the country well suited to face the effects of the global financial crisis. Panama’s growth, meanwhile, is expected to be supported by public works on the Canal and other infrastructure projects, keeping GDP growth at 8.5% in 2008 compared to 11.5% in 2007.
Posted inDaily Brief
Credit Draw Cramps AMX Liquidity
America Movil’s full draw on $2bn in bank credit facilities in Q3 and decision to use cash to repurchase MXP17.4bn in shares have weekend its liquidity position, says Moody’s, which cut the outlook on its A3 rating to stable from positive. The move will make it more challenging for the Mexican mobile phone operator to cover its MXP20bn commercial paper programs, of which it now has MXP6.5bn outstanding. Moody’s also revised expectations regarding America Movil’s “ability to increase margins and improve credit metrics in 2009, due to the likely impact of a more adverse economic environment on its pre-paid subscriber base,” it says.
Posted inDaily Brief
Moody’s Detects AmBev Strains
Moody’s has cut its outlook for AmBev to stable from positive, reflecting increased pressure on margins, increased dividend payments and lower free cash flow, and an environment of restricted or more expensive financing. AmBev’s cash flow from operations minus capex amounts to BRL4.5bn on an last-12-months basis, which, when combined with cash and cash equivalents of BRL2bn, would be sufficient to cover AmBev’s current portion of long term debt of BRL2.43bn and could also cover other short term debt maturities of BRL1.61bn, which are composed of revolving credit lines that are normally renewed. However, AmBev has historically maintained a high level of payout to investors, which amounted to BRL4.6bn – including share buybacks and dividends – for the 12 months ending September 30, Moody’s says. The agency also affirms the Baa3 foreign currency issuer rating.
Posted inDaily Brief
Fitch Sees High JBS Leverage
Fitch has assigned a B+ to Brazilian beef producer JBS, it says. The agency based its ratings on JBS’ strong competitive position and high liquidity, but also cyclical risks, high leverage and aggressive growth strategy. Fitch expects the credit ratings to strengthen as it begins to consolidate the acquisitions of Tasman and Smithfield beef made earlier this year. The outlook is stable. Moody’s rates JBS an equivalent B1, and Standard & Poor’s B+.