Category: Brazil

The Brazilian central bank’s monetary council has passed a new resolution that permits banks of all kinds, as well as mortgage lenders and real estate financiers, to issue bonds with medium and long-term tenors. The so-called letra financeira note has a minimum tenor of 2 years and must be issued in an amount that exceeds BRL300,000. It can carry fixed or floating rate, and issuers can hold the notes they issue in an amount equal to up to 5% of the total sale. The move helps reestablish banks’ ability to raise long-term funding which was taken away in 2008 when the central bank prohibited issuance of debentures by banks’ leasing arms on the grounds it was allowing them to circumvent deposit requirements. With the real estate market heating up in Brazil, and lenders of all kinds gearing up for mortgage finance, long-term bonds will help the institutions lend at long tenors while matching assets and liabilities.

Brazil is better positioned to recover from the economic crisis and experience stronger growth than Mexico in 2010, although the one-notch rating gap between the countries is unlikely to close in the near term, says Fitch. It forecasts a growth rate of 5.5% for Brazil’s GDP in 2010 after an estimated contraction of 0.4% in 2009. By contrast, Fitch predicts Mexico’s GDP will grow 4% in 2010 following a contraction of 6.5% in 2009. The agency expects account deficits to deteriorate in both countries due to the economic recovery, although higher capital inflows should allow both the Brazilian and the Mexican central banks to accumulate additional reserves in 2010 to increase their cushion against potential external shocks. Brazil is likely to do so at a faster pace, thus further increasing the gap between its favorable external credit metrics and those of Mexico.

Brazilian telecom GVT, which was acquired by Vivendi between November and January, says it has received an intercompany credit facility worth up to EUR250m with draw-down maturities of 5-years. The facility pays a meager Euribor plus 35bp, according to GVT, which also notes the benchmark rate stands at 0.92% a year as of February 23. Proceeds are being used to finance GVT’s expansion plan in Brazil and round out its balance sheet. GVT was the subject of a bidding war between Telefonica’s Telesp and Vivendi. The French media company won the target by securing a majority stake through a private negotiation while Telesp’s tender offer for the shares was still outstanding. The original stake purchase by Vivendi valued GVT at BRL7.17bn.

Brazil’s central bank has reverted to some of its pre-crisis bank reserve requirement rules in a broader move to unwind stimulus measures adopted immediately after the beginning of the financial crisis in 2008. The move should drain an estimated BRL71bn of liquidity out of the banking system, according to the central bank. “Despite the large amount, we do not see [these measures] as a replacement for higher interest rates,” says Alexandre Schwartsman, head of Brazil macro research at Santander in a report. “Instead, we believe they represent simply a gradual return to normalcy as the effects of the financial crisis are being overcome.” Goldman Sachs also sees the moves as positive and predicts the bank will begin a 375bp tightening cycle in March, ending in October. Yesterday’s measures by the central bank, which will take effect in March and April, depending on the measure, include upping the deposit requirement to 15.0% from 13.5%; moving the exemption limit back to BRL500,000, from BRL10,000; increasing deductions for small an medium-sized institutions; and reducing portfolio acquisition-related deductions to 45%, from 100%.

Brazilian payments processing network Cielo, formerly VisaNet, has tapped Deutsche to be the depository institution for its new Level 1 ADR listing, which will trade on the OTC in the US. Deutsche won the mandate despite not having any role in the company’s
June 2009 IPO, which was led by Bradesco BBI, Banco do Brasil, Santander, JPMorgan, BTG Pactual and Goldman Sachs. Ricardo Chicizola, a London-based director at Deutsche’s depository receipts group, says his firm has in the past 12 months won 7 ADR appointments, 3 of which, including Cielo, MRV and CPFL, have been launched.

Brazil’s Ferrous Resources is reported to be evaluating a $2.5bn offer made by India’s largest miner National Mining Development Corp. (NMDC) for a 50% stake, according to Indian daily Economic Times. A Ferrous spokeswoman declines to comment and senior officials at Ferrous could not be reached. Nevertheless, NMDC has publicly said that it is seeking opportunities to invest in iron ore, coal, manganese, diamond and gold assets around the world. It says it is seeking to lease, buy properties or form joint ventures.

Brazilian steel and ore specialist CSN says it has not acquired any shares in Cimpor after its public tender for a minimum of 33% and a maximum of 100% of the target’s 672m shares failed to reach the minimum threshold. In a statement posted on the CMVM, NYSE Euronext notes CSN was only able to acquire 8.6% of the company’s shares, well short of the third it sought. On February 12, CSN had revised its original offer by increasing the price per share of its offer to EUR6.18 from EUR5.75 and lowering the minimum target to 33% plus one share from 50% plus a share. With CSN out of the bidding, for the moment at least, Cimpor’s shareholder structure stands as follows, according to the company: Camargo Correa owns 28.6% of the total shares and of the voting rights, having acquired stakes from Teixeira Duarte and Bipadosa; Grupo Votorantim owns 21.2% of the share capital and 30.8% of the voting rights alongside Caixa Geral de Depositos, which separately also owns 9.6% of the share capital; Manuel Fino owns 20.3% of the shares and 10.7% of the capital and 20.3% of the voting rights; Banco Comercial Portugues owns 10.0% of shares and votes, and public investors account for 19.1% of the shares and voting rights. Credit Suisse advised Camargo Correa, Deutsche advised Votorantim and BES advised CSN.

Brazilian development bank BNDES says it recorded a profit of $2.0bn in 2009, a 26.8% increase from the previous year. The bank attributes the increase in returns to growth in its credit operations’ and securities’ portfolios. This was helped by allocation of $57.9m in funds from the national treasury in 2009. BNDES says it disbursed $75.5bn in 2009.

Brazil’s Vale says it has signed a memorandum of understanding with Andrade Gutierrez Participacoes, Neoenergia Investimentos and Votorantim Energia, to form a consortium to participate in the public auction and bidding process of the Belo Monte hydroelectric power plant in the Brazilian state of Para in April. The plant, expected to cost around BRL20bn to build, will generate about 11GW of electricity, according to the local mines and energy ministry. It is expected to be operational in 2015.