Category: Brazil

Brazilian mining giant Vale is denying rumors that it is in talks to acquire Freeport-McMoRan, the US copper and gold giant. Vale spokesman Fernando Thompson describes as baseless market chatter that Vale is looking to acquire Freeport, or that it was in talks with any other companies about acquisitions. NYSE-listed shares of Freeport traded as up as much as 8.35% Friday – apparently because of the M&A rumors – but ended the session up just 3.79% as Vale poured cold water on the talk. Thompson meanwhile reiterates that Vale is in talks to acquire assets belonging to Brazil’s Paranapanema. Vale preferred shares closed down 0.34% Friday at BRL40.16.

Brazilian developer Rossi Residencial has formed a partnership with Amazon region-based builder Construtora Capital. The two will develop a portfolio of projects in Brazil’s north expected to reach about BRL1bn in value. Rossi will structure the project financing and Construtora Capital will be responsible for construction and management. Rossi signed a 1-year BRL200m loan with Bradesco in March, following cancellation of an IPO in February. As the market matures, Brazilian developers are turning to partnerships with regionally based builders to expand into new areas with economies of scale. Last moth Cyrela announced a similar partnership with Redil and Construtora Lider, through which it plans to launch more than BRL1bn in projects in 2008-2009.

Moody’s has cut the outlook to stable from positive on Brazilian pork and poultry processor Sadia’s Ba2 local currency corporate family and senior unsecured foreign currency ratings. The actions affect $250m in guaranteed senior unsecured notes due 2017 issued by Sadia Overseas with an unconditional and irrevocable guarantee from Sadia, says the agency. The change in outlook was prompted by a sharp rise in soy and corn prices, the main raw material input for poultry and pork production. Moody’s also worries about Sadia’s capital intensive growth plans for the next few years, which are likely to pressure the company’s operating margins and free cashflow, the agency says. In June, S&P upgraded Sadia to BB+ from BB.

The IMF is slightly raising its projections for Brazilian and Mexican growth, despite a downbeat overall assessment of the global economy released this week. Brazil will expand by 4.9% and 4.0% this year and next, a 0.1% and 0.3% revision higher, respectively, versus April forecasts. Mexico is set to see GDP growth of 2.4% this year and next, up 0.4% and 0.1%, respectively versus earlier projections. Global growth is meanwhile projected to moderate from 5.0% in 2007 to 4.1% in 2008 and 3.9% in 2009. And EM expansion is forecast to ease to around 7% in 2008-09, from 8% in 2007. In China, growth is now projected to moderate from nearly 12% in 2007 to around 10% in 2008-09. “The global economy is in a tough spot, caught between sharply slowing demand in many advanced economies and rising inflation everywhere, notably in emerging and developing economies,” says the fund in a World Economic Outlook update.

Swiss financial services group Zurich announced today that its Brazilian subsidiary Zurich Participacoes has signed an agreement to acquire common shares representing 87.35% in Companhia de Seguros Minas Brasil from Banco Mercantil do Brasil and two private investors, and the 100% of Minas Brasil Seguradora Vida e Previdencia from Banco Mercantil. The purchase price for both companies amount to BRL286.9m, the Swiss company says. The transaction is subject to regulatory approval and expected to close by Q4 2008, Zurich adds.

Recent testimony from Brazilian central bank head Meirelles about inflation raises the pressure on rate hikes, according to analysts. “Governor Meirelles’ statement was hawkish,” says Goldman Sachs. “We reiterate with a high degree of confidence that Governor Meirelles telling the markets that COPOM is ready to raise the pace of monetary tightening to 75bp per meeting beginning at the next meeting scheduled for July 23,” it adds. Goldman predicts the Brazilian benchmark rate will hit 15.00% by year-end, ending the tightening cycle with a 50bp rise in January 2009 to 15.50%. Easing is then forecast for Q4 2009, with a 12.50% rate forecast by May 2010, says the shop.

Brazil’s Parana Banco is selling $50m in 2011 bonds, half of the originally planned $100m, says an executive close to the company. The deal is on a roadshow, and expected to price at the end of the month, says an official. Dresdner and Queluz Securities are running the B+ transaction. Last week, fellow mid-size Brazilian Bank Cruzeiro do Sul pulled a 2011 bond issue of around $100m due to market conditions.

Sao Paulo state water utility Sabesp has approved a program to issue up to BRL3bn in local bonds. The first issue will for be up to BRL500m, though Sabesp does not provide specific details. HSBC will manage the transaction, with Citi, Banco do Brasil and Caixa Economica Federal as co-managers.

Brazilian conglomerate Lupatech has signed memorandum of understanding to acquire 100% of Brazilian industrial valve manufacturer Tecval for approximately BRL61.7m. The combined valve production of Tecval and Lupatech will represent 70% of the total Brazilian market, the company claims. Management at Tecval estimates for the fiscal year of 2008 Ebitda of BRL18m, says Lupatech.

Citi has chopped its forecasts for Brazil and Mexico equity indices, but still names the latter as its top LatAm stock pick for the second half. The shop forecasts a solid H2 in Mexico assuming that the US economy does not deteriorate materially from current forecasts, the next rate hike in Mexico to 8% should signal the peak of the cycle and the fact that after an 18% market fall, valuations are back down to long-term averages. “We would play this expected rally through homebuilders (we raise consumer discretionary to overweight) and retail,” says Citi, which also has an overweight in Telecoms. The shop meanwhile has consumer staples at underweight, along with financials, and cut industrials to neutral, while raising materials to neutral. Its focus list names are Homex, Walmex, Comerci, Cemex, ICA and Asur. Nonetheless, Citi cut its Bolsa year-end target to 32,000 from 35,000, versus 27,435 Tuesday. It also reduced its Bovespa target to 66,000 from 74,000, versus 61,000 Tuesday, tipping the following sectors in that market: materials, utilities and consumer staples. Citi meanwhile has Colombia at neutral. “In Latin America, growth remains resilient, albeit with downside risk in some countries, while corporate earnings growth is strong. Rising inflation poses a policy challenge that most countries are meeting. Moreover, recent market declines have effectively erased the region’s valuation premium,” says Citi.