Category: Brazil

Banco do Brasil, Brazil’s largest bank, has sold $500 million of perpetual bonds in the international markets at a record low interest rate of 7.95%, reflecting the continuing strong investor demand for Brazilian paper. The offering, which was increased from the original $300 million, was reportedly more than four times oversubscribed. The sale was managed by Citigroup.

Argentina is also looking to its energy demands. The state-owned energy company Enarsa has signed agreements with Repsol YPF of Spain, Brazil’s Petrobras and Petrouruguay (part of ANCAP) to explore hydrocarbons in offshore Argentina. The 10-year agreement sees the foreign companies investing up to $100 million with no financial risk to Enarsa in the event that no discoveries are made. Enarsa was set up in 2004 by President Néstor Kirchner to ensure a supply of gas and electricity at affordable prices for the domestic market.

Argentina’s new economy minister, Felica Miceli, is to make her first trip abroad when she visits Brazil next week together with President Néstor Kirchner. Miceli is scheduled to meet Brazil’s development minister, Luiz Furlan, to discuss the issue of tariffs on Brazilian imports to protect Argentinian manufacturing and on agreeing a possible common automotive policy between the two countries.

Brazil’s state-owned oil company Petrobras says it will invest $18 billion over the next 10 years to explore and expand domestic natural gas production, in particular in the offshore Santos Basin. The plans are in line with government efforts to meet growing energy demands and cut reliance on imported natural gas. Brazil’s largest current supplier is neighboring Bolivia, which provides around half of the country’s daily demands. Meanwhile, Petrobras has signed an agreement with iron-ore producer Cia. Vale do Rio Doce (CVRD) to look at the feasibility of natural gas exploration and electricity production in Mozambique.

Brazil has returned to the international capital markets with a $1 billion dollar-denominated issue, to take advantage of lower borrowing costs. The bonds, which mature in 2037, were priced at 295 basis points above comparable US treasuries, yielding 7.557%. Brazil’s last offering of global bonds was at the end of November when it sold $500 million in bonds due 2034. Those bonds were priced at 362.5 bp over comparable US treasuries with a yield of 8.311%. The sale is being co-managed by Deutsche Bank and UBS.

Brazil’s industrial production rose by only 0.6% in November, compared with October, less than the average 1–2% expected by economists. This may lead to a greater interest rate cut next week to boost economic growth. The most recent cut in the middle of last December saw the first lack of unanimity when two members of the central bank’s monetary policy committee (Copom) voted to cut the rate by 0.75% instead of 0.5%.

Brazil’s state-owned oil company Petrobras has had another stellar year of production, processing an average of 1.758 billion barrels per day (bbpd) of oil in 2005. This is the second year in a row the company has reached record production levels; in 2004 average output reached 1.728 bbpd.

The world’s largest iron-ore producer, Brazilian Cia. Vale do Rio Doce (CVRD), has made Brazil’s largest corporate foreign currency offering with its $1 billion bond sale. The bonds were issued to help fund a buyback of up to $300 million of its 9% 2013 bonds which will cut the company’s borrowing costs. The record international bond sale, led by JP Morgan, mature on 16 January 2016 and were sold to yield 6.254%. CVRD’s debt has an investment-grade rating.

The Brazilian government’s statistics agency forecasts a 13.2% rise in grain and oilseed production to 127.6 million tons in 2006. Brazil is the world’s second-largest soybean exporter. Soybean production should rise 15.8% to 59.2 million tons this year despite a 6.1% drop in acreage. Corn production is set to rise 27% to 34.6 million tons. Cotton could about 25% to 2.8 million tons. Brazil’s total agricultural production fell 5.2% to 112.7 million tons in 2005.

An assembly of 150 employees of bankrupt Brazilian airline Varig voted 96% in favor of a recovery plan put forward by the Ruben Berta Foundation that controls the carrier. The assembly rejected a $112 million takeover plan by Brazilian tycoon Nelson Tanure but approved the sale of Varig’s logistics and maintenance divisions to TAP of Portugal.