Category: Brazil

Latin American countries were the top issuers of local currency debt in the third quarter of 2005, thanks mainly to Brazil. The Bank for International Settlements (BIS), which publishes the figures of local currency issues in international markets, noted that Brazil’s real-denominated offering in September, worth $1.5 billion, accounted for most of the region’s total local-currency international issuance of $2 billion.

Brazil has carried out its seventh currency swap contracts auction since November in a continuing bid to get rid of excess dollars in the market. The central bank sold 11,300 currency swap contracts, worth $541.2 million, maturing between 2006 and January 2008. Brazil has sold just over $3 billion of currency swap contracts since 18 November when it resumed selling the instruments after an eight-month break. Despite the announcement of the sale yesterday, Monday, the real continued to strengthen against the US dollar, driven by increased investment and trade flows.

Brazil’s President Luiz Inácio Lula da Silva has tried to allay investors’ fears of a government spending spree ahead of next year’s elections by saying that the government will continue to follow current economic policies. Lula was upbeat about future economic growth despite a slightly gloomier picture seen recently. The government and the president’s popularity rating are at an all-time low following months of political scandal and investigations into bribes-for-votes allegations. Last week Lula lost one of his allies – Jose Dirceu, his former Cabinet chief – who was voted out of Congress despite any conclusive evidence of corruption links.

Brazil’s trade surplus was up $4.1 billion in November from $3.7 billion driven by an increase in exports of 9% and a slower import rise of 8%. This was the first increase in both exports and the trade surplus in three months.

Brazilian Safra Leasing, part of local Banco Safra, has completed the country’s largest single debenture offering to date, issuing 5 billion reais ($2.26 billion) of long-term unsecured non-convertible bonds. The bonds, which mature in July 2015, carry an annual interest rate linked to the local interbank rate. The issue was coordinated by Banco Safra de Investimentos SA.

Brazil’s economy has slowed for the first time in two years, contracting 1.2% in the third quarter compared with the second. Year on year, GDP grew by 1% in the third quarter compared with 4% y-o-y growth in the second quarter. Analysts think the slowing economic expansion may prompt larger interest rate cuts by the central bank. Brazil’s benchmark interest rate has been cut three times since September but remains at a high 18.5%.

Brazilian Unibanco Leasing has offered indexed notes maturing in 2020 worth $913 million (R2 billion). The long-term unsecured debt will pay an annual rate linked to the local interbank lending rate. The deal is being coordinated by Unibanco, Brazil’s third-largest private banking group.

Brazil sold nearly all its currency swaps contracts in the latest of several such auctions this month. The central bank yesterday, Wednesday, sold 11,900 out of 12,400 reverse dollar currency swap contracts worth around $576 million. The contracts, which are linked to local interest rates allow investors to access Brazil’s high rates without having to buy local currency.

Brazil sold $500 million of its 2034 global bonds yesterday, Tuesday, to take advantage of record prices. The bonds will yield 8.311%. The sovereign last issued the bonds in May 2004 to yield 8.81% when it sold $500 million. It had originally offered $1.5 billion of the 30-year bond in January 2004 at 8.75%. The sale was managed by Merrill Lynch & Co and Barclays.

Brazil’s Companhia Vale do Rio Doce (CVRD), the world’s largest iron-ore producer, has paid $749 million in cash for a 93% stake in nickel company Canico. CVRD originally made an offer to buy the Canadian company in September at C$17.50 but later increased its offer to C$20.80 after the bid was rejected by Canico’s board.