Category: Brazil

Sabesp, Brazil’s largest water utility, reported first-quarter net profits of $61 million, up 31 percent year-on-year. Revenue came in at $468 million and Ebitda was $22 million, both up 7 percent. Sabesp operates in São Paulo, Brazil’s wealthiest and most populous state.

State-owned Banco do Brasil posted a net profit of $368 million in the first quarter, up 57% year-on-year. Assets at Brazil’s biggest bank grew 2.8% to $93 billion.

Bradesco, Brazil’s largest private-sector bank, has issued the country’s first ever perpetual bond overseas. The bonds, which carry no maturity date but are callable after five years, raised $250 million. More bond offerings are expected from power generator Cesp, Banco Votorantim, petrochemical firm Braskem and Coimex Trading.

TAP, Portugal’s biggest airline, is in talks to buy a stake in Varig that would help the Brazilian carrier reduce its $2.3 billion of debt. Varig is seeking to stave off liquidation after Brazil’s government, its biggest creditor, refused to bail out the airline. Varig, which defaulted in 2002, is losing domestic market share to competitors such as budget carrier Gol.

Brazil’s Treasury Secretary Joaquim Levy announced that the government wants foreign investors to buy more of the country’s sovereign debt. Foreign participation in the domestic debt market could “quickly” be increased to at least 10 percent through planned cuts in bureaucracy and easing of requirements for foreign purchases, Levy said. Brazil is seeking to broaden demand for its $353 billion domestic debt, which is about four times as large as its dollar debt, and sell bonds with longer maturities.

Brazil’s state-owned oil company Petrobras reported net income of $2.0 billion for the first quarter, up 32 percent year-on-year. The company raised fuel prices and boosted output in the quarter to record levels. This is Petrobras’ fourth straight quarterly gain.

Brazil’s third-biggest private bank Unibanco posted a net profit of $163 million for the first quarter, up from $112 million a year earlier. The bank registered a credit portfolio of $13.5 billion at the end of March, up 22 percent year-on-year. Deposits were $14.2 billion, up 28 percent.

Latin America issuers were very busy this week. Brazil and Uruguay hit the global market and Chilean copper producer Codelco borrowed $210.5 million-equivalent with a local currency bond. Last week, Argentina raised over $300 million with a domestic market bond. What’s going on? Emerging markets and Latin America in particular were meant to suffer a hammering after S&P downgraded GM and Ford to junk status.

The market begs to differ. Latin American bonds – even Ecuador – are trading above America’s carmakers. Indeed, the chance of big issuer like Brazil winning an upgrade looks pretty good while the likelihood of GM or Ford pulling itself off the junk heap don’t look too good.

But don’t get too excited. Debt-addicted Latin America has a long history of punishing optimism. The debt crises of tomorrow are born in the bull markets of today – just remember what people used to say about Argentina ten years ago.

Brazil’s annual inflation rate rose to 8.07 percent in April, its first time above 8 percent in 16 months as medicine costs jumped and a drought in the south of the country drove up grain prices. The monthly inflation rate surged to 0.87 percent in April from 0.61 percent in March. Brazil’s central bank has lifted the benchmark lending rate eight times since September to 19.5 percent.

Brazil sold $500 million of bonds Tuesday priced to yield 8.83 percent, 4.58 percentage points more than US Treasuries of similar maturity. The bonds mature in 2019. Emerging-market bonds have rebounded from their slide in late March as concern has eased that higher rates in the US will crimp demand for debt from emerging markets. Including Tuesday’s sale, Brazil has raised $4.9 billion of the $6 billion it plans to sell in international bond markets this year.