Category: Daily Brief

Brazilian hedge fund Mauá Investimentos, has hired Mauro Cunha from Franklin Templeton Asset Management’s Brazil office, to head the fund’s equities team. Cunha will start at Mauá on July 10 as William Trosman, former head of equities at Mauá, takes on a new role developing new businesses for the fund. Earlier this year Lourenço Bastos-Tigre, left Mauá’s fixed income team to join Greenwich-based Tudor Group. He was replaced by Fernando Monteiro who came from Quest Investimentos, another prominent Brazilian hedge fund.

Brazil’s Perdigão, a pork and poultry processor, has acquired three of Unilever’s margarine brands in Brazil – Doriana, Delicata and Claybon for BRL77m ($39.47m). A Bradesco BBI report noted the acquisition fits in with the company’s strategy to diversify out of its meats business, though immediate upside for the stock will be limited. The company negotiated the deal directly with Unilever, without the help of banks. This year, Perdigão has also acquired Unifrig, a beef producer in Brazil, for BRL100m, and Plus Foods, a Dutch food processor, for €30m.

Brazil’s development bank BNDES is preparing to issue BRL1bn in local currency bonds through its financing unit BNDES Participações. The debentures will be issued in two classes maturing in 2011 and 2013. Timing and price talk are yet to be determined. While the proceeds are being used to fund the bank’s lending operations, the main purpose of the sale is to stimulate trading activity in Brazil’s secondary corporate bond market. BNDESPar tapped the market with a similar transaction in December, selling BRL600m in 2012 inflation-linked bonds that pay 8.525% over the IPCA. That sale was managed by Banco do Brasil and Bradesco BBI, both of which took on active market-making and trading roles. The forthcoming sale of BRL1bn is being led by UBS Pactual, and other banks are expected to join.

Economists believe Brazil should push for a 50bp reduction in the 2009 inflation target to 4.00%, from the current 4.50%, the target for 2005, 2006, 2007 and 2008. But recent comments from President Lula and Finance Minister Guido Mantega suggest the National Monetary Council, which meets this Wednesday, may opt to keep the target at 4.5%, despite what analysts are calling an opportunity to reduce the market’s future expectations for inflation, which today are already at 4.0% for 2008. Citing excessive sacrifices and the potential to make the central bank nervous, Mantega suggested last week that he prefers maintaining the target at the current level. And speaking to local paper Valor last week, Lula also said a reduction to 4.0% would cause sacrifices for the country. Mailson da Nóbrega, head of consultancy Tendências in São Paulo says “President Lula used the wrong argument,” adding a lower target would result in gains in credibility, lower sovereign risk and higher growth. A Citi report points out that a lower target could lead to lower nominal interest rates in the medium term. And according to a Goldman report, “Not reducing the target [would result in larger] costs for society in the form of an upward increase in inflation expectations. To put it differently, this was a rare opportunity [in which] the government had an almost free lunch, but decided to throw it away.”