Category: Brazil

India’s state-owned Oil and Natural Gas Corporation Ltd (ONGC) has agreed to buy the 30% stake that ExxonMobil Corp holds in a block of Brazil’s Campos Basin off the coast of Espirito Santo for $1.4 billion. The block is expected to yield 400 million barrels of oil. This is the largest foreign purchase by the Indian oil company after investing in Russia’s Sakhalin-I field.

The world’s largest iron-ore producer, Brazilian Cia. Vale do Rio Doce, is using some of its excess cash to buy up the remaining shares of local mineral and metals company Caemi Mineração e Metalurgia SA in a stock trade worth around 3.3 billion reais ($1.46 billion). CVRD already owns around 60% of Caemi’s capital.

Brazil’s central bank has moved to cut interest rates by three-quarters of a percentage point to 17.25%, the lowest point in just over a year. This is a bolder cut than has been seen in over two years, but one that was widely expected by economists. Growth in Latin America’s largest economy has slowed in recent months and the kick start to boost economic activity has yet to be seen. GDP growth for 2005 has been estimated at only 2.2%, well behind the 4.9% expansion witnessed in 2004.

Mexico’s second-largest brewer and the world’s second-largest coca-cola bottler, Femsa, is to buy 68% of Brazil’s Cervejarias Kaiser from Molson Coors of the US in a deal worth $68 million. Femsa will also assume $60 million of Kaiser’s debt. Molson Coors, together with Dutch beermaker Heineken bought the São Paulo-based Kaiser brewer three years ago for $765 million and will retain a 15% stake in Kaiser; Heineken is keeping its entire 17% holding in the Brazilian company.

Brazil’s Empresa Brasileira de Aeronautica SA (Embraer), the world’s fourth-largest aircraft manufacturer, is planning to reorganize its capital structure. Board approval is being sought to convert its stock – which accounts for two-thirds of the company’s capital — to voting shares. The capital reorganization would allow larger investors to reduce their equity holdings in Embraer by increasing trading of the company’s shares. If the board approves the plan, it will be submitted for shareholder approval.

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.