Category: Brazil

Private power producers failed to take up the Brazilian government’s offer of energy licenses to build new power plants, with state-owned Centrais Eletricas Brasileiras SA winning four of the seven being auctioned. Private investors cited the low level of prices offered by the government for the electricity from the new plants as the main obstacle. Brazil needs to invest heavily in power to avoid shortages in the coming years.

Brazilian internet access provider Universo Online (UOL) is planning to raise around $200 million equivalent via its first public share offering today, Friday. The IPO via Bovespa will offer about 20% of the company’s shares. UOL is owned by local media group Folhapar and Portugal Telecom.

US retailer Walmart has agreed a deal to buy Portuguese Sonae’s Brazilian retail business for $757 million. The purchase, involving 140 stores, will double Walmart’s presence in Brazil. Walmart is currently the country’s third-largest retailer but is engaged in fierce competition with French retailer Carrefour for market share in Brazil.

Brazil’s central bank has cut the benchmark lending rate by half a percentage point to 18%, its lowest rate in nearly a year. This follows slower than expected economic growth of 1% in the third quarter and a lower inflationary environment. Annual inflation in November fell to 5.31%.

Brazil has announced it will settle its $15.5 billion debt with the International Monetary Fund (IMF) before the end of this year – two years ahead of schedule. The government said the move will save Brazil around $900 million of interest payments. Brazil had been due to repay $7.03 billion of its debt next year and $8.43 billion in 2007. The sovereign borrowed heavily from the IMF following the devaluation of its currency in 1999. Strong economic fundamentals and trade and current account surpluses have allowed the government to make the move.

Brazil’s currency, the real, continued to fall from its four-and-a-half year high as the central bank sold more currency swap contracts yesterday, Monday, and announced it may intervene directly to buy dollars to build up its international reserves. The real fell 0.6% Monday to 2.266 against the US dollar following the central bank announcement. The central bank sold 7,600 currency swap contracts worth $365.3 million of dollar-linked debt.

Brazil’s central bank continued with its series of currency swap contract auctions to absorb excess dollars from the market. On Friday, in its eleventh auction since resuming the activity in November, the bank sold 8,600 currency swap contacts linked to short-term interest rates. The contracts cancel out around $411 million of debt instruments indexed to the dollar. The dollar-linked notes were originally sold to prevent the real from weakening.

Brazil’s inflation in November slowed to 0.55% compared with 0.75% in October. Annual inflation totalled 5.31% to November and is forecast to reach 5.67% by the end of the year. Analysts expect the central bank to make a half a percentage point interest rate cut on Wednesday from the current 18.5% to 18.0%.

Brazil’s currency the real has continued to slide from its four and a half year high after finally weakening following continuous intervention by the central bank to absorb excess dollars from the market. The real fell for two consecutive days, closing down 1.32% at 2.224 reais against the US dollar yesterday, Thursday. The central bank has been auctioning currency swap contracts since November in attempts to halt the rise of the real. The most recent auction was Thursday.

Brazil’s central bank has revised down its growth forecasts for this year from 3.4% to 3.0%. This follows the recent announcement of the economy’s slowest growth in two years – 1% y-o-y in the third quarter against 4% in the second quarter.