Category: Brazil

Brazil’s biggest mining company Cia. Vale do Rio Doce (CVRD) says it has increased its program of committed bank lines to $650 million from $500 million. A syndicate led by HSBC structured the transaction to ensure disbursement independent of shifts in sovereign risk. The new two-year facility has an annual commission fee of 0.3%, and annual interest rate of 075% over Libor if Vale activates the loan. Vale began the backstop program in May 2004 but has not had to draw on the line.

Brazil’s Paranapanema mining group earned $44.4 million in 2004, ending six years of losses. The company is now negotiating with the government’s BNDES development bank to convert its $100 million debt into equity. Pension funds led by Previ, the country’s largest, control the company and will convert $200 million in corporate bonds into equity before they mature in 2007.

Brazil’s industrial production expanded at the slowest pace in five months in February as rising interest rates curbed demand. Industrial output rose 4.4 percent from the year-earlier period after increasing 6 percent in January. The slowdown indicates the pace of economic growth is easing, which may take pressure off the central bank to keep boosting the benchmark lending rate. Central bankers have raised the benchmark overnight rate seven times since September, leaving it at a 17-month high of 19.25 percent.

Brazil’s electricity regulator granted utilities bigger rate increases than analysts had forecast, raising concern that inflation may accelerate. Companhia Energética de Minas Gerais, the country’s largest combined power generator and distributor, can raise prices 21% while Companhia Paulista de Força e Luz, which serves São Paulo state, can boost rates 9%. The Central Bank is trying to lower inflation, which hit 7.4% in the 12 months through February.

Brazilian bonds rose Tuesday on expectations that declining US bond yields will prompt investors to seek higher returns on riskier emerging-market debt. Brazil’s benchmark bond due in 2040 gained 55 cents to $111.25 as the yield on the benchmark 10-year US Treasury note held near a four-week low, making emerging market bonds more attractive. Brazil’s government owes creditors about $450 billion, making it the largest debtor in the developing world.

The Brazilian real rose to a five-week high Wednesday on expectations that record exports will sustain the fastest economic expansion in a decade and boost demand for the local currency. The real ended the day at 2.60 to the dollar. The currency has gained 4.7 percent since Finance Minister Antonio Palocci on March 28 raised his 2005 export forecast to $112 billion, 17 percent above last year’s record.