How many reais needed to screw in a light bulb? 12 Sep 2012 That’s what investors should ask about Brazilian President Rousseff’s plan to slash sky-high electric rates that are restraining economic growth. Power companies are being forced to shoulder most of the burden. Government can afford to pick up the tab on the next round of cuts.
Brazil’s infrastructure plans look rose-tinted 22 Aug 2012 President Rousseff hopes private investors will help provide $66 bln for rail and roads over the next 20 years, boosting growth - and that’s just a start. But past state-led efforts have fallen short of expectations. Now, red tape is still a problem and financing is a challenge.
Bondholders should back Brazil’s bank bail-in 20 Aug 2012 Some are crying foul over plans to impose a 50 pct haircut on creditors in seized Banco Cruzeiro. This may just be grandstanding, though there’s favoritism in the bail-in. But with no buyers for the disgraced mid-size lender, the other option is liquidation. No one wants that.
New Petrobras oil worth little stuck underground 15 Aug 2012 Five years after an 8.3 bln barrel discovery vaulted Brazil into the big leagues, a Petrobras partner has talked of another huge subsea find. But state meddling has prevented the oil giant or rivals fully exploiting reserves. Unless that changes, the bonanza won’t yield riches.
Brazil bourse has more staying power than economy 9 Aug 2012 Bovespa’s been hit by delistings and a dearth of IPOs. Rival exchanges may soon arrive, too, though that’s not easy. And Bovespa has a lock on other business while expanding elsewhere. Operating leverage is wobbly, but the bourse is well placed to weather the economy’s headwinds.
Nasty Petrobras surprise won’t be its last 6 Aug 2012 The Brazilian oil giant’s first quarterly loss in 13 years reflects harmful state meddling. President Rousseff seems happy for Petrobras to miss production targets if fuel prices stay low. Big well writedowns may help reset expectations, but policy damage will be tough to gauge.
Itaú’s aims would be badly served by Citizens 6 Aug 2012 The Brazilian bank has been tipped as a possible buyer for the U.S. retail arm of RBS. While Citizens might come cheap relative to Itaú’s own valuation, competing in a saturated country with the likes of Wells Fargo and BofA would be unwise. Better to stick with emerging markets.
Brazil’s Chevron ban straddles worst of two worlds 2 Aug 2012 Suspending the U.S. oil giant’s operations over a minor spill keeps Latin America’s biggest economy aligned with the likes of Argentina. Such meddling won’t help Brazil revive flagging growth. At the same time, the prosecutorial zeal apes bad practice from the developed world.
Eike Batista adds bottom feeding to tangled web 1 Aug 2012 The Brazilian billionaire is taking his logistics arm LLX private after the share price halved in a year. Investors may rue getting on board with Batista, but delays, losses, missed targets and a slowing economy swamping his complex conglomerate make it a good time to jump ship.
Miners’ journey back to normal will be a hard slog 27 Jul 2012 The sector’s software-like margins were due a reality check. Results from Vale and Anglo American confirm it has entered a period of more challenged returns. Stubborn costs will take time to ease. After a decade-long boom, reversion to the mean will be painful.
Brazil’s bank giants put prudence before politics 24 Jul 2012 Itau and Bradesco are slowing consumer lending as loan defaults climb. That’s counter to the aims of President Dilma Rousseff, who’s pushing the nation’s banks to lend more at low rates. But with consumers and the broader economy under pressure, financial conservatism is welcome.
Brazil risks throwing good money after bad 16 Jul 2012 Its central bank is contemplating a state-guaranteed fund to buy structured loans from small banks. That looks misguided. It introduces moral hazard into already weak loan markets, may not boost available credit and could leave taxpayers holding a bag of worthless loans.
Ousted Vale CEO returns unshackled by the state 13 Jul 2012 Roger Agnelli was deposed from the Brazilian mining giant last year after resisting President Dilma Rousseff’s meddling. Partnered with billionaire banker André Esteves, Agnelli is back to invest in iron ore and metals. It’s a chance to show he can outperform Brasilia.
Brazil’s bet on consumer-led growth is not enough 12 Jul 2012 The central bank’s eighth cut in less than a year leaves rates at a record low 8 pct. That fits with President Dilma Rousseff’s belief in the power of consumers to reignite growth. But they can only do so much. Boosting investment and revamping infrastructure could achieve more.
What’s next on Carlos Brito’s shopping list? 9 Jul 2012 AB InBev will need some time to digest its purchase of Mexico’s Modelo and pay down debt. At that point it’s hard to believe the hyper-acquisitive CEO will be finished. Yet with few independent brewers of any size left, his next deal may be a whopper like SABMiller or even Pepsi.
How does a $670 mln deal spark a $400 bln battle? 2 Jul 2012 When Brazil’s largest credit card processor goes on the hunt. Cielo is buying U.S. e-commerce shop Merchant e-Solutions hoping to defend its lead in a highly competitive market. With industry profits expected to fall, Cielo, Redecard and others are all fighting for an edge.
Billionaire’s fall from grace has a familiar ring 29 Jun 2012 Stop us if you’ve heard this before. A flamboyant energy boss running a maze-like empire built on lofty promises and burning cash suffers a big loss of confidence from investors. Yes, it’s Chesapeake Energy and CEO Aubrey McClendon. But it’s also Brazil’s EBX and Eike Batista.
Brazil’s richest man overpromises, underdelivers 28 Jun 2012 Billionaire Eike Batista is swiftly falling from favor. His flagship oil company OGX lost 25 pct of its value Wednesday after massively cutting output expectations. Batista is a savvy salesman and wheeler-dealer but his failed promises are building up rapidly. Investors beware.
Brazil’s lending hangover is red flag for banks 27 Jun 2012 Consumer defaults hit record levels in May, despite a decent economy. Lax lending in 2010 to customers not used to borrowing money caused the problem. With President Dilma Rousseff pushing to make credit cheaper, banks need to ensure they don’t make the same mistakes again.
AB InBev can pay top dollar to gulp down Modelo 25 Jun 2012 The brewing giant is considering buying the rest of the Mexican beer maker it doesn’t own. That would give it another leg up over regional rival Heineken and let CEO Carlos Brito cut costs. Just matching Modelo’s operating margin to its own would justify a $15 bln price tag.