Brazil Economic Scan | 12 May 2009

12-May-2009

Brazil Economic Scan

In this edition: Brazilian CEOs optimistic on Brazilian economy, Brazil's state development bank to lend $58 bln this year - drive M&A, Standard Bank to expand Brazilian PE and M&A operations, Petrobras profit falls 20%, Bovespa falls on highest valuation in 5 years.

Top headlines

CEOs say Brazil crisis end in sight, rebound soon

• Brazil's economy is leaving the global crisis behind it, supported by strong local demand and tax relief, chief executive officers said at this week's Reuters Latin American Investment Summit.
• "Brazil's time has come. My feeling about the international crisis is that we are starting to look at it from the rearview mirror," said Luiz Carlos Trabuco Cappi, chief executive of Bradesco.
• "There's no doubt the country will emerge faster from the crisis and because of that it will come out stronger," said Roberto Setubal, head of Itau Unibanco, "The economy is better, showing important signs of a recovery,"

Brazil Creating ‘Champions’ With $58 Billion Loans: Week Ahead

• Brazil’s state development bank is financing the biggest acquisitions in the country as other sources of credit dry up, driving a consolidation in the meat, ethanol, paper and telecom industries.
• The Rio de Janeiro-based bank, known as BNDES, expects to lend as much as 120 billion reais ($58 billion) this year, 30 percent more than the 92.2 billion reais set aside last year, according to the bank’s President Luciano Coutinho.
• A total 95 merger and acquisition deals worth $18.9 billion have been announced in Brazil this year through March 7, down from 181 deals valued at $34.7 billion in the same period last year.

Standard Bank to expand Brazil private equity, M&A

• Standard Bank, Africa's biggest bank by assets, plans to hire up to 5 people for a new private equity team in Brazil, betting on growth in Latin America's largest economy.
• Standard Bank will soon hire the head of private equity, who will bring a team of 3 or 4 people onboard, said Fabio Solferini. The bank has set aside $250 million for the private equity unit.
• "Brazil is a target country for us and because of that, we are expanding all of the bank's platform," Solferini said. "The country has a stable legal and economic framework and has a significant size and growth prospects."

Petrobras Profit Declines 20% After Oil Price Slump

• Petroleo Brazileiro (Petrobras) net income declined 20% to 5.82 billion reais ($2.82 billion), from 7.24 billion reais, a year earlier; beating analyst estimates of 5.71 billion reais.
• Petrobras is seeking to bolster profit and cash generation after the average price of oil in the quarter fell 56 percent to $43.34 a barrel from $97.79 a year earlier.
• Declining profit comes as the company embarks on the world’s largest corporate investment plan. The $174.4 billion five-year program requires the company to spend almost $100 million a day.

Bovespa Falls on Highest Valuation in 5 Years; Bolsa Drops

• The Bovespa fell -0.8% to 50,976.39. The main stock index rallied for a ninth week, pushing up the ratio of value to combined reported profits of companies in the index to 18.87 times last week, the highest since at least 2004. The Bovespa has climbed 36% this year.
• Bradesco paced declines for banks, sliding -2.6% to 28.25 reais as UBS cited the “strong” performance of the shares in its downgrade. The shares had jumped 46% since UBS upgraded the stock on March 3. Itau, Latin America’s biggest bank, dropped 2.6% to 29.58 reais.
• Petrobras slipped 0.4% to 32.87 reais. Crude oil fell on speculation that last week’s 10% advance will be undone as U.S. inventories climb and fuel consumption declines.

Source: Brazil Economic Scan