Emerging Markets: Brazil

Roundup

 

By Antonio Guerrero

 

Brazil_1

Nacional, part of Wal-Mart’s rapidly expanding Brazilian arm

With Brazil’s strong economic recovery fueling consumer demand, local and international retailers are increasing their market presence. Retail sales are expected to grow by 12% in 2010. Wal-Mart announced plans to invest up to $1.2 billion in Brazil this year, representing a 40% annual increase. The US retail giant expects to add another 100 to 110 units in Brazil, where it already operates 435 stores. Competitors CBD and Carrefour are also battling for market share. While analysts predict Brazil’s GDP will expand
by some 5% this year, planning minister Paulo Bernardo estimates it will grow by closer to 6%.


Brazilian banks are predicted to increase their loan portfolios by as much as 25% this year, according to the National Banking Association. Growth will be driven mainly by infrastructure financing, though increased consumer
credit will also support overall expansion. Brazil’s total loan portfolio, which had grown by as much as 30% per year before
the recent global financial crisis, grew by a slower 15% in 2009.


In a move to halt the real’s rally, the administration of president Luiz Inácio Lula da Silva unveiled rules for Brazil’s new sovereign wealth fund that include allowing the government to tap the fund to purchase dollars on the spot market. The real gained 34% against the dollar last year, fueled by increased investment flows. Last November Goldman Sachs said the real was the world’s most overvalued currency. Brazil’s sovereign wealth fund, created in December 2008 as a cushion
against external shocks, had $9.35 billion at end-2009, when international reserves neared $239 billion.

 

 WorldVest, a global merchant bank based in New York, is launching its first Brazilian investment vehicle. The WorldVest Brasil Finance FIDC will focus on the country’s underserved consumer finance market. The securitized finance fund will consist of senior and subordinated shares and is scheduled to receive an S&P rating based on its credit portfolio collateral. The fund will invest initially in retail consumer direct credits and credit cards.

 

 

 

 

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