Emerging Markets Roundup: Brazil

SPENDING BOOST PLANNED TO LIFT OIL OUTPUT

 

By Antonio Guerrero

 

Brazil’s Petrobras state-controlled oil company plans to more than double its investments to develop the country’s pre-salt offshore oil fields through 2015.

 

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Petrobras to accelerate output from pre-salt fields

The company will hike its spending to $54 billion from a previous $22.1 billion strategic plan announced for 2010–2014. Increased investments will accelerate output from the deep-sea fields, which are expected to produce 241,000 barrels per day by 2014 and more than one million barrels per day by 2020—making Brazil one of the world’s top five oil producers.

 

Gavea Investimentos, a fund management company founded by former Brazilian central bank president Arminio Fraga, has established a $2 billion fund to acquire stakes in Brazilian companies. Executives say the new fund will capitalize on the country’s expanding consumer demand by targeting companies producing consumer goods. Highbridge Capital Management, a JP Morgan Chase subsidiary, acquired a 55% stake in Gavea last year and has an option to buy the remaining 45% within the next five years. Private equity funds are estimated to have as much as $8 billion available to acquire Brazilian companies.

 

Brazil-based Vale, the world’s second largest mining company by market value, will invest $1.5 billion in the controversial Belo Monte mega-dam. The $17 billion hydropower facility to be built in the Amazon region was blocked by environmental activists before the government decided to forge ahead with construction earlier this year.

 

Asian carmakers are taking advantage of Brazil’s booming automobile market, as the country is poised to become the world’s third largest auto market by 2015. Japan’s Mitsubishi will invest $636 million over the next five years to increase local production capacity to 300 vehicles per day from 180 vehicles. China’s Chery plans to open its first Brazilian plant by 2013 and expects to take a 5% market share by 2015. Korea’s Hyundai has announced plans to team up with Spain’s Banco Santander to offer auto loans.

 

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