Author: Antonio Guerrero

Growth expectations

This year’s list of best Brazilian companies is made up mainly of those firms that have taken advantage of the country’s increasing consumer confidence and booming exports. Despite high interest rates and ongoing demands for infrastructure improvements, winning companies were able to remain on a solid growth path that led to increased sales and improved profit margins.
With companies remaining in growth mode, even as GDP growth slowed to 2.3% in 2005 from 2004’s 4.9%, banks also benefited from the corporate turnaround. Banco Itaú continues to dominate, as it maintains a winning market segmentation strategy to service a full range of clients, from corporate clients and high-net-worth individuals to the nation’s underbanked population. The bank saw net income rise from R$3.78 billion in 2004 to R$5.25 billion, while total assets rose from R$130.34 billion to R$151.24 billion during the period.
Companies expect the central bank’s gradual easing of its monetary policy to help spark healthier growth this year—probably closer to 4%. The benchmark Selic rate has edged down from a record-high 19.75% in May 2005 to 16.5% in March this year, with private sector forecasters predicting the rate could hit 14% by year-end.
Falling interest rates are encouraging corporates to increase borrowing to fund growth, with total outstanding credit expanding to 31.3% of GDP in 2005. An expected sovereign upgrade to investment grade within the next 24 months could further curb financing costs, with Standard & Poor's raising Brazil's rating to BB from BB- in March.

Antonio Guerrero

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