By Antonio Guerrero
Banco Santander Brasil, the local subsidiary of Spanish banking giant Banco Santander, in October raised more than $8 billion in Brazil’s largest-ever IPO and the world’s largest this year. Abu Dhabi’s state-controlled Aabar Investments invested $328 million in the share offering through ADRs. Santander will invest proceeds to finance further expansion in Brazil. With a 10% market share by assets, Santander is Brazil’s fourth-largest private sector bank.
News of Rio de Janeiro’s winning bid for the 2016 Olympic Games prompted expectations of investment inflows, with the federal government alone committing some $11 billion in infrastructure spending for the games. Finance minister Guido Mantega says the event will add 1% to the country’s GDP in coming years, while the 2014 Soccer World Cup will add another 1%. China, host of the 2008 Olympics, has offered to lend technical assistance in coordinating the games, providing a further sign of the growing ties between the two countries.
Moody’s in late September became the third major ratings agency to give Brazil an investment-grade rating. Moody’s upped Brazil’s foreign currency debt ceiling to Baa2 from Baa3 and the deposit ceiling to Baa3 from Ba2, both with positive outlooks. Standard & Poor’s and Fitch had upgraded Brazil to investment grade a year ago. Moody’s cited strong economic and financial resilience as part of its rationale for the action, which will enable Brazil to attract more pension funds and institutional investors to its bond markets. Chile is the only other South American sovereign with a Moody’s investment-grade rating.
Bank credit in Brazil will grow by an annual rate of 20% over the next five years, according to a report by Bank of America-Merrill Lynch. The report says greater credit availability and lower spreads, driven partly by lower real interest rates, will spark private consumption and GDP growth. The bank, which increased its Brazil growth forecast for next year to 5.3% from 4.5%, warns that pending risks for banks include government intervention, increased competition and higher delinquency rates. Bank of America-Merrill Lynch predicts Brazilian corporate earnings will grow by 26% in dollar terms in 2010.