Rio de Janeiro-based law firm Veirano Advogados has advised London-based foreign exchange provider TTT Moneycorp on its $3.2 million acquisition of 45% of São Paulo foreign exchange business Novo Mundo Corretora de Câmbio. Announced on August 12, the deal awaits approval by Brazil's president Dilma Rousseff and the Brazilian Central Bank. Although Novo Mundo was not willing to sell 100% of its business to Moneycorp at this time, the contract includes the possibility of Moneycorp acquiring the entire business in the future. Partner Roberto Rudzit Neto led Veirano in advising Moneycorp, and partner José Luis Leite Doles of São Paulo-based Barcellos Tucunduva Advogados advised Novo Mundo, which made the deal because “they had to expand, [and] they need[ed] a partner to help them expand in Brazil,” according to Doles. Moneycorp entered the deal as part of a long-term strategy to expand into South America, according to the company's CEO, Mark Horgan.
In an August 12 interview with The Telegraph, Horgan mentioned the difficulty of “sourcing a clean, well-managed Brazilian foreign exchange house.” Horgan elaborated on some of these difficulties in an interview with IFLR1000. He said that because Brazil’s educational reforms are relatively recent (within the past 25 years), “quality skills are a premium.” He added that the Brazilian Central Bank “has had a long-term policy to tackle a historical black market in dollars, which was present during periods of hyperinflation in the '80s and '90s.” Still, Horgan said, because Novo Mundo is still a new company – founded in 2006 – it has avoided being restricted by historic education issues and has avoided “any historical possibility of participating in black market transactions.”
Despite the potential for problems like these, as well as corruption scandals and the decline of the real, Neto noted that many companies continue to look for opportunities in Brazil. “During the last two years, I would say that we’ve seen more interest from abroad in doing business in Brazil,” Neto said. “At the moment, the Brazilian currency is a little lower, so maybe the prices are attractive in foreign currency, and [people are] looking for the long run and not really paying attention to the problems that the country is going through.”
Horgan also suggested that the decline of the real was not a disadvantage. “Novo Mundo has a 15-year heritage of foreign exchange and international payments in Brazil. The business has seen strong and steady growth, with a 332% increase in turnover in the last five years. Brazil’s major trade routes with the US and Asia remain strong, and cross-border payments to and from Brazil continue to grow,” Horgan said. “Rather than being a barrier, the real’s recent decline gave us an opportunity to invest in Novo Mundo at a favorable point for the sterling.”
Although the Brazilian real outlook has not been favorable in the past year, recent news suggests it is doing slightly better. An August 18 Bloomberg article said the real will “strengthen and hover above 3 per U.S. dollar.”