This content is from: Local Insights

Brazil

On August 10 2000, within the space of two hours, Brazil sold $9.3 billion in stocks and bonds, mostly to foreign investors. This represents the strongest sign yet that investors have regained confidence in Brazil after last year's currency devaluation.

Of the total amount raised, Brazil gained $4.1 billion from the sale of a 28% voting stake in state-owned oil company Petrobrás. Two hours later, it sold $5.2 billion in 40-year bonds - its longest maturity ever sold - in a swap for outstanding debt.

The stock and bond sales set several precedents. In addition to the bond being the longest maturity sold by Brazil, the swap is the biggest ever in emerging markets. The sale of Petrobrás stock is the biggest sale of a non-controlling stake in a Latin American company, according to the banks that managed the sales.

Brazil is winning back investors by shaving its bloated budget deficit, driving it down to R47.5 billion ($26.5 billion) from over R100 billion early last year. The deficit reduction has helped shore up the currency, which has been little changed against the dollar this year, after losing a third of its value last year.

Halting the currency's slide after the devaluation prevented an inflation spiral and helped bring down domestic interest rates by more than half, which is helping to fuel an economic recovery. The economy, now entering its fourth quarter of expansion, is expected to grow by at least 4% annually over the next three years.

After pumping an average of $2.3 billion a month of direct investment into the country in the first half, investors poured in $5.1 billion in July, the highest monthly total since the devaluation, according to government's reports.

Brazilian GPD in the first half of 2000 surpasses forecasts

Brazil's gross domestic product (GDP) grew by 3.84% in the first half of this year compared to the same period during 1999 according to the Brazilian Institute of Geography and Statistics, a government-run research institute.

During this period GPD was boosted by expansions of 6.45%, 5% and 2.96% in the agricultural, industrial and service sectors respectively. The agricultural sector showed increases in farming (up 6.49%), vegetable extraction (up 8.55%) and livestock production (up 6.28%).

As for the industry sector, leading segments included transformation (up 6.45%), mineral extraction (up 7.53%), public utilities (up 5.48%), and construction (up 1.91%). In services, the highlight was telecommunications with an expansion of 14.06%.

Bovespa and LSE enter into a co-operation agreement

The São Paulo Stock Exchange (Bovespa), and the London Stock Exchange (LSE) signed a co-operation agreement on August 7 2000, in a move intended to boost equity trading in both markets.

According to this agreement, the bourses will exchange information on assets traded both on Bovespa and the LSE, including details such as trading suspension, regulations and trading volume. Each stock exchange will be required to make available, at regular times, data pertaining to the activity in their respective markets.

The agreement was completed in London by Ian Salter, chairman of the LSE, and Raimundo Magliano, Bovespa's vice-president. According to Bovespa, it will take effect in the next few months.

Eliana Maria Filippozzi

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