Posts Tagged ‘Brazil’

Overview of Brazilian Investment Banks – Market Realist

Wednesday, February 27th, 2013

According to Market Realist’s Emerging Market’s Analyst:

In a previous article we reviewed the main Brazilian Retail banks to give investors in EWZ some background on MSCI Brazil Index’s 25% exposure to the Brazilian financial sector.  This article will focus on the domestic investment banks.

Santander and HSBC occupy the #6 and #7 spots in the Top 10 Brazilian Banks by assets, with shares of 8% and 3% respectively.  Other major foreign banks such as Citi, J.P. Morgan, Credit Suisse and Deustche Bank are small market players in the retail banking arena, each with shares between 0.5% and 1% of the total banking assets.

While most of these banks are not leaders in the Brazilian retail banking landscape, all these foreign banks are part of the top 10 banks by investment banks by fees for Latin America (consisting mainly of Brazil and Mexico).  This classification includes fees for M&A (merger and acquisitions advisory), loans (credit lending), DCM (debt capital markets, i.e., bonds) and ECM (Equity Capital Markets, i.e. stock issuance).

The local Brazilian investment banks

The only local banks within the top 10 investment banks are BTG Pactual (leading the table), Itau BBA, and Santander BBI.  The table below shows the league table rankings as of Aug 2012:

BTG Pactual has an interesting story and has been referred to by some as the Goldman Sachs of Latin American or its “tropical version”.  The bank was sold by Brazilian investment banker Andre Esteves to UBS in 2006 for US$3.1bn when he was just 37 years old.  Three years later he bought it back for USD2.5bn when UBS hit a rough patch during the financial crisis.  Pactual currently has a joint venture with Caixa Economica Federal that jointly owns Banco PanAmericano.  This is BTG Pactual’s first acquisition of a retail bank.

Itau BBA, the investment bank arm of Itau Unibanco Holding, was created in 2002 when Itau acquired Banco BBA-Creditanstalt in 2002.  In 2011 it achieved third place in the Top 10 Brazilian Investment Banks table; as of August it was placing fourth for 2012.  Earlier this year it received the Best Investment Bank for Brazil 2012 Award by Euromoney.

Bradesco BBI was #7 in the Top 10 table for 2011 and so far this year its holding the #8 spot, followed closely by foreign banks Santander and HSBC.  Earlier this year it also received the Best Investment Bank – Brazil 2012 Award, this one was awarded by Global Finance.

For more information, please visit Market Realist’s emerging market section: Emerging Markets

Learning Spanish for Business – CBS Online Lessons 1 & 2

Wednesday, November 2nd, 2011

The Leverage Academy team has increased its efforts in targeting the Latin American market, as more financial firms enter the region because of robust growth and legal reform. For example, since Brazil’s credit rating was upgraded above investment grade in 2008 by Moody’s, hot money flows have increased dramatically from institutional investors. For it’s surrounding countries, a commodity rally has also contributed to economic growth. The bulge bracket banks have increased their exposure to the region as well.  For example, in the Latin American derivatives market, Barclays and Socgen hold the strongest positions.  JPMorgan, UBS, and HSBC also have strong Latam coverage groups. In an effort to help our readers practice their Spanish, we have included a link here for free Spanish lessons online using CBS – Coffee Break Spanish. The first lesson audio (link only available in blog entry) goes over greetings and salutations. You can listen at work or during a lunch break. The second lesson audio elaborates on basic conversation. The corresponding PDF is below:
cbs-02-guide

This PDF goes over greetings, saying goodbye, introducing yourself, and informal greetings. Enjoy!  Hasta otra!

Quantitative Easing II: A Video Tale of Mr. Ben Bernanke

Thursday, November 18th, 2010

Today, Ben Bernanke defended his second economic stimulus package, using monetary easing to lower interest rates and spur both spending and lending.  The first $2 trillion package apparently wasn’t enough, so now another avalanche of capital will flow into the United States economy and abroad.  When criticized by China and other East Asian economies now being flooded with excess capital flows, Bernanke claimed that both growth and trade are not balanced and that emerging market currency pegs were to blame.  Now begin the currency wars between the mature and emerging economies…can anyone actually win?  Bernanke claims that emerging market growth will be stimulated as the developed nations recover; therefore, a weaker U.S. currency could be better for everyone.  Only time, our inflation rate, and the price of gold will tell. (Paulson’s gold fund has certainly been on a tear…)

.
This video should provide some humor to the current situation.  The section on Mr. Dudley’s role at Goldman Sachs is pretty revealing…

[youtube]http://www.youtube.com/watch?v=PTUY16CkS-k[/youtube]

According to Bloomberg, “Federal Reserve Chairman Ben Bernanke, took his defense of the U.S. central bank’s monetary stimulus abroad, saying it will aid the world economy, and implicitly criticized China for keeping its currency weak.

The best way to underpin the dollar and support the global recovery “is through policies that lead to a resumption of robust growth in a context of price stability in the United States,” Bernanke said in prepared remarks to a conference later today in Frankfurt. Countries that undervalue their currencies may eventually inhibit growth around the world and risk financial instability at home, he said.

The Fed chief is confronting criticism from officials in countries including China and Brazil who say the Nov. 3 decision to buy $600 billion in Treasury securities has weakened the dollar and contributed to flows of capital to emerging markets. The policy has also come under fire in the U.S., where critics including Republican members of Congress have said it risks fueling inflation and asset bubbles.

“Globally, both growth and trade are unbalanced,” Bernanke said, with economies growing at different rates. “Because a strong expansion in the emerging-market economies will ultimately depend on a recovery in the more advanced economies, this pattern of two-speed growth might very well be resolved in favor of slow growth for everyone if the recovery in the advanced economies falls short.”

Group of 20

While Bernanke didn’t identify China, he took aim at “large, systemically important countries with persistent current-account surpluses.” Bernanke’s comments come a week after leaders of the Group of 20 developed and emerging nations meeting in South Korea failed to agree on a remedy for trade and investment distortions. At the summit, President Obama attacked China’s policy of undervaluing its currency.

Bernanke said that the “sense of common purpose has waned” after officials around the world united to fight the financial crisis. “Tensions among nations over economic policies have emerged and intensified, potentially threatening our ability to find global solutions to global problems,” he said.

China has tied the yuan to the dollar to promote exports that helped produce the fastest gains in gross domestic product of any major economy. China, which surpassed Japan’s GDP to become world No. 2 in the second quarter, recorded 9.6 percent annual growth in the three months through September. It holds about $2.6 trillion in foreign reserves, the most in the world.

International Panel

The Fed released the text of Bernanke’s speech in Washington ahead of the address scheduled for at 11:15 a.m. Frankfurt time at a European Central Bank conference on monetary policy. He will then speak on a panel at 11:45 a.m. with ECB President Trichet, International Monetary Fund Managing Director Kahn and Brazil central bank President Meirelles.

In the panel discussion, Bernanke will say that “financial conditions eased notably in anticipation” of the Fed’s stimulus announcement, “suggesting that this policy will be effective in promoting recovery,” according to a text released by the Fed.

It’s Bernanke’s first trip abroad since the Federal Open Market Committee made the decision, dubbed QE2 by economists and investors, to implement a second round of so-called quantitative easing. Bernanke said the term is “inappropriate” because it usually refers to policies that change the quantity of bank reserves, “a channel which seems relatively weak, at least in the U.S. context.”

Global Call

In the speech, Bernanke called on policy makers around the world to “work together to achieve a mutually beneficial outcome — namely, a robust global economic expansion that is balanced, sustainable and less prone to crises.”

German Finance Minister Schaeuble said Nov. 5 he was “dumbfounded” at the Fed’s actions, which won’t aid growth and will instead contribute to imbalances by driving down the currency. U.S. monetary policy is creating “grave distortions” and causing “collateral effects” on faster-growing economies such as Brazil, Meirelles said in October.

Bernanke said that different economies “call for different policy settings.” In the U.S., inflation has slowed since the most recent recession began in December 2007, and “further disinflation could hinder the recovery,” he said.

“Insufficiently supportive policies in the advanced economies could undermine the recovery not only in those economies, but for the world as a whole,” he said.

Jobless Rate

America’s unemployment rate at 9.6 percent last month is currently “high and, given the slow pace of economic growth, likely to remain so for some time,” Bernanke said. He said that “we cannot rule out the possibility that unemployment might rise further in the near term, creating added risks for the recovery.”

The asset purchases will be used in a way that’s “measured and responsive to economic conditions,” Bernanke said. Fed officials are “unwaveringly committed to price stability” and don’t seek inflation higher than the level of “2 percent or a bit less” that most policy makers see as consistent with the Fed’s legislative mandate, he said.

Bernanke, 56, also appealed to human concerns to justify the Fed’s policy.

“On its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for many years,” he said. “As a society, we should find that outcome unacceptable.”

The former Princeton University economist devoted the majority of his speech to discussing global policy challenges and tensions.

China’s Criticism

China’s vice foreign minister, Mr. Tiankai, said Nov. 5 that “many countries are worried about the impact of the policy on their economies,” echoing concerns raised across Asia over stronger currencies and possible asset-price inflation.

Bernanke used one of nine charts to show how countries including China and Taiwan are intervening to prevent or slow appreciation in their currencies. Allowing stronger currencies would help result in “more balanced and sustainable global economic growth,” Bernanke said.

The comments echo views of Obama administration officials including Treasury Secretary Geithner, who said Oct. 6 that “it is very important to see more progress by the major emerging economies to more flexible, more market-oriented exchange-rate systems.”

Depression Lesson

Bernanke, a scholar of the Great Depression, drew a comparison between the current period and events leading to the 1930s economic disaster. The U.S. and France maintained “persistently undervalued” exchange rates by preventing inflows of gold from feeding into money supplies, which created deflationary pressures in other countries and helped bring on the Depression, Bernanke said.

“Although the parallels are certainly far from perfect, and I am certainly not predicting a new Depression, some of the lessons from that grim period are applicable today,” Bernanke said. “In particular, for large, systemically important countries with persistent current-account surpluses, the pursuit of export-led growth cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account.””

BP Closes $7 Billion Deal

Thursday, March 11th, 2010

Strategic acquirers are rumored to have as much as $1.4 trillion, that’s right, TRILLION dollars on their balance sheets in the United States.  Of those potential acquirers, banks have between $600-800 billion of idle cash.  Last year, I remember discussing with a colleague how Exxon Mobil had $200 billion in treasury stock and $30 billion in cash for acquisitions.  Strategic acquirers will certainly pounce faster than financial acquirers.

According to Mr. Swint of Bloomberg, “BP Plc will pay Devon Energy Corp. $7 billion for assets in Brazil, the Gulf of Mexico and Azerbaijan, adding fields that may extend its production lead over Exxon Mobil Corp.

“This is one of the best deals BP has ever made,” Jason Kenney, head of oil and gas research at ING Commercial Banking in Edinburgh, said in a telephone interview. “Brazil was missing from BP’s portfolio, and the assets are all high-margin barrels.”

BP, which overtook Exxon for the first time last year with 4 million barrels a day of production, will enter deepwater exploration off Brazil. With his biggest purchase since becoming chief executive officer in 2007, Tony Hayward may add more than 100,000 barrels a day of oil by 2015, according to Kenney.

As part of the cash deal, Devon will buy a 50 percent interest in BP’s Kirby oil sands project in Canada, BP said in a press release today. Devon, which is selling assets to focus on North America, will pay $500 million for its stake and meet $150 million of BP’s capital costs.

Devon rose 1.4 percent to $72.70 as of noon in New York. BP closed down 0.2 percent at 623.7 pence in London. The shares have risen 39 percent in the past year.

In Brazil, BP will have access to deepwater exploration in eight blocks in the Campos and Camumu-Almada basins, as well as two onshore licenses in the Parnaiba basin.

Entering Brazil

Petroleo Brasileiro SA, Repsol YPF SA and BG Group Plc found more evidence of oil in the same offshore Brazilian block where the companies’ Guara field holds as much as 2 billion barrels of crude, Brazil’s National Petroleum Agency said yesterday. Royal Dutch Shell Plc and Galp Energia SGPS SA are investing in the country’s deep-sea pre-salt region, whose Tupi field is the largest find in the Americas since 1976.

For BP, “Brazil was the single type of asset play they lacked the most,” Gudmund Halle Isfeldt, an Oslo-based analyst at DnB NOR ASA, said in a telephone interview. “They also increase their footprint in deepwater oil in the Gulf of Mexico.”

Oil companies worldwide are seeking acquisitions to bolster reserves. Today’s purchase is BP’s biggest since it started the Russian TNK-BP joint venture in 2003.

Exxon sought last year to buy closely held Kosmos Energy LLC’s Ghana assets, including a stake in the offshore Jubilee field, valued at about $4 billion. Exxon agreed to buy gas producer XTO Energy Inc. for $29 billion in December. Total SA and China National Offshore Oil Corp. will become partners with Tullow Oil Plc in Uganda.

‘Huge Potential’

Devon’s assets may add 40,000 barrels a day for BP starting next year, based on current production, with “huge potential” for exploration, BP spokesman David Nicholas said. The company said last week it aims to increase production by as much as 2 percent annually through 2015.

“This strategic opportunity fits well with BP’s operating strengths and key interests around the world,” Hayward said in today’s statement. “As well as giving us a broad portfolio of assets in the exciting Brazilian deepwater, it will strengthen our position in the Gulf of Mexico, enhance our interests in Azerbaijan and enable us to progress the development of Canadian assets.”

Focus on U.S.

Devon, based in Oklahoma City, said Nov. 16 it plans to sell all its offshore and non-North American assets to focus on U.S. and Canada drilling.

The deal is subject to regulatory approval, BP said. In the Gulf of Mexico, the company will receive 240 leases, including interests in the Zia, Magnolia, Merganser and Nansen fields. In Azerbaijan, BP is buying Devon’s stake in the ACG development, increasing its interest to 40 percent.

Oil from the undeveloped Kirby sands in Canada will be routed to BP’s Whiting, Indiana, refinery through a supply agreement with Devon. BP is planning to expand the plant to process larger volumes of heavy crude oil, the type produced in Canada.

Deutsche Bank AG and JPMorgan Chase & Co. advised Devon on the transaction. BP didn’t use an outside financial adviser though Linklaters LLP gave the company legal advice.”

Soros Backs Sugar in Latin America

Tuesday, February 2nd, 2010

Brazil Sugar
.
So it seems as though even Soros has a sweet tooth like Mr. Buffett…although he is more interested in rising sugar prices than an occasional Cherry Coke…
.
Soros, the legendary founder of the Quantum Fund recently invested in a venture called Adecoagro, which focuses on energy and agricultural investments in Latin America.  This week, the fund considered an IPO to fund sugar projects in Brazil.  According to a Bloomberg interview with, the company’s Director Viera said:
.
“We never had difficulties in raising capital from shareholders, but if market conditions are attractive, we could go for an IPO, why not?  The sugar and ethanol sector in Brazil is thriving so we decided to focus our new investments here.”

The Adecoagro venture owns and leases about 840,000 acres of farmland in Argentina, Brazil and Uruguay.   Here, it grows agricultural commodities including coffee and soybeans.  Adecoagro is also the largest rice grower in Argentina.  This is certainly a play on food scarcity and price appreciation in the near future.  It is surprising to the LA Team, however, that ethanol production is still rising in these parts.  Land prices have skyrocketed in the area along with commodity prices.  It seems as though these prices are here to stay for the near to medium term.

According to Bloomberg, companies that include Royal Dutch Shell Plc also are expanding into ethanol in Brazil.  According to a reporter, Adecoagro operates two mills, one in Minas Gerais and the other in Mato Grosso do Sul state.  One unique aspect of the mills is that they also produce energy from cane waste, which is known as bagasse.

Soros currently owns 30% of the venture.  To date, Soros has built a fortune of over $11 billion, according to Forbes magazine.

According to Bloomberg, “Sugar prices have more than doubled in the past year because of a global deficit after above-average rains in Brazil and a drought in India pared yields. German research company F.O. Licht revised its deficit forecast today to 8 million tons in the season that began in October, from 6 million tons forecast on Nov. 17.

Prices should ease after Brazil starts harvesting in March, Vieira said. He said prices are set to remain above 20 cents a pound during 2010.”

~I.S.

For more information, please visit Bloomberg…