Experts on Investment in Brazil Have Their Say

New York recently hosted the Bloomberg Link Brazil Conference. The event brought together Brazilian investment experts and their views on Brazil’s economy and future.

Hot topics among analysts on investment in Brazil were inflation, Brazilian currency and interest rates. Those present at the conference were also asked by Bloomberg on the possibility of Brazil suffering a credit bubble, a concern that has been aired by some media recently.

General opinion was upbeat and the Brazilian investment experts painted a positive picture for the Brazilian economy over the next few years. As one analyst said, “everyone is in love with Brazil”, a claim backed up by foreign ownership of 40% of Brazilian stock.

Inflation & Interest Rates

For Standard & Poor’s, inflation in Brazil is high, but their representative pointed out that when the rate is put “into the bigger picture, we don’t see it moving out of control”. Alexei Remizov from Global Capital Markets at HSBC said high inflation rates could affect Brazilian investments but that “it is very clear that the government is taking action to curb inflation”.

Consensus is that interest rates will continue to rise. Barclays Capital predicts two further rises this year. For Oppenheimer Funds, “the highest real interest rates in the world” plus the fact that Brazil is one of the few countries in the world with a primary surplus mean that “it’s hard not to have overweight in Brazil”.

Froth not Bubble

For the CEO of Equity International, Gary Garrabrant there is no evidence of a bubble in the Brazilian credit market. “We see growth opportunities driven by fundamental demand in Brazilian real estate sectors,” he said.

Obelisk International also sees this growth potential in property in Brazil, particularly among the middle classes, one of the engines behind this “fundamental demand”. The representative from ICAP, one of the largest brokers in Brazil, pointed out that the new middle class consumers are demand drivers and this, he said “shows it’s an event”.

The Chief Brazilian Economist at Barclays Capital also sees no sign of a bubble but rather “a little bit of froth”. Marcelo Salomon believes this will “be cleaned out” as the economy slows down. (After last year’s GDP growth of 7.9%, Brazil is looking at around 4% for this year.)

Bright Future for Brazilian Investment

Furthermore, Mr Salomon sees no problem of debt overhang with consumers. Barclays Capital believes that the Brazilian real should not be depreciated despite the recent high rises in Brazilian currency exchange rates. For Mr Salomon, the future looks good for Brazil – “things are going to continue as they are right now for a while,” he said.

Obelisk International coincides with this opinion. Our market research points to more of the same when it comes to investment potential, particularly in north east Brazil where lower foreign investment and domestic wealth levels give more room for manoeuvre.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.
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