Why Brazil looks expensive compared to the BRIC nations

Stephanie Johnson – Market Realist, 11/12/2014

Looking at the price-to-earnings (or P/E) multiple for Brazil over the last two years, equity shoppers may find that Brazil became a bit more expensive. Brazilian equities have been selling at 15–20x their earnings in the last two years. The valuations become clearer when we compare Brazil to its closest emerging market counterparts—Russia, India, and China.

The above chart compares Brazilian equity valuations with those of other emerging countries—like Russia, China, and India—over the last two years. Comparing the economies in the Brazil, Russia, India, and China (or BRIC) nations, Brazil is the more expensive or overvalued economy—compared to China and Russia.

However, part of the recent surge in Brazilian equities can be attributed to the four yearly elections in Brazil. This year the elections were in October. Markets surged partly on the expectations of a change in presidency from Dilma Rousseff—chief of the Worker’s Party—to Aécio Neves da Cunha—chief of Brazil’s Social Democracy Party. Brazil’s economic conditions hadn’t changed much. The conditions got worse during Rousseff’s first tenure as president—starting in 2011.

Read more…

Brazil Stock Market Gains Not Entirely Political

Kenneth Rapoza – Forbes, 10/07/2014

Voters of Social Democrat Aécio Neves might cheer the recent rise in the Brazilian stock market as a testament to his real shot at becoming president, but there is more to Bovespa’s recent 10% gain than politics.

“The election results have had an immediate and strong impact on the market, as we can see, but this is only momentary and has no grounds for support,” says Raphael Juan, a fund manager for BBT Asset in São Paulo. “To think that politics is the savior and whatever candidate wins or loses will make everything wonderful is a grave error for short-term investors.”

Bullish market commentary during the last few days seems centered around the prospect of incumbent Dilma Rousseff’s defeat, and bearish signs centered around her victory. This narrative continued Tuesday with the iShares MSCI Brazil (EWZ) exchange traded fund up another 2.4% in intraday trade. Most news outlets are connecting the bullish Bovespa to Neves’ vote totals, with UBS saying today that he has a 50/50 shot of beating Dilma.

Read more… 

Dreams on hold, Brazil’s ‘new middle class’ turns on Rousseff

Asher Levine – Reuters, 09/08/2014

The streets of Jardim São Luis, a poor and violent neighborhood near the edge of São Paulo, have not been this quiet in years. And that is exactly why Valeria Rocha is so worried.

Arms folded, she scans the racks of baby clothes in her small store before flicking a glance towards the empty sidewalk. “Just a year ago this area used to be packed with shoppers but nowadays it’s all empty, my store included,” she said.

After a decade of economic growth and welfare policies that lifted more than 30 million Brazilians out of poverty, Jardim São Luis and other tough neighborhoods across Brazil had high hopes for the future. But a faltering economy and mounting frustration over poor public services are dimming the outlook for Brazil’s “new middle class.”

Read more…

Brazilian President Criticizes Marina Silva’s Political Platform

TeleSUR – 09/01/2014
Brazilian President Dilma Rousseff claims that Marina Silva’s industrial policies will negatively impact employment. During a press conference at the Brazilian presidential palace, President Dilma Rousseff criticized the policies of her opponent Marina Silva on Sunday leading up to the presidential elections in October, claiming that Silva’s political platform would greatly hurt the country’s domestic industrial sector and could potentially lead to widespread unemployment.

“After reviewing her political proposals, I am very concerned particularly with regards to the creation of employment and industrial policy,” Rousseff said.

In particular, Rousseff questioned her presidential candidate rival’s proposal with regards to providing fiscal incentives to certain industrial sectors, stating that such measures “are only effective in particular cases not as general rule of thumb.”

Read more… 

Environmentalist Surges Ahead In Brazilian Presidential Polling

Nick Cunningham – Oilprice.com, 8/28/2014

Political change could be coming to Brazil. A new Ibope poll in Brazil shows that an unexpected challenger in the 2014 presidential election would defeat incumbent President Dilma Rousseff in a hypothetical run-off.

Rousseff was once thought to be in a strong position for reelection, but Marina Silva, an ardent environmentalist, has vaulted to the front of the pack.

The daughter of a rubber tapper, Silva had humble beginnings. She grew up poor and was illiterate until she was a teenager. But after years of activism in union politics, Silva was eventually elected senator from her home state of Acre.

Read more… 

BR Partners Offers Debt Restructuring as Brazil Stalls

Cristiane Lucchesi and Jonathan Levin – Bloomberg, 8/27/2014

BR Advisory Partners Participacoes SA, the investment bank and asset-management firm founded by Goldman Sachs Group Inc.’s former Brazil chief executive officer, is creating a debt-restructuring advisory business as the country’s economy stalls.

Claudio Citrin joined as a managing director to build the new division, said Andrea Pinheiro, who founded Sao Paulo-based BR Partners in 2009 with Ricardo Lacerda, Goldman Sachs’s former Brazil CEO. Citrin, 52, previously worked as an executive at Spinnaker Capital Ltda for about 14 years, overseeing hedge fund investments in Latin America.

Demand for restructurings may rise amid estimates Brazil has slipped into recession. Credit Suisse Group AG lowered its second-quarter gross domestic product forecast to negative 0.5 percent from negative 0.2 percent this month, and said revisions to the first quarter might also show a contraction. The corporate delinquency rate rose 4.9 percent in the 12 months through June compared with a year earlier, according to data provider Serasa Experian.

Read more…

COLUMN-The score on Brazil as a long-term investment

John Wasik – Reuters, 6/16/2014

The beginning rounds of the World Cup have offered thrills to global soccer fans. But what should excite investors about Brazil?

The South American country is brimming with natural resources and growth possibilities. Despite concerns about its growth slowdown and its preparations for the upcoming Olympics, the country can be a good holding if global population growth remains on course.

There are more than a dozen exchange-traded funds (ETFs) that hold Brazilian stocks exclusively. They vary from broad-based index funds to specialized ETFs that use leverage to amplify market moves.

Read more…

Brazil must act to boost trade with Brics

Samantha Pearson – The Financial Times, 4/29/2014

The location of the India-Brazil Chamber of Commerce’s office says a great deal about the trade relationship between the two developing countries. Based in Brazil’s hilly state of Minas Gerais, the Chamber is more than 500km from most companies’ headquarters in São Paulo, but only a short drive from some of the country’s largest mines.

Metals, along with other commodities such as crude oil and sugar, make up the vast majority of Brazilian exports to India. Crude oil alone accounts for 45 per cent of the value of shipments to the Asian country, according to the latest data from Brazil’s ministry of trade. According to Thomson Reuters, exports to India stood at $3.6bn in the 12 months to last November (see graphic).

While Brazil’s politicians have talked fervently over the past few years about a new relationship with fellow emerging markets – a south-south alliance in defiance of “old world”-trade – data show its commercial links with these countries are as problematic as they have been with the US and Europe.

Read more…

Brazil: a role model for development?

Armando Barrientos & Ed Amann – The Guardian, 4/17/2014

Brazil isn’t getting the best press at the moment, with ongoing problems with the construction of the World Cup stadiums and protests about public services. Recently economic growth in the country has slowed, with some commentators arguing the recent government response sounds “the death knell for Brazil’s economic strategy“.

It’s remarkable how far and fast Brazil has fallen from grace. Only a couple of years ago, the IMF and others were lauding the country for its resilience to the global financial crisis and its sound economic management.

We need to get this into perspective, because behind the hyperbole, there’s much for other developing countries to learn from Brazil’s recent experiences. Countries such as Zambia, which has seen positive growth rates that haven’t translated into poverty reduction, or Nigeria, which has seen inequality dramatically widen over the past 20 years.

Read more…