After a challenging year for Brazilian credit markets and a broader lull in the Latin American markets following the US election, Petrobras found a narrow window to launch a US$4bn dual-tranche bond as part of a liability management exercise that was oversubscribed by 5x.
In summer of 2016 Brazil was able to quickly recover from a recent downgrade, and despite Brexit and US election-related uncertainties managed to set a new 30-year US dollar benchmark with a US$1.5bn sovereign bond, achieving a 25bp discount over its 10-year benchmark set in March same year.
Economist Zeina Latif warns of the risks of sweeping Brazil’s current problems under the carpet and leaving them for the next administration to deal with.
Brazil is really learning how to be modern. This week the Congress approved the new Labour Laws, making up-to-date the labour laws created by President Getulio Vargas over 70 years ago.
As political chaos erupted this week in multiple South American countries, investors must now decide if Latin American sovereigns are still worth the risk.
Although the fiscal crisis is a major cause of Brazil’s recession, by generating higher inflation and feeding fears of a debt default, distortions of the economic system, such as the malfunctioning labor market, greatly aggravated the economic crisis. This is precisely what affects peoples’ lives the most, and can hamper the pace of economic recovery and define the political scenario in 2018.
As Fintech start-ups bloom in Brazil, authorities are faced with the challenge of regulating these new companies, in a way that proves to be safe for clients and without hampering their growth.
The concern over high interest rates in Brazil is understandable. It impacts the public coffers in favour of the richest and discourages productive investment. Many analysts argue that the interest rate is too high, and that the main reason for its inaction is pressure from special interest groups, notably the financial market. Although this argument is seductive for its simplicity, it does not jibe with the complexity of the theme.
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- Time for Caution on Inflation in Brazil
- Between the Spread: Market Intervention and its Side Effects in Brazil
- A Closer Look: Pension Reform in Brazil
- The Worst Has Passed for Brazil’s Credit Cycle
22 May 2017
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17 May 2017