Brazil beef giant tapped Minerva took advantage of favourable conditions in emerging markets to sell a US$1bn bond due 2026, which priced inside the company’s yield curve at 6.625%.
In the Summer of 2016, automotive wheel producer Iochpe Maxion led by example to become one of the few Brazilian corporates to tap the dollar denominated syndicated loan market with a US$275mn dual-tranche term loan facility that was 43% oversubscribed.
Central bankers in Brazil don’t have easy lives, as shown by recent events. Just when the economy seemed to be heading in the right direction, up pops another political crisis that has increased uncertainties – particularly on the reform front. The social security reform is the main focus, due to its consequences on the government’s solvency, but monetary policy is very much in play.
The signals sent by the Planalto are that President Temer intends to dig in and fight to preserve his mandate. There is some room for this, politically and economically. Although his situation is difficult, there is no climate of “Down with Temer” in the same way “Down with Dilma” manifested. The probable reason is the gradual recovery of consumer and business confidence. The pattern of net layoffs has been interrupted, and the unemployment rate shows signs of stabilizing much sooner than expected.
Due to a toxic combination of regulations, a challenged banking sector and a strained real economy, Brazil’s real-estate sector seems to be feeling downward price pressure from an unlikely candidate – the country’s banks. The curious dynamic has created new opportunities in distressed assets, however.
New accusations and an incriminating audiotape have piled heat on president Temer and put his reforms agenda in doubt. But whatever the short-term outcome of the latest scandal, the market’s demand for Brazilian debt remains strong, argues Ashmore’s Head of Research Jan Dehn.
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.
- When it Comes to Labour Unions, Brazil is Not Venezuela
- Brazil: More Taxes in Sight?
- Social Unrest in Latin America: Back to the Old Ways?
- Brazil: We Want to Work
- In Brazil, Start-Ups Go Toe-to-Toe with Banks on Credit
28 Jun 2017
26 Jun 2017