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Investor report: Brazil

Sep 25, 2013

Since output stalled in 2011, Brazil became the economy that emerging market investors loved to hate. Dismal growth, erratic policymaking and dire stock market performance have been the most widespread complaints. In early September, companies controlled by businessman Eike Batista appeared to be hurtling towards a major restructuring.

While that group’s troubles are not representative of other firms, its freefall in the stock market has only served to further tarnish Brazil’s image. Some players are starting to take action: as we examine here, the BM&FBovespa has moved to tackle problems with the country’s benchmark index.

Still, the performance of the LatinFinance M&E Brazil Stars index shows there is value to be found in the country’s stock market.

Meanwhile, concerns are growing over the country’s 180 billion real infrastructure concession program, a year since it was first announced. An auction for a road concession, expected to be one of the more attractive on offer, failed mid-September when not a single investor bid. We look at investors’ skepticism on the government’s plans.

Since the global financial crisis, anger — especially in European capitals — has grown over the huge sums paid to investment bankers. Between state-led bailouts and a view that investment bankers were largely responsible for the crisis, politicians and the public have attacked the largest institutions for what they see as profligate spending on pay. Regulations that will restrict what European banks can pay in bonuses are already having an effect on pay for Brazil’s investment bankers.

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