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Brazil awarded Investment Rating BBB

Discussion in 'Brazil Property' started by JMBroad, May 19, 2008.

  1. JMBroad

    JMBroad New Member

    Standard & Poor's - Standard & Poor's eleva rating soberano de longo prazo em moeda estrangeira do Brasil para 'BBB-', grau de investimento; perspectiva estável

    Standard and Poor's have classified Brazil as the 14th country with Investment Rating, according to this article on their site.

    Looking at their rating, they have increased the rating to BBB, described as Investment Grade, which is defined as: "Capacity to service and repay debt normally is still satisfactory, but risks increase if conditions become adverse."

    This new rating was awarded on the 30th April 2008 - previously Brazil was considered (BB), defined as: "Increasing uncertainty surrounding service and repayment of debt. Debt carries an increasing degree of risk."

    ./discuss
     
  2. michaelbush

    michaelbush New Member

  3. JMBroad

    JMBroad New Member

    Not sure about the currency however the financial institutions are likely to "Broaden their minds".

    One of the very important factors mentioned in the report, in my opinion is that FDI in Brazil (Foreign Direct Investment) has continued a strong and steady growth in 2008 despite achieving a record 34.6 bn US$ in 2007.

    The pragmatic macro-economic policies have laid solid foundations for a real GDP growth of around 4-4.5%

    If the world generally feels more confident about investing in Brazil and consider that it is an increasingly safe investment, surely this will lead to higher FDI which will lead to higher investment in the country by the government which will continue the sustained growth of the economy and the middle class, which in turn increases the demand for residential property by this growing middle class who are also now starting to have access to more and more financial solutions for their purchase.

    With 22 million houses in deficit currently, not counting the growth over the coming years, it is easy to see how buying a property in Brazil can be a very wise investment.
     
  4. FCZ

    FCZ New Member

    Yes, it is possible. Below is a link for the chart. I'm not particularly happy because my salary is in dollars and I saw my salary savings being eating 50% during the last 4 years. Let me rephrase the "not particularly happy" thing: :mad::mad::mad:. Perhaps I should have done this (buy Real future) few years ago; but anyway stocks and property increased in value too, balance is ok.

    I hope that is the bottow and things starts moving other way around; I don't believe in surprises or anything radical though. I should choose carefully my property.


    FinData: Share Price for FOREX, USDBRL - US Dollar Brazilian Real
     
  5. robh

    robh Administrator Staff Member Premium Member

    FCZ,

    Do you know if anyone trades FX options on the Real?
     
  6. FCZ

    FCZ New Member

    Dear Robh,
    Below is the Chicago Mercantile exchange site for Real future & options, but I’m confident these operations can be done in Europe as well, though Real isn’t so popular yet, but with the investment grade should increase the demand for these operations (Michael point):
    CME Brazilian Real Futures & Options
    It can be done as well at Bolsa de Mercadorias & Futuros:
    BM&F - Bolsa de Mercadorias & Futuros
    I’m a small investor (just my personal savings), so I never did it. What I do is diversify my investment portfolio. I’ve some stocks and bonds (balanced) + one apartment in the South. So, what I will do when I sell my apt., is to buy another property, in this case in the NE, not sure if for investment or Summer, but I’ll keep the diversification. I don’t buy property to make money (clearly I don’t understand it to do the buy & sell thing), but just as a safe port. I feel comfortable having my own “real” (or would say “concrete” :)) asset. Actually, if I have to choose just one asset, that would be the one.
    Back to Real: Investment grade brings lots of long term investments, but the speculative $$ (or “hot money”) is about to leave because they were anticipating the news. Additionally, the government may increase the IOF on short-term capital. Trade balance may become slightly negative after years of fantastic surplus, due the real appreciation. But there are so many political factors out there that we (I) cannot really anticipate. That’s why I diversify.
    But yes, if you sell properties in one currency, your company may just do the other way around by buying (selling) the other currency in the future (hedging). You may even offer this option to your international clients while facing "local" prices variation. But I’ve no experience on that.
    I hope it helps.
     
  7. robh

    robh Administrator Staff Member Premium Member

    Thanks for the links, the reason I am looking at this is to find a way to protect our clients from movements in the Real or their own currency.
     
  8. robh

    robh Administrator Staff Member Premium Member

    I had a better look, options are only traded on the exchange for the major currencies so it looks like I will have to find a broker who will write me OTC FX options.
     
  9. FCZ

    FCZ New Member

    If you contact Bolsa de Mercadorias e Futuros (or Bovespa, they are working together now), they should indicate a Broker in case your doesn't do it. A long time ago (one of my very first jobs) I used to work at the trading table of Citicorp. Usually options could be done 12 months (forward) abroad and 24 months in Brazil, against dollar. But financial instruments were different then. I'm getting old...

    I hope you succeed in offering this plus ("insurance" against flutuation) to your clients.

    My personal take is that if someone from abroad choose to buy a property in installments today (for instance, 3 years), may even do some profit with a contract in Reais. But that is a long shot, and I hope no one will knock my door 3 years from now to complain, but in case of a profit, mostly welcome to share with me!
     
  10. FCZ

    FCZ New Member

  11. michaelbush

    michaelbush New Member

  12. FCZ

    FCZ New Member

    It's good material, and it seems that it is the beginning of a series of news from Brazil; and the CNBC video journalist is cute too :).

    Warren Buffet is a clever man, no doubt on that.

    P.S.: "models that demonstrate that monopolistic pricing is anti productive", "FX Options", "FDI in Brazil and S&P ratings", and so on. Where you guys come from!? Where is my book...
     
  13. FCZ

    FCZ New Member

    Fresh Numbers

    The Central Bank just released some news regarding the Balance of Payments for April (Banco Central do Brasil the English version + the detailed data should be available within a couple of weeks. Everything is ok; transaction accounts shows deficit, but it is offset by the capital account net inflows. FDI for April shows net positive balance of 3.9 billion dollars, net positive result for stocks and bonds are, respectively, 5.9 billion dollars and 230 million dollars. International reserves of 195.8 billion dollars. What may be of interest of this forum is that, in April, expenses of Brazil residents traveling abroad increased by 67.9% while non-residents traveling to Brazil increased by 13% (despite Real appreciation & low season, I would add). Naturally, the Central Bank data doesn’t show where these non-residents where traveling in Brazil, or what they were doing, but moneywise, it shows an increase. And that despite the rough times that several airlines are going through (routes cancellation, oil barrel at US$130,…). Now draw your conclusions…:)
     
  14. Dotty

    Dotty Banned

    Hi there,

    Having just read your article and being a Brasilian resident that travels abroad anually I think that the figures are slightly wrong.The cost of travel for a Brasilian resident within Brasil and overseas has actually decreased by quite a large percentage and not increased.It has increased for the overseas traveller because of the weak pound and dollar .Can you clarify clearly what you mean by increasing in 67% and not merely figures and within what area.
     
  15. FCZ

    FCZ New Member

    Sorry if the post wasn’t clear. These are aggregate numbers, inclusive of use of international credit cards. For instance, for the 13% increase on total expenses of non-residents traveling to Brazil in April, it may be caused by an increase of dollars expended by a small number of travelers, by a simple increase of the number of travelers to Brazil, or something in between. Due to the conditions mentioned in my previous post, it is indeed a positive number. What these numbers don’t tell is if these travelers are businessmen or tourists (either way is good) and where they are going to. Air traffic numbers, as was posted here before for some others, holds clues on this issue.
     
  16. JMBroad

    JMBroad New Member

    Basically it is supportive of the theory (while not serving as absolute confirmation) that although less international travellers are coming to Brazil, those that are coming are spending more money during their trip.

    This is good for the real estate market because it may indicate that we are moving away from the all inclusive package deal traveller and towards the second residency tourist who is more likely to purchase a house and spend money on the local economy rather than go for the all paid for hotel stay
     
  17. Dotty

    Dotty Banned

    That is true ,but where are the tourists ?Also as prices have increased in Brasil would that not show a growth of tourist expenditure in Brasil and not a decrease?

    I would also like to mention that borrowing and buying is the simplest thing to do in Brasil.You select what you want to buy,negotiations are easily made and deal done.A Brasilian only needs to make an offer and thats it!No need to show proof of a steady income (unless you need to borrow from a bank),so the future problems will be when the over borrowing hits home and all the debts remain unpaid . So it may look like flowers are blooming in Brasil,but the truth is that only time will tell.QUOTE=JMBroad;54840]Basically it is supportive of the theory (while not serving as absolute confirmation) that although less international travellers are coming to Brazil, those that are coming are spending more money during their trip.

    This is good for the real estate market because it may indicate that we are moving away from the all inclusive package deal traveller and towards the second residency tourist who is more likely to purchase a house and spend money on the local economy rather than go for the all paid for hotel stay[/QUOTE]
     
  18. FCZ

    FCZ New Member

    DBRS Ratings - Upgrade

    As some of you may know, yesterday Brazil was upgraded to investment grade by DBRS (http://www.dbrs.com/intnlweb/jsp/content/document.faces). I would say that this agency is the fourth one in importance (subjective opinion), below S&P, Moody's, and Fitch. Now is missing the upgrades from the second and third ones. Stocks from properties dealings companies are doing well.

    What should I say, specially considering what is going on in the world economy ...

    P.S.: BBB- is better (investment grade) than BB+ (speculative) in a rating scale.
    P.P.S.: Game is not over, still plenty to do in all fronts, but I don't remember that Brazil ever got investment grade before.
     
  19. FCZ

    FCZ New Member

    Fitch Upgraded

    Fitch just upgraded Brazil to investment grade.

    What is next? Government expenditures reductions combined with tax cuts? Well, not that optimist; easier to see an alien spaceship than this happen any time soon.
     
  20. robh

    robh Administrator Staff Member Premium Member

    Once they are all upgraded, you will see the pension funds, government funds, etc. putting a lot more of their money into Brazil.
     
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