Latin Finance - November/December 2012 - 14
Brazil infrastructure
foreign exchange rate market in order Less volatility to prevent the appreciation of the real, If needed, the central bank will choose which for all intents and purposes is not to tighten monetary policy again, but free-floating any longer. (Indeed, the the interest rate hikes will not be as naturally volatile Brazilian currency has drastic as on previous occasions. “Brazil hovered around two reais to the dollar for has become a more predictable country, the past three months.). which means less interest rate volatility,” “They drew a line in the sand,” says says Pablo Fonseca Pereira dos Santos, Marcelo Carvalho, chief economist at deputy secretary of economic policy at the BNP Paribas in São Paulo, who points to Brazilian ministry of finance. the risks of such a strategy. “If commodity Although the government has pledged prices rise, there will be no buffers – the exchange rate will not be able to absorb the shock – and there will be some impact.” Carvalho says a number of factors could increase price pressures, following another year of sluggish growth in Brazil (around 1.5%). “Economic recovery is accelerating, and the labor market will become even tighter,” he says. It’s not just that market expectations are no longer anchored on the central inflation target: he argues that inflation will blow the top range of the target next year (at 6.7% instead of 6.5%). Coutinho: we are ‘crowding in’ the market Brazilian policymakers may have gotten themselves in a bit of a bind. to pursue investor-friendly policies, not “You can’t target inflation and the everybody is convinced that this will be currency at the same time, without the case. having free capital flows,” Carvalho says. An immediate example of this is the “Sooner or later, the authorities will need privatization of the airports. Three of to start tightening policies again next them were auctioned this year, including year, if they care about inflation.” São Paulo’s international terminals, but But the BNDES’ Coutinho says that the winners were not the ones that the pragmatism will prevail, and the central government had expected – which has bank will tighten if need be. Coutinho, led to delays in the privatization of other who obtained his PhD in economics airports. from Cornell University, is often referred “The government is not willing to to as “professor” by his colleagues, but play the game for what it takes. They he does not mince his words at the want to tell investors what the return rate suggestion that the new strategy might should be. They don’t believe in market be implemented at the expense of forces. They understand the economy macroeconomic stability and the fight as a club,” Paulo Bilyk, a founding against inflation. partner at Rio Bravo, an investment firm, “That would be such a stupid idea. tells LatinFinance. “They are weary of There is no way we will shoot ourselves in private enterprise. They don’t have a the foot by doing so,” he says. performance-improving agenda. They do
have an agenda for a stable economy, but not for productivity.” Brazil fell two places to rank 130th out of 185 economies in the World Bank’s report on the ease of doing business compared with last year, with areas such as obtaining credit, registering property, resolving insolvencies and protecting investors falling in the rankings. The BNDES, which Coutinho has headed for the past five years, was instrumental in helping the Latin American giant implement a countercyclical strategy and support investment in the wake of the global financial crisis, thanks to massive capital injections – over $100 billion – from the Treasury. Since last year and until the end of 2012, an additional 100 billion reais ($49 billion) will be added. While minimizing the fiscal cost of such measures in the longer term, Coutinho insists that the BNDES has taken on a new role in the Brazilian economy by promoting the importance of the private sector in financing and the reforms of capital markets. “This idea that the BNDES is ‘crowding out’ usually comes from economists who do not know how the market works,” he says. “In fact, we were the main propellers of this new agenda in suggesting the legislation – for private involvement in long term financing/capital market reform – and adjustments in stimulating the creation of new funds and new instruments, and providing liquidity in the secondary market. “The main hindrance for the big
©REUTERS
Continued on page 19
14 LatinFinance
November/December 2012
Latin Finance - November/December 2012
Table of Contents for the Digital Edition of Latin Finance - November/December 2012
Latin Finance - November/December 2012
Contents
The big easy
Rules of the game
Terms of endearment
Rise of the redback
Good buys
Winning streak
Awards in full
Staying the course
Revolutionary road
Latin Finance - November/December 2012 - Latin Finance - November/December 2012
Latin Finance - November/December 2012 - Cover2
Latin Finance - November/December 2012 - Contents
Latin Finance - November/December 2012 - 2
Latin Finance - November/December 2012 - 3
Latin Finance - November/December 2012 - 4
Latin Finance - November/December 2012 - 5
Latin Finance - November/December 2012 - 6
Latin Finance - November/December 2012 - 7
Latin Finance - November/December 2012 - 8
Latin Finance - November/December 2012 - 9
Latin Finance - November/December 2012 - 10
Latin Finance - November/December 2012 - 11
Latin Finance - November/December 2012 - The big easy
Latin Finance - November/December 2012 - 13
Latin Finance - November/December 2012 - 14
Latin Finance - November/December 2012 - 15
Latin Finance - November/December 2012 - Rules of the game
Latin Finance - November/December 2012 - 17
Latin Finance - November/December 2012 - 18
Latin Finance - November/December 2012 - 19
Latin Finance - November/December 2012 - 20
Latin Finance - November/December 2012 - 21
Latin Finance - November/December 2012 - Terms of endearment
Latin Finance - November/December 2012 - 23
Latin Finance - November/December 2012 - 24
Latin Finance - November/December 2012 - 25
Latin Finance - November/December 2012 - 26
Latin Finance - November/December 2012 - 27
Latin Finance - November/December 2012 - Rise of the redback
Latin Finance - November/December 2012 - 29
Latin Finance - November/December 2012 - 30
Latin Finance - November/December 2012 - 31
Latin Finance - November/December 2012 - Good buys
Latin Finance - November/December 2012 - 33
Latin Finance - November/December 2012 - 34
Latin Finance - November/December 2012 - 35
Latin Finance - November/December 2012 - Winning streak
Latin Finance - November/December 2012 - 37
Latin Finance - November/December 2012 - Awards in full
Latin Finance - November/December 2012 - 39
Latin Finance - November/December 2012 - 40
Latin Finance - November/December 2012 - 41
Latin Finance - November/December 2012 - 42
Latin Finance - November/December 2012 - 43
Latin Finance - November/December 2012 - 44
Latin Finance - November/December 2012 - 45
Latin Finance - November/December 2012 - 46
Latin Finance - November/December 2012 - 47
Latin Finance - November/December 2012 - 48
Latin Finance - November/December 2012 - 49
Latin Finance - November/December 2012 - 50
Latin Finance - November/December 2012 - 51
Latin Finance - November/December 2012 - 52
Latin Finance - November/December 2012 - 53
Latin Finance - November/December 2012 - 54
Latin Finance - November/December 2012 - 55
Latin Finance - November/December 2012 - 56
Latin Finance - November/December 2012 - 57
Latin Finance - November/December 2012 - 58
Latin Finance - November/December 2012 - 59
Latin Finance - November/December 2012 - 60
Latin Finance - November/December 2012 - 61
Latin Finance - November/December 2012 - 62
Latin Finance - November/December 2012 - 63
Latin Finance - November/December 2012 - Staying the course
Latin Finance - November/December 2012 - 65
Latin Finance - November/December 2012 - 66
Latin Finance - November/December 2012 - 67
Latin Finance - November/December 2012 - 68
Latin Finance - November/December 2012 - 69
Latin Finance - November/December 2012 - 70
Latin Finance - November/December 2012 - 71
Latin Finance - November/December 2012 - Revolutionary road
Latin Finance - November/December 2012 - Cover3
Latin Finance - November/December 2012 - Cover4
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