The expression “riche comme un Argentin” was popular in Paris a century ago, when Argentina was one of the world’s 10 wealthiest countries. Today the phrase could be reworked to “rich as a Brazilian”, given last week’s share offering by Petrobras – the world’s biggest ever. At $67bn, the state-controlled oil company raised a sum roughly equivalent to the annual economic output of a reasonably sized country such as Iraq. And, as President Luiz Inácio Lula da Silva crowed (if not entirely accurately), it all took place in São Paulo.
This projection of financial might comes just a week before the presidential election. That is handy but not decisive for Dilma Rousseff, given that the former Petrobras chairwoman and Mr Lula da Silva’s anointed successor is expected to romp home anyway. Globally, though, Petrobras’ offering is more than just a big deal. It is a marker of Brazil’s growing international financial presence.
Giant companies such as Odebrecht have long been active abroad, but mostly in Latin America. Globally, lusophone corporate imperialism is better known via the likes of Vale and JBS, the world’s largest meat producing group. Brazilian banks, such as Itaú-Unibanco, the world’s eighth biggest by market capitalisation, have followed such clients abroad. All are known dealmakers, and globally active issuers of equity and debt.
Petrobras’ offering, however, has introduced a whole new investor audience. Hitherto, most knew Brazil for its bonds – especially in Japan, where retail investors bought some $8bn of sovereign debt this year. China prefers direct investment. Either way, Brazil needs this international reach to fund a current account deficit running at about $50bn a year. Investors seem happy to stump up. During the credit crunch, Brazil was one of few emerging countries to enjoy continued net inflows.
The globalisation of Brazilian finance will be felt increasingly in international centres. New York is a traditional regional hub, but London (the same flying time from São Paulo) is gaining ground, in part thanks to its timezone which allows South-to-South trades to be executed the same working day. It is no accident that BNDES, Brazil’s development bank, with a balance sheet larger than the World Bank’s and aspirations to become Brazil’s sovereign wealth fund manager, chose London as its main foreign office.
As hedge funds threaten to decamp from London to less taxed climes, the City need not panic. The Brazilians are coming instead.
source: www.ft.com/cms
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