Reuters
Brazilian stocks edged higher on Wednesday and posted hefty gains of about 83 percent for the year, underscoring the strength of the recovery in an economy viewed as an investor darling. The index’s 2009 gains of 82.66 percent stand in stark contrast to the Bovespa’s performance in 2008, when it plunged 41.2 percent, its second-worst performance in its 41-year history.
Brazil snagged a coveted third investment-grade rating in September, when Moody’s Investors Service said the global crisis had helped prove the resilience in Latin America’s largest economy. Comparatively, Mexico — Brazil’s closest peer in Latin America — saw its sovereign debt downgraded twice.
Brazil also held its own compared to other emerging market powerhouses. Hong Kong’s Hang Seng index rose just over 49 percent in 2009 through Wednesday’s close, with India’s BSE index up about 80 percent over the same period.
Two of the world’s biggest initial public offerings came out of Brazil this year — an $8.07 billion Santander offering, topping the list, and the $4.33 billion VisaNet — now Cielo sale. The money pouring in from abroad has helped the Brazilian currency, the real (BRBY), strengthen 34 percent against the greenback so far this year.
On the Bovespa index,
Itau Unibanco, Brazil’s largest private-sector bank,
Banco do Brasil, Latin America’s largest bank by assets,
The index’s two biggest stocks – State-controlled energy company Petrobras and mining giant Vale
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Bloomberg.com
Latin American foreign trade will increase as much as 15 percent in 2010 as a global economic recovery and rebound in commodity prices bolster exports, according to Banco Latinoamericano de Comercio Exterior SA (Bladex). The Panama City-based bank, was created by Latin American central banks in 1979 to provide trade financing in the region
The region’s exports fell 31 percent in dollar terms in the first half of 2009 while imports dropped 29 percent, according to the United Nations’s Economic Commission for Latin America and the Caribbean. Amaral, who gave a growth forecast range of between 10 percent and 15 percent for 2010, declined to give a trade estimate for this year.
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Surjit S Bhalla in the Business Standard
Two key conclusions emerge about Indian GDP growth. First, that this growth is now at a plateau level of 8-9 per cent. Second, that very soon, analysts and punters will have to change their Word documents to “India is the fastest growing economy in the world” rather than, “excepting China, India is the fastest growing economy”.
There are three separate reasons for this, all of which have been outlined numerous times before in these columns (and a detailed assessment was provided in Bhalla-2007*). The reasons refer to the broad determinants of economic growth — capital, labour and productivity. On the first, India is investing at the same rate as China (approximately 40 per cent of GDP), on the second, India’s labour force growth is about 1.8 per cent per year faster than China, and on the third, China has outpaced India by about 2 per cent per annum (for the last five years). Most of this outpacing has had to do with the deep and deeper currency undervaluation practised by the Chinese authorities which led to two unsatisfactory outcomes: the great financial crisis of 2008, and now the largest and fastest growing polluter of the world. For how long will the international community stand idly by? Not very, and this is the first big forecast for the ensuing decade: China’s exchange rate will appreciate significantly starting 2010. How significantly? A first year appreciation to about 6 yuan per dollar from the present 6.8 level.
This scenario will have predicted effects — China’s GDP growth should moderate to a less polluting 8.5 per cent in 2010 and then proceed on a declining trend for the rest of the decade. This will mean jobs for the rest of the world. The other side-effect of the China growth rate decline will be on carbon emissions. They too will decline, and allow China to reduce its carbon intensity of output to at least the world average. In stark contrast, India does not have pressure from the world community to mind its currency or emissions. The productivity growth advantage of 2 per cent a year that China currently enjoys will soon disappear, leaving India with a GDP growth rate in excess of China, and in excess on a sustained basis.
This has been a structural change decade for India. Sadly, this reality hasn’t quite seeped into the psyche and mind-set of a large body of Indian policy-makers and opinionratis. This should, will, also change in the new decade.
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As I’ve said before, one of the big apportunities is for Indian hospital groups to do JVs with/buy out counterparts in Mexico, and Central America to cater to US retirees who either will choose to relocate to those regions full-time because of lower cost of living or will be traveling to those regions in increasing numbers for cheaper medical treatment.
PBS NewsHour
South of the [U.S.] border, tourist season is just beginning. Beach-loving Americans are headed to Mexico’s seaside towns, reaching for the sunscreen and soaking up the local color.
But this year’s annual migration has a twist. Thousands of Americans are coming to places like Puerto Vallarta, not to dip their toes in the warm Pacific, sip a margarita, or browse a crafts fair. No, they are coming for health care, in many cases, care they could never afford to acquire in the United States.
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VCCircle
Essel Propack Ltd, part of the $2.4 billion Mumbai-based Essel Group and the second largest manufacturer of laminated tubes in the world, has completed the process of sale of its investment in its overseas medical device business. The stake sale happened through its overseas subsidiary companies, said the company in its filing to the stock exchange.
Essel Propack, which supplies tubes for toothpaste, cosmetics, pharmaceutical products, grease and adhesives, has presence across 14 countries including Mexico, Colombia, Germany, Egypt, Philippines, Singapore, Indonesia and India.
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Bloomberg.com
Cosan SA Industria & Comercio, the world’s biggest sugar-cane processor, gained to a 15-month high as the price of the sweetener rose in New York and demand for fuel pushed up ethanol prices in Chicago. Cosan rose 3 percent to 24.40 reais in Sao Paulo trading, the highest level since September 2008.
Sugar has almost doubled this year as excess rain hampered harvesting in Brazil and India, the largest producers, extending a global supply deficit.
Cosan, which got about 41 percent of revenue from ethanol sales last year, said Dec. 24 that a 1.2 billion reais ($688.9 million) contract with ALL America Latina Logistica SA, Latin America’s biggest railroad operator, to expand ALL’s transport capacity is valid starting from that date.
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Financial crisis or not, 3.5 billion people in India, China and Vietnam need to eat and drink every day – in an uncertain world, it is one of the few certainties. As they get richer, they will eat and drink more, no matter if according to some worst case scenarios, global stock markets entirely collapse and there is a second great depression in the coming decade. Soft commodity investments will also hedge against any resulting fiat currency devaluations. Investing in the soft commodity sector in Latin America could be one of the best moves in the next few years.
FT.com
The prices of soft commodities – including tea, cocoa and sugar – have jumped to multi-decade highs, boosted by supply shortages and robust demand. The rises are set to translate into higher retail prices early next year, according to analysts. The shortages – due to bad weather and a persistent lack of investment – have started to attract financial investors into soft commodities, further boosting prices.
Production of many of these soft commodities is concentrated in a small group of developing countries, mostly in tropical areas prone to output troubles caused by a combination of bad weather, political unrest, credit shortages and the inability of small farmers to respond to rising prices.
Sugar hit a 28½-year high, up 165 per cent this year.In the sugar market, prices have been driven higher by strong demand from India, the world’s second-biggest producer, which has experienced a crop failure and has tapped the global sugar market at the moment heavy rains have curtailed output in Brazil.
Coffee prices are up 30 per cent this year, with high quality arabica trading at levels seen only briefly in the past 11 years. Hussein Allidina, head of commodities research at Morgan Stanley, said the rally was due to low production in Brazil, Vietnam, and Colombia, which account for 60 per cent of global output.
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For India, the awareness of opportunities in South America is quite low. Many senior Indian business executives I’ve spoken to admit that they have traveled 100+ times to the US and Europe, but not once to any part of Latin America. To me, being in the food business in India and having never traveled to Latin America, is like being in the software business in the US and having never been to India.
Colombia is a big coal producer with only minor production elsewhere, while Brazil is the big daddy in iron ore, with Chile and Peru also being producers. Venezuela produces both, but political risk there needs to be taken into consideration.
livemint.com
Eleven investment bankers and deal advisers Mint spoke with said Indian firms are mainly searching for overseas targets to boost both growth and resources. This would trigger acquisitions primarily in oil and gas, metals and minerals, technology and telecom, mostly in Africa, Europe and North America, they said.
“A lot of Indian companies have strong balance sheets. They have the ability to strike deals,” said Sanjay Thakkar, head, transactions and restructuring, KPMG India Pvt. Ltd. “European companies have taken longer in recovering from the slump. And many European and North American groups are looking at dispensing their non-performing, non-core assets.”
Several Indian IT firms, too, are looking to buy companies in North America and Europe as they try to secure high-value government contracts coming up in those countries. Other companies are looking to South American nations such as Chile and African countries such as Zimbabwe for firms owning iron ore and coal mines.
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Financial Express
In a move that would heighten competition for French tyre major Michelin and Bridgestone in the Indian market, Delhi-based JK Tyres will soon sell radial tyres manufactured by Mexico’s Tornel — the company it acquired last year — in the Indian market. The tyres would be competitively priced at Rs 15,000-Rs 25,000 and come with the specification that JK Tyres doesn’t have in India. “To test the market with Tornel radial tyres, we would introduce those tyres in the Indian market. After gauging the customer response, we would go on full steam with Tornell tyres in India,” JK Tyres and Industries marketing director A S Mehta said.
In an effort to expand operations overseas, JK Tyre and Industries had acquired Tornel for Rs 270 crore [~USD 55 mil]. Around 70% of the company’s tyres are used to cater to customers in Mexico and Brazil. At present, the company is not interested in any American firm as it has already made inroads into that market. With India and South America under its domain, JK Tyres has now set sights on the South East Asian market to cater to customers at that end.
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