Brazil on the Rise

September 14th, 2010 Posted in Agriculture, Brazil, BRICs, Economics - Indicators, Policy and Trends, Food and Beverages, Investing
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Here at IndusLatin we recently highlighted the growing role of cities like Mumbai, India, and São Paulo, Brazil, as international financial centers. The NY Times has just drew attention to a few recent developments in Brazil that indicate that this trend is unlikely to stop any time soon. Here are some key facts from the article:

  • A Brazilian-backed investment firm just acquired Burger King, further securing Brazil’s place as an ascendent global commercial leader
  • The number of millionaires in Brazil jumped nearly 70 percent, to 220,000, from 130,000, between 2006 and 2008
  • JBS Friboi, a Brazilian company, butchers and packages 8 percent of the world’s beef

The article further emphasizes that Brazil is an increasingly dominant world player in the food and agriculture industries, and with growing fears over the world’s food supply, Brazilian agriculture is looking like a solid investment.

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Brazil’s growing international presence

May 27th, 2010 Posted in Brazil, BRICs, Economics - Indicators, Policy and Trends, Latin America, Politics
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The BBC recently had an optimistic profile of Brazil’s position on the world stage. The article argues that Brazil has been largely successful at putting its own house in order, and is increasingly seen as a strong force in the international arena as well.

Democracy and democratic institutions have been strengthened. At the same time, Brazil has enjoyed high levels of economic growth, the result of continuity in economic policy that saw inflation remain low and stable, the fiscal situation under control and a floating exchange rate.

Poverty has been significantly reduced, and 31 million Brazilians lifted into the middle class, which in turn has brought about a rapid expansion of the domestic consumer market.

Commercial liberalisation and the globalisation of Brazilian companies are indicative of how Brazil’s economy has modernised. Diversification in the industrial and service sectors has gone hand in hand with the growth of the agricultural sector, highly competitive and with a strong presence in international markets. Brazil today sees itself as a global trader.

Brazil’s nascent position of power in global politics is due in large part to its credibility on issues that affect the developing world, and its status as a leader with the BRIC countries.

Brazil’s voice cannot be ignored on issues of importance to the developed world, such as foreign trade, climate change, energy (biofuels and oil), food, water and human rights.

Then there is the emergence of the BRIC countries, as Brazil, Russia India and China are known, a grouping that has become one of the new players on the international scene in recent years.

Brazil’s traditional diplomatic involvement in multinational organisations has reinforced the image of the country as a builder of consensus, an “honest broker”.

International attention has also focused on Brazil’s ethnic and religious harmony and the role it plays as mediator in more troubled parts of South America.

The article ends on this positive note:

For these reasons, Brazil today, confident and assertive, is seeking to carve a role for itself outside South America as a regional power able to act well beyond its immediate borders…

What is clear is that Brazil’s voice is set to be heard ever louder on the world stage.

IndusLatin has long shared this optimistic view of Brazil and its potential as a world power.

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Bursting India’s myths about skin color

May 10th, 2010 Posted in Arts, Culture and Society, BRICs, India, Philosophy and Culture
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A few months back IndusLatin spotlighted the expansive use of skin whitening creams in India and Latin America. Recently the issue has been back in the news in India. Vogue magazine’s India edition dedicated its May cover story to the issue, and declared that it is time “to say we love, and always have loved, the gorgeous color of Indian skin”. It may prove difficult, however, to change societal perceptions of beauty. From The Christian Science Monitor:

Skin color matters in India, a fact made clear by the adjectives used in personal ads seeking spouses. Suitors use keywords such as “dusky,” a euphemism denoting dark skin, or “wheatish,” meaning one is light-skinned, to indicate their complexions… Being darker-complected has traditionally been considered an impediment to finding a good partner…

Sales in skin-lightening creams are up by 17 percent from the previous year, reported marketing firm Nielsen Company late in 2009. One Indian advertising executive, who worked on a skin-whitening campaign and wished to remain anonymous, explained the growth by saying that “being fair is seen as a passport to getting the ideal partner.” These attitudes are also reflected in India’s thriving film industry.

“In Bollywood, there is a premium on being fair. Dusky actresses … aren’t considered glamorous,” says filmmaker Jag Mundhra.

Mr. Mundhra, is more hopeful about the future. “The economic changes have meant that India no longer sees itself as a third-world country. This newfound pride will help us accept our own skin color.”

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Brazil’s crisis philosophy: Foreign currency reserves trump IMF credit lines

March 29th, 2010 Posted in Brazil, BRICs, Economics - Indicators, Policy and Trends
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One reason for Brazil’s relative success at navigating the current economic crisis is that it maintains US $243 billion in foreign exchange reserves. These reserves have acted as a crisis fund, of sorts, for the Brazilian government. Brazil has been able to use the fund to avoid having to rely on credit lines from international institutions like the International Monetary Fund (IMF).

From MercoPress:

The reserves gave the central bank credibility when it deployed a number of mechanisms to help exporters, the financial system and the foreign exchange markets to deal with the sudden liquidity crisis, he said, adding that some have been removed and others can continue to be withdrawn.

Brazil’s National Development Bank, or BNDES, will end its extraordinary funding to the Brazilian economy in June, but the private sector should be ready to take over, he said. “I think it’s about time to exit all the crisis structures,” Meirelles said.

He added that while multilateral credit lines can be complementary, the crisis showed there are two major problems. First, the IMF would struggle to cope with the sheer volume of demand, and secondly, that the need during the crisis was proven to be higher than had been expected.

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Building fashion empires of their own

September 25th, 2008 Posted in Arts, Culture and Society, Brazil, BRICs, India
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International Herald Tribune

Some insiders believe that Indian brands, which already have a majority share of the country’s luxury market at their fingertips, are more attractive to investors than local designers in other emerging economies.

“Why smaller versions of the European conglomerates?,” asks Akshaya Chauhan, a director of the Fashion Design Council of India, who believes that nascent Indian conglomerates have every reason to dream big and try to match the scale of LVMH one day.

Unlike in Russia, China or Brazil, fashion consumers in India continue to favor traditional or fusion dress over imports. That gives Indian brands an edge over international luxury brands, Chauhan said, adding, “The average discerning consumer will take time before graduating to wear all-Western clothes.”

Anil Chopra, vice president for Lakme, the beauty company that sponsors Lakme Fashion Week, has seen more deep pockets sitting in the front rows of Mumbai’s fashion shows than ever before.

“Over the last two to three years, there has been a high degree of interest from potential investors in the Indian fashion business,” Chopra said. “Some are purely private equity funds, while others have been more strategic in nature, who will bring in expertise in the processes, contacts and so on.”

Mass- and mid-market Indian apparel retailers, like the Pantaloons chain and Reliance Industries, have recently spun off companies dedicated to acquiring new fashion brands. Their respective subsidiaries, Future Brands and Reliance Retail, are reportedly looking for local brands to develop.

Meanwhile, designer brands on the catwalks of New Delhi and Mumbai have already caught the eye of Sanjay Kapoor, managing director of the holding company Genesis Colors. This summer, Genesis was injected with an investment of 1.1 billion rupees , or $24 million, from a private equity consortium led by the U.S. firm Sequoia Capital Fund.

“Mr. Kapoor has invested in local brands, like Satya Paul and home-grown designer Deepika Gehani, with the goal of turning small-scale family businesses into commercial enterprises,” said Bandana Tewari, fashion features editor at Vogue India.

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Industry experts say mining’s future shines

September 24th, 2008 Posted in BRICs, Chile, Commodities, Peru
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Peru, Chile and Brazil are in the sweet spot.
San Jose Mercury News

Every segment of the mining industry and the companies that support it continue to enjoy great success with no end in sight despite trouble on Wall Street, industry leaders said Monday at a national conference and trade show.

Much of the optimism can be attributed to the unprecedented demand from China and India, said Harold Quinn, president and CEO of the National Mining Association.

“The boom in worldwide mining activity and the equipment to bring those products to market has arguably been the biggest economic success story of the year,” he said at MINExpo International 2008, which opened Monday in Las Vegas. He expects the gathering to be the largest ever with more than 35,000 attendees—twice as many as the last such expo in 2004.

Timothy W. Sullivan, president and CEO of equipment manufacturer Bucyrus International Inc. and chairman of MINExpo 2008, said the record size of this year’s exhibition is an indication of the strong market conditions for mining and mining equipment.

“We’ve had an unprecedented run over the last few years, thanks largely to the developing world’s powerful and sustained demand for copper, gold, iron ore, coal and other products of mining,” he said. “We see nothing near term to dampen the bullish outlook.”
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The infrastructure boom – Building BRICs of growth

September 20th, 2008 Posted in BRICs, Economics - Indicators, Policy and Trends, Infrastructure
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The Economist

Compounding this year’s figure, Morgan Stanley predicts that emerging economies will spend $22 trillion (in today’s prices) on infrastructure over the next ten years, of which China will account for 43% (see left-hand chart). China is already spending around 12% of its GDP on infrastructure. Indeed, China has spent more (in real terms) in the past five years than in the whole of the 20th century. Last year Brazil launched a four-year plan to spend $300 billion to modernise its road network, power plants and ports. The Indian government’s latest five-year plan has ambitiously pencilled in nearly $500 billion in infrastructure projects. Russia, the Gulf states and other oil exporters are all pouring part of their higher oil revenues into fixed investment.

Good infrastructure has always played a leading role in economic development, from the roads and aqueducts of ancient Rome to Britain’s railway boom in the mid-19th century. But never before has infrastructure spending been so large as a share of world GDP. This is partly because more countries are now industrialising than ever before, but also because China and others are investing at a much brisker pace than rich economies ever did. Even at the peak of Britain’s railway mania in the 1840s, total infrastructure investment was only around 5% of GDP.

Infrastructure investment can yield big economic gains. Building roads or railways immediately boosts output and jobs, but it also helps to spur future growth—provided the money is spent wisely. Better transport helps farmers to get their produce to cities, and manufacturers to export their goods overseas. Countries with the lowest transport costs tend to be more open to foreign trade and so enjoy faster growth. Clean water and sanitation also raise the quality of human capital, thereby lifting labour productivity. The World Bank estimates that a 1% increase in a country’s infrastructure stock is associated with a 1% increase in the level of GDP. Other studies have concluded that East Asia’s much higher investment in infrastructure explains a large part of its faster growth than Latin America.

A recent report by Goldman Sachs argues that infrastructure spending is not just a cause of economic growth, but a consequence of it. As people get richer and more of them live in towns, the demand for electricity, transport, sanitation and housing increases. This mutually reinforcing relationship leads to higher investment and growth.

Related articles:
BRIC growth prospects
Inflation won’t derail BRIC growth

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Considering investments further afield

September 20th, 2008 Posted in Brazil, BRICs, India, Investing
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The Irish Times

Overall, emerging markets are down by about 25 per cent this year, while the worst-hit markets include the Ukraine, which has fallen by almost 60 per cent this year; China, which is down 57 per cent due to fears of a bubble; and Russia, which is down 46 per cent since its May 19th peak.

The Brazilian market has fallen by about 20 per cent, and India is down by about 30 per cent for the year to date.

For investors, emerging markets are riskier than developed countries. “The political risk is higher and you may get individual countries doing silly things on an individual basis,” says Chowdry, citing Russia’s recent activities in Georgia. “The other risk is that stock markets are relatively immature with less developed corporate governance structures, but the major risk factor going forward is probably the external environment, and in particular, the US economy.”

One trend currently affecting emerging market funds is the “flight to safety” of investors, both institutional and retail, out of riskier equity funds to safer investments such as bond and cash funds. According to data provider EPFR Global, over the past three months, outflows from emerging markets bond and equity funds reached $29.5 billion (€ 20.9 billion), the highest level since at least 1995, and withdrawals continue to gather pace.

However, Chowdry says that this “panic” selling is leading to a great buying opportunity.

“I don’t believe where we are today is any different from other crises such as the Mexican crisis, the Russian crisis or 9/11. These were all periods when markets fell in the short term, but subsequently proved to be great buying opportunities, and I believe that we’re currently in one of those great buying periods now.”

He cites factors such as a levelling off in inflation as being behind the next wave of growth. “As inflation peaks, we expect interest rates to come down,” he says, adding that he favours the Brazilian and Indian markets.

“Brazil is one of the cheapest markets in the world, with some of the highest earnings growth.”

Although India has been one of the worst-performing markets in the world so far in 2008, down by about 30 per cent in the year to date (not as bad as the Iseq, though, down almost 40 per cent), Chowdry believes it’s close to bottoming out.

“India is a very big importer, so when oil prices went through the roof in the first half of the year, the market suffered as inflation rose, interest rates rose and corporate earnings suffered. However, the story on India today is as oil falls it will kick in significantly in terms of corporate earnings.

“The other thing we like about India is that it is very much a domestic demand story in the sense that the growth in the economy is being led by local demand, local consumers, local industry, rather than exporting to the US or developed countries.”
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BRIC offers best career options for executives globally

September 14th, 2008 Posted in BRICs
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The Economic Times

India, along with its emerging market peers Brazil, China and Russia, offers best career options for majority of executives around the world as opposed to the developed nations such as the US, Europe and Japan, a latest survey says.

As per an executive quiz, focussed on international career options for todays business leaders and released by talent management solutions provider The Korn/Ferry Institute, around 64 per cent respondents feel that the BRIC (Brazil, Russia, India and China) nations offer the best career options.

While just 22 per cent executives selected the United States and nine per cent preferred other developed economies such as Western Europe and Japan, the survey revealed.

“Todays leaders have to be globally aware and understand a variety of international markets, economies and cultures to support their career growth,” Korn/Ferry International Chief Executive Officer Gary Burnison said.

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Oil Below $120 Will Reverse `BR-IC’ Fortunes:

July 25th, 2008 Posted in BRICs, Economics - Indicators, Policy and Trends, Energy
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Bloomberg.com: Opinion

If the price of oil goes below $120 a barrel (from about $126 yesterday), if China’s annual inflation rate slows to 5 percent (from 7.1 percent last month), and if the U.S. banking crisis comes to an end, then the sagging fortunes of equity markets in the two Asian countries may reverse in relation to their better-performing “BRIC” cousins: Brazil and Russia.

At the beginning of this year, Indian and Chinese stock markets, taken together, were almost three times as large as the combined value of shares traded in Brazil and Russia.

Since then, the gap has almost halved.

Brazil’s Bovespa Index, the world’s 10th-best-performing, has risen more than 5 percent in U.S. dollar terms this year, while Russia’s Micex Index has declined 11 percent.

By comparison, Indian and Chinese benchmarks have taken a hammering, falling 36 percent and 42 percent, respectively.

BRIC has become “BR-IC”: two disjointed halves.

With runaway commodity prices, such an outcome was only to be expected. After all, Brazil and Russia produce a lot of the stuff that 2.3 billion people in India and China guzzle.

By contrast, Indian and Chinese energy and resource producers have little exportable surplus and are forced to satisfy domestic demand at less-than-remunerative prices.

These companies have, therefore, been nowhere as appealing to investors as their counterparts in Brazil and Russia.

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