LatinFinance - September/October 2015 - 69
Economy
The difficulty of
balancing the books
INVESTOR
REPORT
BRAZIL
PAGE 70
Infrastructure
Calling the debt
capital markets
PAGE 74
Banking
Tricky market
for lenders
PAGE 80
Testing times
Long are the shadows that stretch over
Latin America's largest economy. Brazil's
sovereign downgrade to the cusp of junk
status at the hands of Moody's in August
is the latest in a string of woes circling the
country. Moody's analysts cited declining GDP growth and rising government
spending behind the one-notch ratings
cut to Baa3. The cut came two weeks after
Standard & Poor's said it may remove
Brazil's investment grade pending the
economic impact of the Lava Jato corruption investigations. Second quarter GDP
numbers, showing economic activity
falling by 1.9%, are unlikely to help the
country's case.
Finance Minister Joaquim Levy was
welcomed by investors, who were frustrated by years of fiscal mismanagement,
when he took up his post at the end of last
year to tackle precisely these issues. The
former Treasury secretary has found a
difficult reception to his prescription of
addressing these fiscal problems, stabilizing debt and restoring growth after a recessionary period. Political infighting and
congressional attempts to pass measures
that would have actually increased government spending have thwarted Levy's
attempts to implement his strategy. As the
corruption scandal widens to investigate
politicians, it has severely weakened the
federal administration and also served to
deepen political fissures at a time when
Brazil needs political and economic
reinforcement.
But still, Brazil perseveres despite the
stumbling blocks. The country announced
a $66 billion infrastructure concession
program in June. It also appears to be
making meaningful strides to shift that
program's cost burden away from the government and its mammoth development
bank BNDES to the debt capital markets.
While scaling back BNDES has been on the
agenda for years, small and gradual changes recently in the bank's lending and its
funding from the Treasury, seem to point
to pragmatic action this time around.
Finally, HSBC's exit from Brazilian
banking, the latest in a notable exodus, is
leaving many wondering what's behind
the flight. Misinformed bets on consumer
credit and a need to use capital more
efficiently in light of Basel III compliance
seem to provide some answers, though
whether lenders will re-approach the
market with a refined or more informed
strategy remains to be seen in light of the
general economic malaise. LF
September/October 2015 - L ATINFINA NCE.COM 69
http://www.LATINFINANCE.COM
Table of Contents for the Digital Edition of LatinFinance - September/October 2015
Contents
LatinFinance - September/October 2015 - Cover1
LatinFinance - September/October 2015 - Cover2
LatinFinance - September/October 2015 - Contents
LatinFinance - September/October 2015 - 2
LatinFinance - September/October 2015 - 3
LatinFinance - September/October 2015 - 4
LatinFinance - September/October 2015 - 5
LatinFinance - September/October 2015 - 6
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LatinFinance - September/October 2015 - 32A
LatinFinance - September/October 2015 - 32B
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LatinFinance - September/October 2015 - G1
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LatinFinance - September/October 2015 - G8
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