Brazil’s new status wins admirers

By Ruth Sullivan - Financial Times

Institutional investors are likely to take a fresh look at Brazil following ratings upgrades by two big agencies in the past two months. PDF

Standard & Poor’s and Fitch have both upgraded Brazil’s long-term sovereign debt to investment status, which means the country is now considered a safe investment destination unlikely to default on its debts.

It has only gained the lowest rung of the investment grade ladder, a long way from the triple A status of developed economies such as the US, Britain or Germany. But the change will nonetheless make it more attractive to a broader range of international investors such as big US pension funds, which are constrained from investing in countries that have not had their capacity to repay debt positively assessed, say fund managers.

Just six years ago the country was widely seen as being on the brink of bankruptcy and many investors would have found it impossible to see Brazil as an investment-grade country.

“The upgrade opens Brazil to a wider investor audience. A lot of funds will only move into a country when it has investment grade rating,” says Julian Thompson, head of emerging market equities at Threadneedle.

Brazil equity funds have just seen their sixth consecutive week of inflows, totalling $1.4bn (£716m, €901m), compared with net outflows of about $632m before that period, according to Boston-based Emerging Portfolio Fund Research, which tracks global fund flows.

“Investors have been attracted to Brazil based on better than expected recent economic growth and the government’s past commitment to responsible fiscal policies that led to fiscal surpluses and mounting foreign exchange reserves,” says Brad Durham, managing director of EPFR.

The strong flows into Brazil’s equity funds come as emerging markets funds in general have suffered severe outflows. The MSCI Brazil index is up almost 20 per cent since the beginning of January, while the MSCI Emerging Markets index is down more than 3 per cent.

Fund managers see the investment grade more as a seal of approval than dramatically changing fundamentals. “When Mexico gained its first investment grade rating in 2000, North American investors gradually began to add Mexican equities to their portfolio,” says Urban Larson, fund manager of F&C’s Latin American fund. He expects a similar pattern to emerge with Brazil.

Although Brazil is the last of the Bric countries (the others being Russia, India and China) to gain investment grade status, many Latin America and Bric fund managers are overweight in the country’s stocks.

“We’ve been fans of Brazil for a long time . . . and expect to maintain an overweight position. Any increase [in weighting] will depend on new companies coming to market,” Mr Thompson says.

Investor appetite has traditionally focused on commodities in a country with significant natural resources, but domestic stocks are beginning to gain some attention as domestic spending and consumption grows. “Brazil is the place where we see the most exciting opportunities,” says Stefan Herz, Latin American fund manager at Charlemagne Capital, an emerging market fund specialist.

“There have been so many initial public offerings in Brazil in the past few years and the emergence of new sectors.”

The information technology, real estate and healthcare sectors have also made a debut. “It is the only Latin American country where this has happened.”

Brazil makes up more than 67 per cent of the weighting of Charlemagne’s Magna Latin America fund.

Nicholas Morse, Schroders Latin America fund manager, is also positive on Brazil. Schroders’ $1.9bn Luxembourg-listed Latin America fund counts Brazil as the “largest overweight country in the portfolio”. The company’s $14.5bn Bric fund is also overweight in Brazilian equities .

On a short term outlook, Mr Morse says equity and fixed income markets have already discounted Brazil’s investment upgrade. But from a longer term perspective, “the status is good for foreign direct investment, especially for sectors [such as] infrastructure”.

At Threadneedle, where 22 per cent of the Global Equity Markets fund is in Brazil, compared with 18 per cent in Russia, 11 per cent in China and just 4 per cent in India, Mr Thompson also sees the attraction of investing in property. “The demand for middle income residential property is strong and remains relatively good value.”

He emphasises the importance of good stock-picking. “Once an investment grade rating has happened, the country [debt] risk has been reduced so there is not so much improvement to come. Then it is more about stock-picking.”

In the financial sector, the fund is looking outside banks, which are growing their loan books strongly but not their earnings, and at companies such as Redecard, a credit card transaction processor.

Another outcome of the rating change is that investor confidence will be boosted enough to encourage investors to look beyond traditional commodities and move into domestic stocks, says Mr Larson of F&C.

F&C’s Latin American Equity fund has been adding Brazilian domestic companies to its portfolio with AmBev, the brewery, which Mr Larson is expecting to show strong volume growth this year. The fund has also added Unibanco to its bank holding and invested in the stocks of All, a railway company, and Localixa, an auto rental company.

But some concerns still remain in the investment community, particularly the spectre of rising inflation and the question of whether current strong commodity prices can be sustained.

By Jonathan Wheatley and Richard Lapper, FT.com site

Published: Feb 21, 2007

Jonathan Wheatley and Richard Lapper, speak to Brazil’s foreign minister Celso Amorim who insists Brazil is not about to adopt 21st century socialism.

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By Polya Lesova, MarketWatch

SALVADOR, Brazil (MarketWatch) — This beautiful coastal city rewards visitors with a variety of intense experiences.

In a single day, you can stroll back in time along the cobblestone streets of the historic Pelourinho district and take in its blend of restored and decaying colonial architecture. You can grab a bite of such typical Bahian foods as acaraje, ground black-eyed peas deep fried in dende oil and served with dried shrimp. After a leisurely afternoon soaking up the sun at the beach, you can savor a folklore show exemplifying the distinctive African-tinged culture of Bahia, including the capoeira martial-arts dance brought to Brazil by Angolan slaves.

For tourism entrepreneurs, such as the executives of Invest Tur, a start-up company engaged in tourism-oriented real-estate development, Bahia holds tremendous untapped potential.

“Brazil has an incredible mixture of natural beauty, [pleasant] climate, a welcoming population and a vast number of different cultural attractions,” said Carlos Novis Guimaraes, chairman of Invest Tur’s board.

“From the Amazon to tropical forests to colonial history to beaches, it’s a myriad of natural and very high-level attractions that have been vastly underdeveloped.”

These attractions, combined with a very positive macroeconomic view of Brazil, encouraged Guimaraes and his partners to launch Invest Tur.

In addition, soccer-mad Brazil is gearing up to host the 2014 World Cup, which will accelerate tourist inflows and speed up investment in tourism and infrastructure.

Last July, Invest Tur raised about $500 million in an initial public offering. Its revenue comes from the development and sale of second homes, as well as from co-development and co-ownership of resorts.

Invest Tur buys land and then builds luxurious hotels and second homes. It has about 15 projects in its portfolio. Txai Resort Itacare in Bahia is currently the lone hotel the company has in operation; other projects are in various stages of development.

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From Economist.com

Forty years after the murder of Martin Luther King, is America any closer to realising his dreams?

MARTIN LUTHER KING dreamed of a day when his children would be judged not by skin colour but by character. Black America has moved far since his murder on April 4th 1968, at least on the political front. Four decades ago racists blew up churches and beat civil-rights marchers. Today, at least at the top, black America has found its voice: a black woman, Condoleezza Rice, is secretary of state, and a black man, Barack Obama, may capture the presidency in November.

In social and economic matters across the black population as a whole, however, blacks are still much worse off than whites. They endure far greater rates of poverty, crime and other social ills. Efforts to tackle these problems have produced dismal results, as opposing groups lay claim to King’s dream of colour-blindness.

Schooling shows some of the most intractable difficulties. Last year the Supreme Court declared unconstitutional plans by two school districts to assign students, according to race, to various schools (in an effort to balance the mix of races in classrooms). The court narrowly declared that the plans were against the constitution’s promise of equality before the law.

Yet few tools exist to tackle de facto educational resegregation. Aggressive federal intervention in the 1960s got black and white pupils to mix more. But by the 1980s white parents and conservative jurists had turned against controversial programmes such as the bussing of students to distant schools. Today blacks are again increasingly concentrated, if not legally segregated, into failing schools. Some 73% of black children study where over half the students are non-white, and 38% attend “intensely segregated” schools (over 90% non-white). Those schools get less funding and have less qualified teachers than average. In turn fewer blacks finish their studies. The most hopeful estimate—a 2006 report by the Economic Policy Institute—suggests that 74% of black students graduate. That is still ten percentage points below whites.

Another difficulty on the road to King’s colour-blind America concerns higher education. In 2006, the average white student scored 1063, out of 1600 on the Scholastic Aptitude Test, which is widely used for university admissions. The average black score was just 863. A 200-point gap usually means the difference between admission to an excellent university and a decent one, or between a decent one and a mediocre one.

The traditional remedy was “affirmative action”: various measures by universities to ensure higher rates of black enrolment. Here, too, jurisprudence has pushed back, most notably in a 2003 Supreme Court ruling, Gratz v Bollinger. The court found that universities may seek “diversity” in admissions, but the mechanistic system used by the University of Michigan, which gave points to students merely for being black, was unconstitutional. A simultaneous ruling on Michigan’s law-school admissions programme provided some ambiguity, when the court said that an “individualised, holistic” review of each application could consider race as a factor. Voters in Michigan responded by approving a 2006 ballot measure that banned affirmative action. The issue may now arise in the presidential campaign. A prominent (and black) opponent of affirmative action, Ward Connerly, is trying to get an initiative on the ballots of five states that would ban public institutions from considering race, sex or ethnicity when, for example, hiring staff.

Affirmative action—and other efforts—have certainly failed to rid America of sharp inequalities. Past oppression probably counts for much of the persistence of black poverty: in 1967, according to the census, the average black person had an income that was just 54% of the average white one. By 2005 the gap had only closed to 64%. And lingering prejudice makes life harder for many black job applicants. Social experiments have repeatedly shown that employers who are offered two otherwise identical résumés prefer one that carries a typically white name to one with a typically black name. Increasingly it is poorer and less educated black Americans who use “typically black” names, according to research by Steven Levitt, an economist at the University of Chicago.

With educational and economic opportunities skewed, no wonder that health and welfare indicators are too: the Justice Department estimates that one in three black men will go to jail at some point. An astounding 68% of blacks are overweight or obese, compared with (a still high) 58% of whites. Black people get cancer slightly more often than whites (despite smoking the same amount), and are more than twice as likely to be shot dead. Overall, black lives are five years shorter than white ones.

King is widely remembered as an inspirational speaker and moral leader. But John McWhorter of the Manhattan Institute concludes that his more mundane efforts may end up mattering as much: “I wish more people thought about the long, hard work he did behind the scenes on policy and negotiation.” Rows continue over the relative merits of race-blind policies and the need to level out America’s inequalities. Four decades after King’s death much remains to be done.

Blog de Azanha

Atualizado em 17 de março de 2008 às 19:07 | Publicado em 17 de março de 2008 às 18:48

Reproduzo, abaixo, o press release oficial da Bear Stearns, uma das empresas mais tradicionais de Wall Street, quando trocou de presidente, no dia 8 de janeiro deste ano. Quem escreveu foi algum assessor ou assessora de imprensa, daí o tom hagiográfico sobre os executivos. Destaco alguns trechos para demonstrar claramente porque ninguém acredita em ninguém no mercado financeiro:

New York, New York • January 8, 2008 A Bear Stearns Companhias Inc. (NYSE:BSC) anunciou hoje que James E. Cayne informou à board de diretores seu desejo de deixar o posto de chief executive officer imediatamente. Embora o sr. Cayne vá se aposentar da firma, continuará como presidente do board de diretores e será sucedido no cargo de chief executive officer pelo presidente da Bear Stearns, Alan D. Schwartz.;

‘Jimmy tem muito do que se orgulhar - sob a liderança dele a Bear Stearns cresceu substancialmente nos últimos 15 anos, com o faturamente subindo para U$ 7 bilhões de U$ 2 bilhões e o número de empregados mais do que dobrando para 14 mil’, disse Vincent Tese, o principal diretor independente da Bear Stearns. ‘Foi uma decisão dele e estamos muito felizes que ele concordou em se manter ativamente envolvido com o negócio como presidente do board’.;

‘O reservatório de talento da companhia é particularmente profundo e o board é afortunado de tem alguém do calibre e experiência do Alan para assumir e liderar a empresa’, Tese acrescentou. ‘Alan passou mais de 30 anos na Bear Stearns; ele entende profundamente nosso negócio e nossa cultura e é um líder forte e um gerente que é admirado e respeitado em toda a organização’.

Mr. Cayne, que serviu como CEO da Bear Stearns desde 1993 e como presidente e CEO desde 2001, comentou, ‘estou grato que o board tem confiança em mim mas acredito que é a hora certa de implementar nosso plano de sucessão. Estamos começando um novo ano e estamos em um ponto decisivo no desenvolvimento de nosso negócio em um momento de mudanças rápidas em Wall Street’, ele disse. ‘Liderar a Bear Stearns e seus maravilhosos talentos tem sido um dos grandes prazeres de minha vida por quase 15 anos. Essas são pessoas que sabem como criar valor, que sabem como servir aos clientes bem e que estou certo vão continuar fazendo isso por muitos anos no futuro’.

‘Alan é um bom amigo e um dos executivos mais capazes de Wall Street. Ele é uma grande escolha para liderar a companhia nessa nova era e estou feliz de poder ajudá-lo’, Cayne acrescentou. ‘Tenho grande confiança nele e nessa suave transição. Estou satisfeito com minha nova posição, na qual sinto que pode usar o meu conhecimento institucional da Bear Stearns e de Wall Street para obter vantagem máxima para a firma nos próximos anos’.

‘Estou honrado de ter a oportunidade de liderar uma das grandes marcas de Wall Street’, disse Alan D. Schwartz, presidente da Bear Stearns. ‘Bear Stearns tem um futuro brilhante. Nossa empresa é sólida como uma rocha graças à liderança de Jimmy; investidores, clientes e empregados não devem esperar por mudanças abruptas no período adiante. Nós temos um posição forte de capital, uma cultura corporativa única e grande talento em toda a organização. Embora o ambiente de operação no mercado tenha sido difícil, tivemos um bom começo em 2008. Continuamos entusiasmados com nossos negócios em equity, banking e fixed income, nossas iniciativas de expansão internacional e o desenvolvimento de nossas plataformas de energia e gerenciamento de riqueza.’

Alan D. Schwartz entrou na Bear Stearns em 1976. Ele se tornou vice-presidente executivo e chefe da Divisão de Investimento Bancário em 1985. O senhor Schwartz foi nomeado presidente e co-chief operanting officer em junho de 2001 e presidente em agosto de 2007. ‘Jimmy Cayne é uma legenda de Wall Street. Aprendi muito com ele nos 30 anos em que somos amigos e parceiros aqui na Bear Stearns e estou feliz que vamos continuar a trabalhar juntos’, ele disse.

Você então me diz: pô Azenha, mas eles foram pegos de surpresa. Surpresa? Olhem o gráfico com o valor das ações da empresa nos últimos 12 meses:

Em maio de 2007 a ação da Bear Stearns custava 150 dólares. Quando houve a troca de presidente, em janeiro deste ano, estava em 90 dólares. Ora, em vez de fingir que estavam no paraíso os dirigentes do banco poderiam ter dito a verdade aos seus próprios funcionários. Alguma coisa do gênero ‘temos desafios pela frente’.

Em vez disso, tentaram tapar o sol com a peneira.

Nas últimas semanas, Alan Schwartz continuava dizendo que estava tudo bem. Olha aí quanto ele ganhou no ano fiscal de 2007: 35 milhões de dólares, ou seja, mais ou menos 3 milhões de dólares por mês.

Ele pode ter perdido dinheiro em ações. Mas com certeza, ao negociar a transferência do controle para o JPMorgan, manteve algum cargo ou no mínimo se arranjou uma belíssima aposentadoria.

Quantos funcionários da Bear Stearns serão demitidos? Ninguém sabe, ainda. Com certeza, milhares.

Culpa de quem? Nessa hora ninguém tem responsabilidade pelas decisões que tomou. A culpa “é do mercado”.

Kennedy Alencar

Uma semana em qualquer país é pouco tempo para conhecê-lo. Relatarei, portanto, impressões de uma viagem rápida à Índia, na qual a missão principal foi acompanhar a visita de três dias do presidente Luiz Inácio Lula da Silva ao país.

A descrição mais ouvida, especialmente de empresários e diplomatas brasileiros com alguma quilometragem de Índia: “Isto aqui é outro planeta”. Mais uma: “Não há comparação com o Brasil, a miséria aqui é muito maior”.

Ao final de uma semana, a primeira observação me pareceu equivocada. A segunda, exagerada.

Lula Marques/Folha Imagem

Indiano cuida de vacas próximo ao Taj Mahal

Chamar a Índia de outro planeta soa a provincianismo de parte da elite brasileira, tão “antenada” com os Estados Unidos e a Europa, tão certa da supremacia de seu modo de vida ocidental.

Berço de uma das civilizações mais antigas do mundo, a hindu, a Índia tem ainda forte influência das culturas islâmica e britânica. Em Goa, litoral oeste, há forte herança cultural da colonização portuguesa.

A Índia fica aqui no planeta Terra mesmo. Sua riqueza cultural é diversa, impressionante, forte. Das mais belas e ricas do mundo. Leia mais aqui

Kennedy Alencar, 39, é colunista da Folha Online e repórter especial da Folha em Brasília. Escreve para Pensata às sextas e para a coluna Brasília Online, sobre os bastidores da política federal, aos domingos.

E-mail: kalencar@folhasp.com.br

Photograph by Gary Knight

Gure Sarki, goat keeper, of Chaurmuni, Nepal.

TIMES MAGAZINE Tomorow

Published: June 10, 2007

The Arniko Highway climbs out of Kathmandu in long wending loops that pay twin tribute to the impassability of Himalayan terrain and the implausibility of its development. Outside Africa, no country is poorer than Nepal. Its per capita income looks like a misprint: $270 a year. Sudan’s is more than twice as high. Nearly two-thirds of Nepalis lack electricity. Half the preschoolers are malnourished. To the list of recent woes add regicide — 10 royals slaughtered in 2001 by a suicidal prince — and a Maoist insurgency.

With few resources of its own, Nepal relies on workers who have gone abroad for 12 percent of its G.D.P.

A few hours east of the city, a gravel road juts across a talc quarry, where the work would be disturbing enough even if the workers were not under five feet tall. Scores of young teenagers, barefoot and stunted, lug rocks from a lunar pit. The journey continues through a district capital flying Communist flags and ends, 12 hours after it began, above a forlorn canyon. Halfway down the cactus-lined slope, a destitute farmer named Gure Sarki recently bought four goats.

The story of Gure Sarki’s goats involves decades of thinking about foreign aid and the type of program often seen as modern practice at its best. Two years ago, an organizer appeared in the canyon to say that the Nepal government (with money from the World Bank) was making local grants for projects of poor villagers’ choosing. First villagers had to catalog their problems. With Sarki as chairman, Chaurmuni village made its list:

“Not able to eat for the whole year.”

“Not able to send children to school.”

“Lack of proper feed and fodder for the livestock.”

“Landslide and flood.”

“Not able to get the trust of the moneylender.”

“Insecurity and danger.”

A week later, they agreed to start a microcredit fund and expand their livestock herds. Twenty villagers would buy a total of 55 goats at $50 apiece. The plan specified who would serve on the goat-buying committee, the per diem the goat buyers would get and the interest rates on the loans (just over 1 percent). Those who were literate signed their names, while others inked fingerprints, and the papers went off to Kathmandu, where officials approved a $3,700 grant. Within two months of the first meeting, Sarki had his goats. They doubled the value of his livestock holdings. He prizes them so much that he sleeps beside them inside his house to protect them from leopards. He plans to sell them next year for a profit of about $25 each.

Lant Pritchett says he has a better idea. Pritchett, a development economist and practiced iconoclast, has just left the World Bank to teach at Harvard and to help Google plan its philanthropic efforts on global poverty. In a recent trip through Chaurmuni, he praised the goats as community-driven development at its best: a fast, flexible way of delivering tangible aid to the poor. “But Nepal isn’t going to goat its way out of poverty,” he said. Nor does he think that as a small, landlocked country Nepal can soon prosper through trade.

To those standard solutions, trade and aid, Pritchett would add a third: a big upset-the-applecart idea, equally offensive to the left and the right. He wants a giant guest-worker program that would put millions of the world’s poorest people to work in its richest economies. Never mind the goats; if you really want to help Gure Sarki, he says, let him cut your lawn. Pritchett’s nearly religious passion is reflected in the title of his migration manifesto: “Let Their People Come.” It was published last year to little acclaim — none at all, in fact — but that is Pritchett’s point. In a world in which rock stars fight for debt relief and students shun sweatshop apparel, he is vexed to find no placards raised for the cause of labor migration. If goods and money can travel, why can’t workers follow? What’s so special about borders? More…