Emerging Markets Roundup: Brazil


By Antonio Guerrero

The Dilma Rousseff administration signed into law new regulations that open the country’s ports to greater private-sector investments.

Approved in June, the policies are expected to help attract up to $12 billion from the private sector, mainly in greenfield projects near existing port facilities. The law calls for auctioning leases at the country’s two largest ports before year-end, followed by other lease auctions after January 2014. Deficient port infrastructure has been blamed for hampering Brazil’s highly competitive agricultural sector, because of costly logistics bottlenecks. Greater private investment will foster increased competition among port operators, thereby reducing cargo-handling costs.

International investors are finding Brazilian bond and currency futures markets more attractive after the government in June eliminated the 6% IOF (financial transactions tax) on foreign investments in local bonds and the 1% IOF on currency derivatives. The government first imposed the bond tax in 2010, amid a self-proclaimed war on foreign fund inflows. Finance minister Guido Mantega said the tax’s elimination was prompted by recent signs from the US Federal Reserve that it is reducing what he felt had been an expansionist policy. Mantega was vocal against a Fed stance that he contends unleashed a “tsunami” of liquidity on emerging markets, inflating currencies and hurting local competitiveness.

With Brazil’s economic slowdown and worrisome public finances, Standard & Poor’s (S&P) in June revised the country’s ratings outlook to negative.