Private-sector capital requirements are set for a dramatic upturn in Brazil, principally driven by a privatization programme expected to involve the sale of assets worth more than $80 billion between now and 2000. As well as buyers issuing debt and equity in order to purchase the assets, newly created private-sector companies in capital-hungry industries such as electricity generation and telecoms will quickly embark on ambitious expansion programmes that will require additional financing.
Much of this money will be raised on the international debt markets. But although the investor base for Brazilian assets has been broadening, investment bankers are aware that being overdependent on foreign bond market access is to give hostages to fortune. This point was underscored by the July crises in some Asian currency markets, which led to volatility in Latin American debt issues in general as well as specific worries over a possible speculative attack on the real, which is linked to the US dollar as a key element of the three-year-old stabilization plan.
"Brazil has been lucky with its timing, since the privatizations so far have coincided with very liquid international markets," says a banker in Sao Paulo.