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Has Brazil opened a window, or door to opportunity?

Success for pensions reform in the Congress – the long-held litmus test of Brazilian recovery – has buoyed asset prices and led to a flurry of activity.

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The country’s stock index is at record levels (it broke the 106,000 level in mid-July and it is also near to a record in dollar terms), which has led to a flood of new equity issuance, most of it secondary deals. 

Investment banks are having a good year: according to data provider Dealogic in the first half of 2019 there were 19 deals worth a combined volume of $8,411, compared to $3,130 in the first half of last year. And the run rate is increasing. 

As Euromoney went to press, there had already been more than R$10 billion ($2.7 billion) in deals in a pipeline chock full of follow-on deals.

On 23 July alone, Petrobras sold R$8.6 billion worth of shares in BR Distribuidora, in what was effectively a privatization of the company, and bankers say that domestic investors remain very keen to participate in a combination of state-driven and private sales. 

However, some bankers report that investors are a little wary of follow-ons that are exits of investors or large-scale reductions in management ownership as they could signal inside knowledge that current valuations are frothy.




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