Marcelo Kopel

💸The Brazilian real is one of the currencies that depreciated the most versus the dollar since the beginning of the year. Having started the year at 4.85 Brazilian reais per unit of U.S. dollar, the currency is now trading at 5.44 BRL/USD, depreciating by more than 12% in the year. But why is the currency falling so much and is it a trend to continue? There are mainly three reasons for the fall of the BRL this year: · 💲     The US reason: the United States is operating at a relatively high interest rate environment with the Federal Reserve (Fed) rate at 5.25% to 5.50%, which was supposed to be cut early in the year but with full employment, resilient inflation and economic growth should take further time before a reduction later in the year which contributes to an appreciation of the USD versus other currencies. · 🗣️     The Brazilian reason: Lack of confidence in the political agents to fulfill a discipled fiscal policy. Lula’s statements regarding the future president of the Central Bank and spending ceiling are destabilizing the forex market sending BRL to a severe depreciation versus the USD in a year where so far economic indicators still show signs of resilience. Brazilian GDP should grow 2.3% this year, inflation continues to slow to 2.52% and unemployment is at the lowest in the last 10 years at 7.1%. The fact that the Selic came down from 11.75% to 10.50% since the beginning of the year while the Fed rate did not, also contributes to the depreciation of the real. · 📢     Speculative reason: investors are speculating and betting on a supposed fiscal crisis in Brazil, exacerbating pricing movements in the forex market. The Central Bank manages US$355 billion which would be uses to defend the local currency despite statements from the president of the central bank, Mr. Campos Neto, that the bank will not intervene to contain the rise of the dollar. 🤔The big question now is to know whether this upward trend will be contained or if the BRL will test new all-time highs versus the USD in the near future. It will all depend on the government measures moving forward, but I’m afraid economic agents still remember Lula’s first government and the growth in public spending. #globaleconomy #capitalmarkets #investments

22

1 Comment

The Brazilian central bank showed the world what to do when the government lacks fiscal discipline – yesterday’s above-consensus (and unanimous) 100bps rate hike was a serious kick in the butt, and the board said it is ready to hike by the same amount in January and March if the current trends continue (=no fiscal consolidation). This morning’s price action shows that the market wants to see more progress on the policy front in order to: (1) cool the economy and inflation expectations; and (2) bring down local yields and reduce net interest payments as percentage of GDP (currently nearing 8% of GDP). In the meantime, the market (DI curve) prices in more frontloading – a 120bps hike in January, followed by 90bps more in March. The ball is in the government’s court. Source: Bloomberg LP

93

1 Comment

I, for one, find the idea of a BRICS currency laughable. a.) To have a common currency, you have to run a common monetary policy regime. The problem is that none of the BRICS are configured to do that with each other. Brazil’s economy has little in common with India’s, South Africa is very different than China, etc etc. b.) Usually – shared monetary policy will be more sensitive towards the needs of the largest economy. For instance, outside of the EU crisis, the ECB has traditionally been more responsive to shifts in the German backdrop. China’s economy is 5x the size of India’s, 8x that of Brazil/Russia, and 44x that of South Africa. Why would any of those countries want to cede monetary policy to China? c.) Several people have mentioned this already, but it’s important to internalize. There is more than $12trln in USD denominated liabilities that exists outside of the US (in the form of deposits and issuance). A substantial portion of that is owed to non-US creditors that are in BRICS countries. This (not reserves held) is THE reason why the USD won’t lose its reserve ccy status anytime soon. #fx #currencies #brics #usdollar #USD #markets #macro #economy #foreignexchange #reservecurrency

247

43 Comments

Is there a fundamental reason behind the recent slide in Brazilian asset prices, or is it all about sentiment and expectations? Bloomberg Economics' New Surprise Indices for Brazil suggest that higher-than-expected growth and inflation, and worse-than-expected fiscal results are at least partly to blame. Another fun project with the superb Ana Beatriz Galvao. Terminal clients can check the research at https://lnkd.in/dYFrmrUS.

40

🚀 Record Growth in Brazil’s Debt Capital Market in April! 🎋 Brazilian Debt Capital Markets sustained their secular growth in April, with total issuances reaching BRL 187 billion ($37B) in the first four months, representing a 139.1% increase compared to the same period last year. 📊 April highlights include: Interest Rates: In Brazil, there was a slight decrease in short-term maturities and a widening of long-term ones, affected by economic uncertainties and a more cautious view on government spending policies. In the US, the Fed indicated that interest rates will remain high for a longer period, which, combined with below-expected economic data, raised inflation concerns. Private Credit Markets: There was a slowdown in the offerings of #CRIs, #CRAs, and #debentures, with a 39% decrease in April compared to March, totaling BRL 33.8 billion ($7B). Factors such as problems in the agricultural sector and uncertainty regarding future Selic rate cuts contributed to this reduction and the increase in private credit spreads. Debentures, Commercial Notes (NC), and Real Estate #ABS (CRIs): Despite the slowdown compared to March, debentures and NCs continued to dominate issuances with a record BRL 115 billion ($23B) in the first four months compared to the same period in 2023. CRIs also showed strong growth, with an increase of 194%, totaling BRL 21.8 billion ($4B). Agricultural ABS (CRAs): These also performed impressively, totaling BRL 13.5 billion ($3B), an increase of 122% in the same period. 🔍 Market Radar: Impact of Spending Policies: Government reactions regarding spending policies are increasing uncertainties, which could influence the term structure of interest rates and investment decisions. Agribusiness: The first quarter was challenging for #agriculture. Requests for debt extensions, bankruptcy filings, and missed expectations made the cost of capital higher and more restrictive. Another point to watch is the impact of heavy rains in Rio Grande do Sul. Want to better understand how these trends can affect your investments or your business? Check out our attached monthly newsletter for detailed analyses and deep market insights. 💡 Exploring debt financing as an alternative to equity? Contact Raquel Silberberg Kryss, Bruno Valsecchi, Igor Donni, Felipe Moraes, Arthur O'Keefe, and discover how Bamboo Debt Capital Markets Platform, Brazil’s Premier Tech-driven DCM Dealer, can boost your company’s growth with our innovative debt solutions. Pioneering Access to Debt Capital Markets, together we can navigate the complexities of today’s market and unlock new opportunities for sustainable growth. 🎋 We look forward to exploring these opportunities with you! 🚀🎋 Article credit: Natan Oliveira Santos - Thank you! 🙏 #DebtCapitalMarkets #Debentures #Investment #BambooDCM #ABS #StructuredCredit

58

2 Comments

Lack of Direct Intense oversight Killed Garantia in 1997 and Lojas Americanas in 2023 : 3G Capital first learned that with Banco Garantia (what Warren Buffet describes as an “ I-have-to-be-smart-every-day business”): investment banks with a large trading footprint are arguably some of the most difficult businesses to run, because of the diversity of risks that need to be managed on an hourly basis: price,liquidity, and counterparty, just to name a few. The experience with Banco Garantia was a hard one: the bank suffered important losses in the Asian Crisis in 1997, and stumbled until it was sold to CreditSuisse First Boston in 1999* . Jorge Paulo Lemann, remembers that period with a certain bitterness, which was described in Sonho Grande, a Brazilian book authored by local journalist Cristiane Correa; he concluded that the lack of direct, intense oversight allowed traders to take too many risks. And the Same has been repeated with Lojas Americanas.

1

Brazil spent $17bn (Bloomberg) or ~5% of international reserves x-gold to stabilize BRL. Is it affordable? Yes. Brazil’s reserves (x-gold) are well above the recommended level (IMF’s ARA framework). Brazil is also a net sovereign creditor (international reserves > public sector external debt).

73

3 Comments

Nice chart from Robin Brooks on flows into Brazilian financial markets. The market goes up when foreigners move in (though a distinction between foreign money and offshore Brazilian money is difficult to make). Brazilian residents are almost always taking money out, preferring U.S. stocks and Miami real estate.#emergingmarkets

19

💖 Love, Money, and Relationships 💸 I got married earlier this year, and my partner and I had a conversation about managing our finances as a household. We realized how important it is to have a balanced system, one that allows us to build a solid corpus (thanks, #FIRE movement!) while enjoying our current lifestyle. After speaking with a couple of our married friends, we saw all sorts of setups—Splitwise, Google Sheets, or some other split of expenses and investments. But through these discussions, we also noticed how income-based power dynamics can complicate things and how financial harmony is crucial for relationship harmony. Should we pool all our money in a joint account and compromise on personal access and privacy? Should we keep all of our money private and then split expenses equally? Ultimately, we found that maintaining individual accounts alongside a shared household account for joint expenses and investments worked best. Both partners can contribute and have full access to this account via UPI and other platforms. That insight led Arnav Grover and me to conceptualize Rovia (https://rovia.one/), a financial platform for households to manage their finances better. We’re eager to hear from more married couples about how they manage shared expenses as we start building Rovia and shape the product to suit your needs! If you or someone you know would be interested in sharing insights, we'd love to hear from you! Schedule a call with us here: https://lnkd.in/gqSPby_5 Thanks for the support! #pfm #jointbanking #householdfinances #personalfinance

81

5 Comments

Pre Budget Economists Meet ; Economists warn against tighter fiscal consolidation - 1. Pre-Budget Consultations - Economists presented their views to the finance ministry during the first pre-Budget meeting for FY26, which will be presented on February 1, 2025. 2. Warning Against Aggressive Fiscal Consolidation - Economists recommended avoiding a sharper fiscal consolidation than the 4.5% fiscal deficit target for FY26, emphasizing the need to support economic growth. 3. Personal Income Tax Cuts - Reducing personal income tax rates was suggested to boost consumption and economic activity. 4. Increased Capital Expenditure ( Capex ) - Economists emphasized a substantial increase in capex allocation for FY26, warning against a modest rise. 5. Current Fiscal Year Capex Performance - FY25 capex progress is slow, with only Rs 4.66 trillion (42%) of the Rs 11.11 trillion target spent during April-October. This is lower than the 55% achievement in the same period of FY24, and the capex may fall short by Rs 1 lakh crore this fiscal year. 6. Need to Spur Manufacturing - Economists highlighted the need for policies to revitalize the manufacturing sector, which has underperformed in FY25. 7. GDP Growth Trends - GDP growth was 6% in H1 FY25, with the full-year estimate at 6.6%. This is lower than the RBI’s earlier projection of 7.2%, which was revised down due to weaker H1 performance. These recommendations aim to balance fiscal prudence with growth-supportive measures. #Rbi #Budget2025 #NirmalaSitharaman @nsitharamanoffc @nsitharaman

12

2 Comments

The growth in the billionaire population and their cumulative wealth over the last decade reflects significant economic and technological shifts globally. Between 2015 and 2024, the number of billionaires increased by 53%, from 1,757 to 2,682, while their combined wealth surged by 121%, rising from $6.3 trillion to $14 trillion. This rapid increase underscores the impact of globalization, technology-driven industries, and emerging markets. Key Highlights - 1. Billionaire Wealth Growth Rates - Between 2015 and 2020, billionaire wealth globally grew at an annual rate of 10%. Since 2020, the growth slowed significantly, averaging just 1% annually. However, regions like the US, EMEA, and India bucked this trend with continued wealth expansion. 2. Self-Made vs. Inherited Wealth - Of the 2,682 billionaires in 2024, 70% ( 1,877 ) are self-made, demonstrating the prominence of entrepreneurship and innovation. The remaining 30% ( 805 ) come from multigenerational wealth. 3. Tech Sector's Dominance - Tech billionaires have experienced the most significant wealth growth, with their cumulative fortunes tripling from $788.9 billion in 2015 to $2.4 trillion in 2024. Early wealth drivers included e-commerce, social media, and digital payments. More recently, the surge in generative AI, alongside advancements in #cybersecurity, #fintech, 3D printing, and #Robotics, has fueled growth. These trends highlight the transformative role of technology and innovation in wealth creation, while also emphasizing regional disparities and the evolving sources of #BILLIONAIRE wealth globally. #Elonmusk #Mukeshambani #gautamadani #billgates #Jeffbezos

7

Which Countries Are Stashing The Most Wealth Offshore? Individuals and corporations send money abroad for various reasons, including seeking better investment opportunities, minimizing tax burdens, and protecting their wealth in low-tax or no-tax jurisdictions. This graphic, via Visual Capitalist's Bruno Venditti, shows the top 10 countries that owned the most offshore financial wealth in 2022, according to data from the Atlas of the Offshore World. Chinese Hold Over $2 Trillion Abroad Chinese mainland businesses and individuals hold over $2 trillion abroad, nearly matching Mexico’s GDP. Hong Kong is a top destination for Chinese corporations and individuals conducting offshore operations. Meanwhile, the Cayman Islands, Switzerland, and Singapore are common destinations for U.S. offshore operations. American hold almost $1.6 trillion abroad. Together, individuals and companies from the UK, France, and Germany hold $2.1 trillion abroad. What Is a Tax Haven? A tax haven offers foreign businesses and individuals minimal or no tax liability. They also have politically and economically stable environments. Entities may legally use tax havens to stash money earned abroad while avoiding higher taxes in the U.S. and other nations. For this kind of operation, companies often establish a shell corporation, which is a corporation without active business operations or significant assets in the country they are located.

29

5 Comments

The devaluation of the real presents a unique entry point for foreign investors to capitalize on Brazil’s vast market potential The significant devaluation of the Brazilian real in recent months, as depicted in the graph released at The Economist, presents a remarkable opportunity for foreign investors considering mergers and acquisitions (M&A) in Brazil in 2025. With the real losing substantial value against the dollar, the cost of acquiring Brazilian assets has become more affordable for international companies and private equity funds. Here’s why this trend is a game-changer: • Favorable Exchange Rates: The weakened real means that assets priced in Brazilian currency are more accessible to foreign investors. Dollar-denominated investors can acquire more value for their investments, stretching capital further than in previous years. • Valuation Gap: The currency devaluation often leads to a misalignment between local market valuations and global benchmarks, providing opportunities to acquire undervalued businesses with high growth potential. • Market Diversification: The devaluation makes Brazil an excellent candidate for portfolio diversification, particularly for investors seeking exposure to emerging markets with high growth potential. Sectors like agribusiness, renewable energy, and technology are poised for growth, making them attractive for M&A. By acting strategically and navigating local challenges, investors can unlock substantial returns in one of the most dynamic emerging markets globally.

83

=> Brazil’s 2024 primary deficit is getting smaller (1.65% of GDP in Nov, 12m running), but high interest payments keep the nominal deficit close to 10% of GDP => Key challenges for 2025 - revenue sustainability and credible spending cuts

46

Paytm's Stake Sale in PayPay - 1. Stake Sale Details 💰 Seller - One97 Communications (Paytm's parent company). Stake Sold - 5.4% in Japanese payment firm PayPay. Buyer - SoftBank Vision Fund 2. Deal Value - ₹2,364 crore (~$280 million). 2. Valuation 🚀 The transaction values PayPay at ₹1.06 trillion (~$7 billion). 3. Purpose and Impact 📈 Proceeds will add to Paytm’s cash reserves, which were ₹10,000 crore as of September 2024. Sale aligns with Paytm's strategy to streamline its portfolio and boost liquidity. 4. Recent Divestment 📋 Paytm recently sold its entertainment and ticketing business Paytm Insider to #Zomato for ₹2,048 crore. 5. Future Plans 📝 Paytm CFO Madhur Deora stated that the board will decide the use of cash reserves once the core business becomes cash positive. 6. Stock Exchange Filing 🗂️ The sale was approved by One97 Communications Singapore, the subsidiary entity holding PayPay shares. This move reflects Paytm's focus on enhancing liquidity and prioritizing core business operations. #Paytm #PayPay #softbank #One97

7

New demat account additions hit 7 month low in November - The pace of new demat account openings appears to be slowing down, as indicated by #November data from depositories. While the overall number of demat accounts continues to rise, the rate of growth is tapering off compared to recent months. In November, 31.7 lakh new accounts were opened, marking the lowest figure in seven months. This was a decline from October's 33.4 lakh new accounts and well below the average of 39.7 lakh monthly openings recorded between January and October 2024. Despite this #slowdown in new account openings, the total number of demat accounts stood at 182.1 million by the end of November, a rise from 178.9 million the previous month. #NSDL #CDSL #Demataccount

5