Brazil Sept. Budget Deficit Widens to Nine-Month High (Update3) - Bloomberg.com

Brazil Sept. Budget Deficit Widens to Nine-Month High (Update3) - Bloomberg.com:
By Andre Soliani and Joshua Goodman

Oct. 30 (Bloomberg) -- Brazil’s budget deficit widened more than expected in September to a nine-month high as the government carried out its stimulus plan amid falling revenue.

The deficit, including the federal government, local governments and state companies, widened to 22.4 billion ($13 billion) from 8.16 billion reais in August, the central bank said in a report distributed today in Brasilia. Analysts expected a gap of 12 billion reais, according to the median of three forecasts in a Bloomberg survey. It was the widest gap for the month of September since the series started in 2001." [more...]

Brazil Corporate Debt Fund to Raise $1.67 Billion, Valor Says

Brazil Corporate Debt Fund to Raise $1.67 Billion, Valor Says - Bloomberg.com:

By Camila Fontana

Oct. 30 (Bloomberg) -- Credit Suisse Group AG and Banco Santander SA’s Brazilian units together launched a corporate debt fund aiming to raise as much as 2.9 billion reais ($1.67 billion), Valor Economico reported, citing an interview with Jean-Pierre Cote Gil, the Standard & Poor’s executive in charge of rating the fund’s shares.

The minimum investment in the fund is 1 million reais, and companies will be able to borrow up to 350 million reais, the Sao Paulo-based newspaper reported.

To contact the reporter on this story: Camila Fontana Correa in Sao Paulo at cfontana@bloomberg.net.
Last Updated: October 30, 2009 06:51 EDT"

Itau Europa to Sell Three-Year Real-Linked Notes (Update2) - Bloomberg.com

Itau Europa to Sell Three-Year Real-Linked Notes (Update2) - Bloomberg.com:
By Camila Fontana

Oct. 28 (Bloomberg) -- Itau Unibanco Holding SA’s European unit plans to sell as much as $100 million of real-linked structured notes this week.

The unit of Brazil’s biggest non-government bank, known as Banco Itau Europa, will sell the three-year securities at an interest rate of 10.5 percent in a private placement, said Mauro Morelli, a member of the company’s executive board. The dollar- denominated notes will be linked to the real, meaning interest and principal payments will fluctuate with movements in Brazil’s currency.

Itau is tapping into demand from investors looking to buy real-based assets without having to pay a 2 percent tax Brazil implemented last week on foreigners’ purchases of stocks and fixed-income assets, Morelli said. The government imposed the tax, known as IOF, in a bid to contain a rally that has made the real the best-performing major currency this year.

“We are issuing to meet demand from investors who want exposure to the real and need an alterative to the IOF in Brazil,” Morelli said in a telephone interview from Lisbon.

To contact the reporter on this story: Camila Fontana Correa in Sao Paulo at cfontana@bloomberg.net
Last Updated: October 28, 2009 17:02 EDT"

Brazil’s Real Falls on Speculation Government May Curb Gains - Bloomberg.com

Brazil’s Real Falls on Speculation Government May Curb Gains - Bloomberg.com
By Camila Fontana

Oct. 26 (Bloomberg) -- Brazil’s real slid for the first time in four days on speculation the government may take additional steps to curb the currency’s rally.

The real dropped 1 percent to 1.7350 per U.S. dollar at 3:08 p.m. New York time, from 1.7173 on Oct. 23. The decline cut the currency’s appreciation this year to 33 percent. Last week the government imposed a 2 percent tax on foreign purchases of stocks and fixed-income securities.

“The market is wondering what the government is going to do after we break the 1.7 barrier,” said Paulo Petrassi, manager of fixed income investments at Leme Investimentos. The government may increase the tax rate on foreign inflows, he said in a phone interview from Florianopolis.

A spokeswoman from the Finance Ministry in Brasilia who declined to give her name said new measures to contain the real’s gains are not off the table, but that no announcement is imminent.

Brazilian authorities will most likely use the country’s sovereign fund to buy dollars in an effort to stop the currency from climbing even further, said Antonio Madeira, chief economist at MCM Consultores Associados in Sao Paulo.

Fixed income manager Rafael Correia of GAP Asset Management said in a phone interview from Rio de Janeiro that if the Brazilian currency reaches 1.8 per dollar, it will be a good opportunity to buy reais again.

The real opened higher and reached 1.7020 in early trading. The proximity to 1.7 prompted many local investors to buy dollars to prevent losses, said Roberto Kropp, a director at Daycoval Asset Management in an interview from Sao Paulo. The central bank bought dollars in the spot market today for 1.7059 reais each.

In the overnight interest-rates futures market, the yield on the contract due January 2011 rose four basis points, or 0.04 percentage point, to 10.28 percent, according to Bloomberg data.

To contact the reporter responsible for this story: Camila Fontana at cfontana@bloomberg.net
Last Updated: October 26, 2009 15:24 EDT"

Fibria Sells $1 Billion of 10-Year Bonds to Yield 9.375 Percent - Bloomberg.com

Fibria Sells $1 Billion of 10-Year Bonds to Yield 9.375 Percent - Bloomberg.com

By Veronica Navarro Espinosa

Oct. 26 (Bloomberg) -- Fibria, the world’s biggest pulp maker formed by Votorantim Celulose & Papel SA’s takeover of Aracruz Celulose SA, sold $1 billion of 10-year.

The Sao-Paulo based company issued the bonds to yield 9.375 percent, according to Bloomberg data. Bank of America Corp., Deutsche Bank AG and JPMorgan Chase & Co. arranged the bond sale, according to a person familiar with the transaction who asked not to be identified because he’s not authorized to speak publicly.

Fibria was formed when VCP rescued Aracruz after it reported $2.13 billion in losses on currency derivatives. Proceeds from the bond sale would be used to “pre-pay existing derivatives-related debt” at Aracruz, Moody’s Investors Service said Oct. 16. Moody’s rated the notes Ba1, one level below investment grade.

Rodrigo Bueno, a spokesman at Fibria, declined to comment on the sale.

Fibria is selling bonds overseas as a recovery in Latin America’s biggest economy boosts demand for Brazilian corporate debt. Last week Petroleo Brasileiro SA, Brazil’s state- controlled oil producer, sold $4 billion of bonds while Tam SA, the country’s biggest airline by passengers carried, sold $300 million of 10-year notes.

To contact the reporter on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net"

BRL Bonds Run

BRL Bonds Run

Prices are indicative only

                               Bid        Ask    B A   Bid   Ask
Security                  Px         Px      SZ SZ YTM             YTM Notes
--------------------------------------------------------------------------------
BANVOR 10⅝ 14 101.000-104.000 2x    10.34/ 9.50
BANVOR 16.2 10 105.500-107.500 2x2 10.48/ 8.57
KFW 12 10 101.750-102.750 2x2 8.34/ 6.62
RBSPAR 11¼ 17 84.000- 89.000 2x 14.81/13.60
BANSAF 10⅞ 17 93.000- 98.000 2x 12.34/11.28
CESPBZ 9¾ 15 69.450- 70.700 2x2 9.46/ 8.98 9.51/9.03
SANTAN 16.2 10 101.625-102.375 2x2 9.88/ 7.75
BRAZIL 12½ 16 114.500-115.500 2x2 9.35/ 9.16
BRAZIL 12½ 22 113.750-114.750 2x2 10.47/10.34
BRAZIL 10¼ 28 100.000-101.000 2x2 10.25/10.12
BRAZIL 5YR Sen 125.000-135.000                               Reference Only
BRAZILIAN REAL BRL                                                   Ref 1.7080

Petrobras $4 billion bond issue Brazil's largest since 2000

Petrobras $4 billion bond issue Brazil's largest since 2000 - MarketWatch
Oct. 24, 2009, 10:19 a.m. EDT

By Riva Froymovich

NEW YORK (MarketWatch) -- Brazilian state-run energy company Petroleo Brasileiro S.A., or Petrobras, sold a total of $4 billion in bonds Friday in two parts, the largest debt sale out of Brazil since the start of this decade.

Massive interest in the issue comes despite a new Brazilian tax law announced Monday, which levies a 2% tax on foreign investment in local equities and fixed-income assets in order to slow appreciation in the real against the dollar.

'That has not filtered into the appetite for Brazilian risk,' said Enrique Alvarez, head of Latin America fixed-income research at IDEAglobal in New York.

Alvarez noted that outstanding debt on Brazil's reference 2040 bond is $4 billion, equal to the combined size of the Petrobras deal.

This is just another sign that, despite the slew of fresh issuance out of emerging markets this year, appetite remains healthy following a glut during the height of the financial crisis. Debt out of Brazil is all the more attractive now, after Moody's Investors Service upgraded Brazil to investment-grade last month, more than a year after Standard & Poor's and Fitch Rating did the same.

Brazilian companies can now take advantage of this status, particularly companies with the implicit backing of the state, such as Petrobras, to issue longer-dated maturities.

Petrobras sold $2.5 billion in 10-year notes Friday at 238.5 basis points over Treasurys to yield 5.875%. It sold $1.5 billion in 30-year notes at 270.6 basis points over Treasurys to yield 7.0%--and it could have sold more.

The ratings on the bonds were Baa1 by Moody's Investors Service, BBB- by Standard & Poor's and BBB by Fitch Ratings.

Both offerings were oversubscribed. Demand for the 10-year notes came in at about $7.5 billion and $4 billion for the 30-year notes.

This is the largest-ever bond issue for a Brazilian company, breaking the title held by giant miner Companhia Vale do Rio Doce (RIO), which sold $3.75 billion in November 2006. It is the second-largest issue for any Latin American company, after Venezuelan PdVSA’s $7.5 billion multi-tranche bond sale in 2007.

But, as a quasi-sovereign firm, analysts say it would be fairer to compare the size of this issue to Brazilian sovereign debt. And still, this is one for the record books. It marks the largest bond sale since Brazil's 2000 issuance of more than $5 billion in debt.

Most investors came from the U.S--about 65% of demand for the 10-year note and 80% for the 30-year bonds. European investors made up 65% of the bids for the shorter-dated bonds, and 13% for the longer-dated ones. Asia bid for about $500 million in the 10-years and asked for about 7% of the 30-years.

Petrobras' attraction now is also tied to their recent discovery of a large offshore light-oil reserves in the subsalt layer off the coast of the southeastern state of Espirito Santo.

'This find is playing a big role in such a large and successful offering,' said Alvarez. 'Knowing that Petrobras is going to need more financing going forward...you can expect subsequent amounts years out.'

The success of this issue is evidence that gaining additional sources of revenue through new debt won't be a problem, he said, as long as oil prices remain near normal historical rice levels.

Earlier this week, Petrobras said that it planned to issue the bond in an effort to pay down a $6.5 billion bridge loan it received earlier this year.

The bonds were issued through the company's international subsidiary, Petrobras International Finance Company, or Pifco.

The company has accessed the international debt market two times so far this year. In February, the company raised $1.5 billion with a 10-year overseas bond issue. In June, Petrobras raised $1.25 billion with paper of the same maturity.

The risk premium on Brazilian debt strengthened Friday on JPMorgan's Emerging Markets Bond Index Global. It was three basis points tighter at 219 basis points over Treasurys. However, the return on the index was down 0.45% amid this new supply. Brazil's benchmark bond, the Global 2040, lost 1 3/8 to 133 bid, according to Reuters.

The overall Embig was nine basis points tighter at 309 basis points over Treasurys in late afternoon trading. The index lost 0.17% on the day."

IMF Official: Brazil Should Phase Out Fiscal Stimulus - WSJ.com

IMF Official: Brazil Should Phase Out Fiscal Stimulus - WSJ.com: "
OCTOBER 23, 2009, 3:20 P.M. ET

SAO PAULO (Dow Jones)-- The best way for Brazil to protect its currency from additional, and unwanted, appreciation is to phase out fiscal stimulus measures, a top International Monetary Fund official said Friday.

'Given that Brazil has already emerged from the global crisis and is growing strongly, it is now time to remove fiscal stimulus,' IMF Western Hemisphere Director Nicolas Eyzaguirre told reporters. 'If not, Brazil will face inflation and rising interest rates.'

Higher interest rates, in turn, could bring in more speculative investment from overseas, leading to persistent appreciation of the Brazilian real.

The Brazilian real has gained 35% against the U.S. dollar so far this year. The strong real has hurt exporters. It has also led to a deterioration of trade and current account balances.

Earlier Friday, the Brazilian Central Bank released September current account figures, showing a monthly deficit of $2.31 billion, up sharply from $822 million in August. Brazil's September trade surplus dwindled to $1.33 billion from $3.1 billion the previous month.

Earlier this week, the Brazilian government slapped a 2% tax on incoming foreign investments in the areas of fixed-income and stocks. The frank purpose of the measure was to reduce foreign investment inflows to halt the appreciation of the real.

Eyzaguirre said, 'We understand perfectly how a country would wish to protect itself in a situation like this. The obvious thing to do is to open your umbrella when it's raining dollars.'

But Eyzaguirre said the increased taxation alone might not be enough to halt the real's appreciation. For that reason, he recommended removal of fiscal stimulus measures.

'Brazil has created a middle class, which has stepped up consumption to the point where fiscal stimulus is no longer necessary and can be phased out,' Eyzaguirre said.

-By Tom Murphy, Dow Jones Newswires; 55-11-2847-4519; brazil@dowjones.com"

Petrobras to Sell $4 Billion of 10-, 30-Year Bonds (Update2) - Bloomberg.com

Petrobras to Sell $4 Billion of 10-, 30-Year Bonds (Update2) - Bloomberg.com
By Veronica Navarro Espinosa

Oct. 23 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil producer, may sell $4 billion of 10- and 30-year bonds as soon as today to repay a bridge loan, according to a person familiar with the transaction.

Petrobras, as the company is known, may sell $2.5 billion of 10-year bonds to yield 5.875 percent and $1.5 billion of 30- year bonds to yield 7 percent, said the person, who declined to be identified because terms aren’t set. Banco Santander SA, Citigroup Inc., HSBC Holdings Plc and JPMorgan Chase & Co. are arranging the bond sale, the person said.

The Rio de Janeiro-based company will use proceeds of the bond sale to repay debt outstanding from a $6.5 billion bridge loan that it signed in January, Petrobras said in an Oct. 20 statement. The company is tapping international credit markets for the third time this year as a recovery in Latin America’s biggest economy boosts demand for the securities.

“Brazil is extremely hot right now and that makes the reception of such a credit a lot easier,” said Luz Padilla, who manages $1.5 billion in emerging-markets debt at TCW Group Inc. in Los Angeles. “You’re going to get a look from people like us, the traditional emerging-markets buyer, on this name but also from the developed market, investment-grade buyers.”

The company sold $1.25 billion of 10-year bonds in July in a re-opening of securities it first issued in February. The yield on the $2.75 billion of notes due in 2019 has tumbled to 5.83 percent from 7.96 percent in February, according to Bloomberg data. The bond’s price has climbed to 114.64 cents on the dollar from 99.44 cents during that period.

Oil Deposits

Petrobras Chief Executive Officer Jose Sergio Gabrielli said last month proven oil reserves may more than double in two to three years to as much as 35 billion barrels.

Petrobras plans to invest about $170 billion in the next five years to boost crude output by 53 percent. The company is spending billions to tap offshore oil deposits including the Tupi field, the largest discovery in the Americas since Mexico’s Cantarell in 1976.

To contact the reporter on this story: Veronica Espinosa in New York at vespinosa@bloomberg.net
Last Updated: October 23, 2009 13:55 EDT"

Brazil - A Quick Guide to the IOF Tax

IOF on Foreign Currency Inflows

Brazilian Finance Minister Guido Mantega announced last Monday that
capital inflows regarding portfolio investments and investments in local
assets will be subject to IOF taxation (at 2%, to be paid on the
settlement date of the BRL 'Reais'). This is the main channel used by
foreign investors to invest both in Equities and Fixed income in Brazil.

The IOF over FX transactions to buy any assets, through the Resolution
2689 was increased from 0% to 2%, regardless how long the investment
remains in Brazil (short or long term).

This is the first time the government imposes an IOF over investment in
equities. From March to October 2008, the IOF for fixed income was
subject to an IOF of 1.5% but for equities remained unchanged at 0%.

In other words:

- All Capital Inflows to Fixed income and Equity Investments are
subject to the IOF taxation at 2%.
- The IOF must be paid in the Foreign Exchange Transaction when
the foreign investor is Buying BRL in all transactions closed from
October 20 onward
(FX contracts closed until October 19 are exempt of the new IOF).
- The IOF tax must be applied on the gross up value, i.e. If you
traded BRL 1.000.000,00 at Bovespa so, the FX contract must be closed
for BRL 1.020.408,16 = BRL 1.000.000,00 / 0,98. Please always observe
this rule for the next FX transactions. See table below:

Amount Traded at BOVESPA

BRL 1.000.000,00
FX Amount to be Considered
BRL 1.020.408,16
IOF Tax on the FX contract
BRL 20.408,16
NET BRL Amount to be paid to local custodian
BRL 1.000.000,00

Calculation
BRL 1.000.000 (100%-2%) = Grossed up Amount = BRL 1.020.408,16 = FX
amount to be closed.

- Please take note that the event to be taxed is the FX contract and
the responsible to collect the IOF on the FX transactions is the Bank
where the FX deal is closed and not the local custodian."

Brazil Yields Drop as Bets for Hike in Rates Are Pushed Forward - Bloomberg.com

Brazil Yields Drop as Bets for Hike in Rates Are Pushed Forward - Bloomberg.com
By Camila Fontana

Oct. 22 (Bloomberg) -- Yields on Brazilian short-term interest-rate futures had their biggest drop in almost three weeks, signaling reduced expectations for an increase in borrowing costs early next year.

The yield on the contract due January 2011 tumbled 10 basis points, or 0.1 percentage point, to 10.27 percent, according to Bloomberg data. It was the largest slide since Oct. 2. The contract expiring October 2010 also fell 10 basis points, to 9.76 percent.

The central bank kept its key interest rate at a record low last night and said its level was “consistent” with a non- inflationary recovery, signaling that no increase in borrowing costs is imminent. In a statement accompanying the board’s unanimous decision to keep the benchmark rate at 8.75 percent, the bank repeated word-for-word the communique issued Sept. 2 when it paused after five straight cuts this year.

The decision brought “calm” to the market and pushed forward the expectations for a hike in basic rates, Jose Vicente Brito, head of proprietary trading at Banco Paulista, said in a phone interview from Sao Paulo.

To contact the reporter on this story: Camila Fontana Correa in Sao Paulo at cfontana@bloomberg.net.
Last Updated: October 22, 2009 14:13 EDT"

Brazil May Change New Tax If It’s Ineffective, Lula Tells Folha - Bloomberg.com

Brazil May Change New Tax If It’s Ineffective, Lula Tells Folha - Bloomberg.com

By Laura Price

Oct. 22 (Bloomberg) -- Brazilian President Luiz Inacio Lula da Silva said his government is ready to change and may even drop a newly imposed tax on foreign purchases of fixed-income securities and stocks if the levy fails to curb the Brazilian currency’s gain, Folha de S. Paulo newspaper reported.

Lula also said his government will stick to a plan to tax savings accounts over 50,000 reais ($28,815), the newspaper reported. Brazil may consider different options within the plan to tax savings, Lula told the newspaper in an interview.

The president also said he ordered the country’s Finance Ministry to pay overdue tax rebates by December to help consumers, Folha reported.

To contact the reporter on this story: Laura Price in London at lprice3@bloomberg.net
Last Updated: October 22, 2009 07:23 EDT"

Brazil Officials Seek Credit Rating On Rio To Attract Funds - WSJ.com

Brazil Officials Seek Credit Rating On Rio To Attract Funds - WSJ.com

By Kejal Vyas
Of DOW JONES NEWSWIRES


MIAMI (Dow Jones)--Brazilian officials are in talks with ratings agencies to assign ratings to the city of Rio de Janeiro as part of a broader effort to attract more investors, the state finance secretary told Dow Jones Newswires Wednesday.

'Now is the right time,' said Joaquim Levy, adding that the move would be 'a signaling device' for investors. He said a rating on the city could come by next year.

While Brazil's sovereign credit is designated as investment grade at all the major ratings agencies, neither Standard & Poor's nor Fitch Ratings rates the city of Rio de Janeiro. Moody's Investors Service rates it Ba2, two notches below investment grade.

A spokesperson at S&P, which stopped rating Rio de Janeiro in 2002, said the firm doesn't comment on pending discussions.

Levy spoke on the sidelines of a Latin America hedge fund conference in Miami as the government looks to bring in overseas investors to help fund its massive overhaul of Rio de Janeiro in time for the 2016 Olympics.

Around $14 billion is expected to be needed just for revamping the city's infrastructure. The Brazilian government is expecting around 30% of funding for the Olympic games to come from private investors.

The rating could help mitigate risk premiums the state would have to pay if it were to borrow funds, though 'we're not planning to be aggressive in the markets,' Levy said.

Foreign investors' interest in Brazilian assets has soared this year as the country's economy, Latin America's largest, was able to avoid much of the global crisis thanks to its sound financial markets and increasing reliance on domestic consumption.

But many were alarmed by the government action Monday to install a tax on some incoming foreign investment, in a bid to curb the steep appreciation of the Brazilian real, which could weigh on its export industries.

'Chances are if you're an investor, you're not going to be happy about this,' Levy admitted, but said the measure will 'certainly be temporary.'

'It's not something we like to do but reality is not in your favor...we had to respond to the imbalance in the markets,' he added.

At the conference on Tuesday, Paulo Leme, Goldman Sachs' director of emerging markets, blasted the move to introduce levies, calling it a 'huge policy mistake that's not going to help at all.'

He added that it's a reminder that there are 'more changes to come that [investors] may not be too happy about' and that market participants should be tracking next year's presidential election closely because expecting continuity in accommodative economic policies could be 'naive.'



-By Kejal Vyas, Dow Jones Newswires; 212-416-2185; kejal.vyas@dowjones.com"

BM&FBovespa to Propose Alternatives to ‘Faulty’ Tax - Bloomberg.com

By Paulo Winterstein

Oct. 21 (Bloomberg) -- BM&FBovespa SA, Latin America’s biggest exchange, plans to press the Brazilian government for alternative ways to curb gains in the currency as a tax on investments sent stocks to the biggest drop in four months.

The benchmark Bovespa index tumbled 2.9 percent yesterday after Finance Minister Guido Mantega announced a 2 percent tax on foreign purchases of fixed-income securities and equities. The levy, higher than a 1.5 percent tax scrapped a year ago that didn’t cover stocks, will hurt Brazilian investors and small- and medium-sized companies, according to Carlos Kawall, chief financial officer of Sao Paulo-based BM&FBovespa.

“We need to do everything we can from now on, talking to the government, getting support from everyone who sees that this is something that is definitely faulty and could be altered,” Kawall, a former Treasury Secretary who served under Mantega in 2006, said during a conference call yesterday.

International investors, who account for about a third of BM&FBovespa’s stock trading, will likely buy American depositary receipts, punishing smaller Brazilian companies who can’t afford the costs of listing overseas, Kawall said. The fact that money raised through ADRs is seen as direct investment and isn’t taxed, while local capital raising will be subject to the levy, is one of the “inconsistencies” in the regulation, he said."

BM&FBovespa to Propose Alternatives to ‘Faulty’ Tax - Bloomberg.com

Brazil to Impose Tax on Foreign Inflows, Mantega Says (Update3) - Bloomberg.com

Brazil to Impose Tax on Foreign Inflows, Mantega Says (Update3) - Bloomberg.com

By Adriana Brasileiro and Andre Soliani

Oct. 19 (Bloomberg) -- Brazil will impose taxes on purchases by foreign investors of real-denominated, fixed-income securities and on purchases of stocks, Finance Minister Guido Mantega said.

The measures are being taken “to avoid an excess speculation in the stock market and in capital markets,” Mantega told reporters in Sao Paulo.

The real has gained 35 percent since the beginning of the year, the best performer amid the 16 most traded currencies tracked by Bloomberg. The currency has gained 5.3 percent in the past month.

The central bank started purchasing dollars on May 8 in a bid to temper the real gains. The currency weakened 0.5 percent to 1.7177 per U.S. dollar at 4:28 p.m. New York time.

Earlier today, the Brazilian real was cut to “underweight” from “overweight” in RBC Capital Markets’ model portfolio on concern the government would impose new taxes.

Today’s announcement reverses last year’s decision to end such taxes. In October 2008, President Luiz Inacio Lula da Silva eliminated a tax, known locally as IOF, of 1.5 percent on foreign investments in certain financial products and of 0.38 percent on foreign-currency loans.

“Excess global liquidity could lead to an over-appreciation of the real,” Mantega said. That would threaten to hurt the country’s exporters and further fuel demand for imports.

Foreign investor will pay a 2 percent tax when they enter the country to buy stocks or fixed-income securities.

In the short term, the measure may help keep the real above 1.7 per U.S. dollar, said Antonio Madeira, chief economist at MCM Consultores Associados Ltd. As the market creates new investment strategies to bypass the tax, the impact in the currency market will be lost, he said.

Mantega said the measures may not lead the real to weaken, but are designed to slow its appreciation and prevent the creation of bubbles in Brazilian markets. “These are to prevent excesses,” he said." ....

Governo taxa capital estrangeiro em 2% para conter valorização do real frente ao dólar - O Globo

Governo taxa capital estrangeiro em 2% para conter valorização do real frente ao dólar - O Globo
Plantão | Publicada em 19/10/2009 às 19h02m

SÃO PAULO - O ministro da Fazenda, Guido Mantega, anunciou nesta segunda-feira que o governo vai criar uma aliquota de 2% do IOF para taxar o ingresso do capital estrangeiro. A medida passa a vigorar nesta terça-feira. A partir desta data, todo o capital estrangeiro que entrar no país para aplicações em bolsa ou em renda fixa e variável terá que pagar uma taxa de 2%.

Segundo o ministro Mantega, a medida tem por objetivo frear a especulação com o dólar e a valorização do Real.

- A medida é para evitar que haja excesso de especulação na bolsa e no mercado financeiro. O Brasil se tornou um país forte atrativo para o mercado internacional e como há um excesso de capital no mundo, temos que evitar a especulação no país - disse Mantega.

Desde o começo do ano, já entrou no país algo em torno de US$ 20 bilhões e tem dias que entram até US$ 5 bilhões. Com o início dos projetos do pré-sal, o governo acredita que a entrada de recursos pode aumentar muito mais, supervalorizando o real frente ao dólar e, com isso, prejudicar as exportações e facilitar as importações.

- Queremos impedir o excesso de valorização do real. Essa valorização prejudica as exportações brasileiras e barateia as importações - esclareceu o ministro, em entrevista concedida em São Paulo."

Brazilian Hedge Funds Lure $19.7 Billion This Year (Update1) - Bloomberg.com

Brazilian Hedge Funds Lure $19.7 Billion This Year (Update1) - Bloomberg.com:
By Alexander Ragir

Oct. 19 (Bloomberg) -- Brazilian hedge funds are luring more money than any type of investment pool in the country after record withdrawals last year, offering returns four times the yield from certificates of deposit.

Local hedge funds attracted a net 33.7 billion reais ($19.7 billion) this year through Oct. 15 after posting 54.6 billion reais in redemptions in 2008, preliminary data from the National Association of Investment Banks’ Web site show. Third-quarter inflows surged to 36.3 billion reais, according to the data, which are scheduled to be revised and re-published today by the association known as Anbid.

The Bloomberg Active Index of Brazilian hedge funds, which tracks the performance for 1,171 funds before fees, rose 44 percent this year through Oct. 12 to a record. That’s more than triple the gain of global hedge funds and compares with the 8.61 percent annual average rate that certificates of deposit paid at Brazilian banks.

“We’re on our way to recover last year’s redemptions because it’s the most flexible alternative asset that big banks and private bankers can offer clients,” said Marcelo Serfaty, who oversees 360 million reais as founder of Fiducia Asset Management in Sao Paulo.

A Brazilian equities rally and record low interest rates are also spurring demand for higher-yielding assets. The Bovespa stock index rose 0.2 percent today to 66,296.69 at 10:07 a.m. New York time, extending a gain this year to 77 percent.

Most Inflows

Brazil’s 326 billion-real hedge fund industry received more money than any fund group in Brazil so far this year, according to Anbid. Funds that invest in asset-backed securities came second with a net inflow of 13 billion reais, followed by fixed- income funds, which recorded 9.8 billion reais in inflows through Oct. 15, Anbid data show.

The Bloomberg index of Brazilian hedge funds, known locally as multimercados, fell 15 percent last year, less than half the 41 percent drop of the Bovespa index. The average global hedge fund’s holdings, as measured by the HFRX Global Index, rose 12 percent this year through Oct. 15. The gauge is still 17 percent below a record set July 13, 2007.

“Flows always chase performance,” said Claudio Andrade, co-founder of $1 billion hedge fund Polo Capital Gestao de Fundos Ltda. “That’s what we’re seeing.”

Latin American hedge fund managers are gathering today for the annual Hedge Funds World LatAm 2009 conference in Miami, hosted by Terrapinn Holdings Ltd., to discuss investment strategies with money managers from the U.S., Europe and Asia.

Tighter Regulation

Brazilian multimercado hedge funds are regulated and most are required to return money to clients within five business days of a redemption request under local securities regulations. They must also publish their performance daily.

Hedge funds in the U.S., Europe and Asia don’t have these rules, said Peter Rup, chief investment officer at New York- based Orion Capital Management LLC, which invests in hedge funds. Multimercados can bet on the rise or fall of traded securities and some use leverage, or borrowed money.

Hedge funds “should continue to lead inflows until new high-yield and equity-driven products are developed and the distributors convince their clients to accept less liquidity in order to increase portfolio diversity,” said Serfaty, the former director of investment banking at Banco Pactual SA, a Brazilian bank acquired by UBS AG in 2006 and sold this year to a local banker.

“Multimercados still have daily liquidity and they’ve been used before, so they’re the easiest for the biggest banks to sell to clients,” he said.

Markets

The Bovespa index climbed 3.3 percent last week, its third straight advance. Gafisa SA, Brazil’s second-biggest homebuilder, rose the most with a 12 percent gain. Lojas Renner SA, the largest publicly traded clothing retailer, slipped 2.2 percent for the steepest decline.

The real strengthened for a seventh week, the longest stretch of gains in five years. The currency increased 1.8 percent to 1.71 per U.S. dollar from 1.7410 on Oct. 9.

The yield on the government’s zero-coupon bonds due January 2011 fell 2 basis points to 10.48 percent, according to Banco Votorantim.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net
Last Updated: October 19, 2009 10:12 EDT"

Brazil’s ‘Moment’ at Risk as Real Gains, Freitas Says (Update1) - Bloomberg.com

By Camila Fontana

Oct. 19 (Bloomberg) -- Brazil’s real, the best-performing major currency this year, may rally another 6 percent against the dollar before investment flows to the country start to ebb, former central bank director Carlos Eduardo de Freitas said.

“Brazil is now at a magical moment but also has weaknesses and is subject to a sudden outflow of capital,” said Freitas, who headed the central bank’s economic department from 1991 to 1993, in a telephone interview from Brasilia. “That is why the central bank needs to be prepared and keeps increasing international reserves. Economies do not adjust smoothly.”

The real fell 0.3 percent to 1.7144 per dollar at 8:26 a.m. New York time. Last week the Brazilian currency completed a seventh straight week of gains, the best run since 2004, helped by the economy’s recovery from a recession, increased demand for the nation’s stocks and a credit rating upgrade by Moody’s Investors Service. The real may rise to 1.6 per dollar before falling, Freitas said.

Its gain this year is the best for the world’s 16 most- traded currencies. The real has rallied 35 percent while the Bovespa stock index is up 76 percent.

The currency is gaining even as the central bank buys dollars daily in a bid to stem the advance. Brazilian central bank President Henrique Meirelles said in an interview last week that emerging-market currencies that have been appreciating as economies recover from a global recession may become volatile as markets overprice assets.

International Reserves

Brazil’s international reserves have risen by $25.3 billion this year to $232.1 billion on Oct. 14, according to data compiled by the central bank.

Analysts estimate the real will end the year at 1.75, according to the median of 20 forecasts compiled by Bloomberg.

Brazilian economists raised their forecast for the real by the end of 2009 for the second consecutive week to 1.7 from 1.76, according to a weekly central bank survey of about 100 analysts published today.

The government is unlikely to adopt measures to curb the rally, Rodrigo Azevedo, who served as the central bank’s monetary policy director between 2004 and 2007 and now helps manage $1.8 billion at JGP SA, said in an interview from Sao Paulo on Oct. 16. “There is very little Brazil can do,” he said.

The same day, President Luiz Inacio Lula da Silva denied a report published in O Estado de S. Paulo newspaper that said the government was planning to tax foreign inflows.

“Fortunately our president seems to be against miraculous ideas”, said Freitas, who runs a consulting firm, OF Consultoria Economica.

Central banks need to “alert investors and markets of the risks of exaggeration in the formation of prices, which can lead to future corrections and create unnecessary volatility,” Meirelles said in the interview in New York.

To contact the reporter on this story: Camila Fontana Correa in Sao Paulo at cfontana@bloomberg.net.
Last Updated: October 19, 2009 08:48 EDT"

UPDATE: Brazil Sovereign Wealth Fund Idea More A Pipe Dream - WSJ.com

UPDATE: Brazil Sovereign Wealth Fund Idea More A Pipe Dream - WSJ.com: "*
OCTOBER 16, 2009, 5:06 P.M. ET

By Riva Froymovich
Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--Despite the enormous influx of capital going into Brazil, a sovereign wealth fund in the near term is little more than a pipe dream.

According to recent reports, Brazil's government is planning to set up a new sovereign wealth fund to invest dollars that the central bank buys on the spot market to limit the sharp appreciation of the local real currency against the dollar.

But Brazil needs all the money it can get to pay for its budget deficit and public debt. Second, much of the capital in flows boosting the real are private and do not go into the government coffers.

Moreover, if Brazil takes anything away from the historic financial crisis the world is just beginning to get over, it is that the country needs to build and preserve domestic reserves to shield it from another bubble. Given the growth in Brazilian assets over the last year, a bubble may not be far off. Brazilian stocks hit a 16-month high Thursday and the real has gained 37% against the U.S. dollar this year.

A sovereign wealth fund is a higher-risk investment portfolio, wielded by monetary authorities or central banks to diversify surplus reserves outside of the economy and potentially make a profit.

Asked again this week about plans for such a fund, a Finance ministry spokeswoman said Friday, 'We have had a lot of requests for comment on this, but the Finance Ministry has no comment on the subject.'

Brazil's reserves have swelled in recent months, up to $231 billion, on the central bank's actions - a testament to recovering risk appetite and Brazil's appeal as a growing and relatively stable economy.

But, economists say this is deceiving.

'There is nothing about wealth in that fund because Brazil does not have a fiscal surplus to capitalize on,' said Alberto M. Ramos, a senior Latin America economist at Goldman Sachs in New York.

Brazil's government is spending well beyond its means. The country's 12-month public sector primary budget surplus declined in August to 1.59% of gross domestic product, well below the year-end target of 2.5%. Primary figures don't include service costs on debt. With such costs included, Brazil posted an August nominal deficit equal to 3.53% of GDP.

'The only way to capitalize is to issue more debt. Then it would be a sovereign debt fund rather than wealth, because there is no wealth being created,' said Ramos.

Brazil is a net borrower.

Foreign debt rose in August to $204.1 billion from $195.9 billion in July. Dividend and profit remittances by multinationals increased to $1.9 billion from July's $1.75 billion. Meanwhile, the central bank predicted a rising current account deficit in 2010 to $29 billion from an estimated $18 billion this year.

Noted Latin American country risk specialist Armen Kouyoumdjian asked: 'How can you say I am putting money aside when you are not even covering your expenses?' He added that Brazil has the largest stimulus program in Latin America, which will increase its debt even more.

Brazil's government may be floating the idea of a wealth fund for the prestige it carries. This may also be the government's way to tell the central bank to intervene more, according to Affonso Pastore, former Brazil Central Bank President and adviser for GlobalSource Partners. But, analysts say the country must reinvest in itself to fund development, rather than try to turn profits with money abroad.

Brazil already tried to launch an outside-looking sovereign wealth fund last year, but had to change plans when the financial crisis struck. Monetary authorities realized they needed to use those dollar reserves for their originally intended purpose, selling dollars in order to stabilize the market.

'The downturn has led to a reconsideration of what really represents too much reserves from a pure currency standpoint,' said Alan Ruskin, head of global strategy at RBS.

He said Brazil's central bank will probably want to build reserves even more before investing them.

The central bank is the other hurdle in the government's supposed plans. It is in the market daily trying to prevent further appreciation of the real, and another authority affecting the foreign exchange market could be counterproductive.



-By Riva Froymovich, Dow Jones Newswires; 212-416-2217; riva.froymovich@dowjones.com

Brazil's Lula: No Foreign Capital Tax Under Study -Estado - WSJ.com

OCTOBER 16, 2009, 12:58 P.M. ET

BRASILIA (Dow Jones)--Brazil's government is not studying implementation of a new tax on incoming foreign capital to curb the appreciation of the local currency, the real, Brazilian President Luiz Inacio Lula da Silva said Friday according to the Estado news agency.

The president made the comments in response to local newspaper reports this week suggesting the government could implement a financial transactions tax on foreign investment in local equities and fixed income.

Brazil's currency has appreciated by more than 35% against the dollar so far this year under the impact of heavy flows of incoming foreign investment.



-By Gerald Jeffris, Dow Jones Newswires; (5561) 3335-0832; gerald.jeffris@dowjones.com"

Emerging Currencies May Be Volatile, Meirelles Says (Update1) - Bloomberg.com

By Fabiola Moura

Oct. 16 (Bloomberg) -- Emerging-market currencies that have been appreciating as economies recover from a global recession may become volatile as markets overprice assets, Brazilian central bank President Henrique Meirelles said.

Central banks need to “alert investors and markets of the risks of exaggeration in the formation of prices, which can lead to future corrections and create unnecessary volatility,” Meirelles said in an interview late yesterday in New York.

The South African rand led declines among emerging-market currencies, dropping 1.4 percent against the U.S. dollar at 8:15 a.m. in New York. Brazil’s real weakened 1.1 percent today.

The real is outperforming the world’s 16 major currencies this year with a 35 percent gain against the dollar. The rand has gained 29 percent in 2009. All but four of 26 developing- nation currencies tracked by Bloomberg have strengthened against the greenback in 2009.

Brazil’s gross domestic product increased 1.9 percent in the second quarter from the previous three months, the biggest gain in four years, and Finance Minister Guido Mantega last week said the economy will expand as much as 5 percent next year. Developing nations are helping the world recover from its deepest recession since the 1930s, Meirelles said.

“The emerging economies in general are getting out of this crisis stronger and faster than mature economies,” Meirelles said. “All that said, in moments of recovery, there is always the risk of excess of euphoria and excesses of pricing of certain assets and I think everybody needs to be aware of it.”

‘Overvalued’ Real

The Brazilian real is among “the most overvalued currencies” in the world, Thomas Stolper, a currency strategist at Goldman Sachs Group Inc., said yesterday on a call with clients. Meirelles declined to comment on the currency, which was little changed at 1.7010 per dollar yesterday in New York, after earlier in the day touching a one-year high of 1.6978.

Mantega said Oct. 8 that policy makers were “aggressively” buying dollars, using intervention to help counter appreciation that may hurt the nation’s exports.

Policy makers have “done a monumental effort” to limit gains in the local currency, Reginaldo Galhardo, foreign exchange manager at Treviso Corretora de Cambio, said in an interview from Sao Paulo. “Now investors wonder if the central bank will use some other kind of weapon.”

Meirelles is “very conservative and is only doing his job of alerting the market and preventing volatility and bubbles. But I don’t believe we have a bubble now. With the investment grade, the Olympics and the soccer World Cup, Brazil’s growth is guaranteed and the country will have its golden years,” said Andre Ferreira, currency director at brokerage Nova Futura DTVM in an interview in Sao Paulo.

To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net
Last Updated: October 16, 2009 08:36 EDT"

Brazil May Tax Foreign Inflows to Curb Real Rally, Estado Says - Bloomberg.com

By Telma Marotto

Oct. 16 (Bloomberg) -- The Brazilian government may reintroduce a tax on foreign capital inflows to curb a currency rally against the dollar, O Estado de S. Paulo reported without saying where it got the information.

The so-called IOF tax may be levied on fixed income investments and also on stock purchases, Estado said. The measure was discussed in a meeting Oct. 13 with President Luiz Inacio Lula da Silva, Estado said.

Foreign inflows in Brazil have intensified in the past few weeks and are becoming a problem for the competitiveness of Brazilian exporters, Estado said. The country may receive $20 billion to $30 billion in foreign investment throughout the end of the year, Estado said.

Finance Ministry spokeswoman Patricia Mesquita in Brasilia declined to comment when called by Bloomberg, saying the ministry doesn’t have an official position on the proposals.

The Brazilian real is up 36 percent this year against the dollar, the best performance among 16 major currencies tracked by Bloomberg.

To contact the reporters on this story: Telma Marotto in Sao Paulo at tmarotto1@bloomberg.net
Last Updated: October 16, 2009 07:52 EDT"

Brazil's sugar, ethanol group Cosan CEO resigns | Reuters

SAO PAULO, Oct 15 (Reuters) - The chief executive of Cosan (CSAN3.SA)(CZZ.N), one of Brazil's largest sugar and ethanol groups, unexpectedly resigned on Thursday.

Rubens Ometto Silveira Mello will remain as chairman of the board and will 'dedicate himself exclusively to the company's strategic management,' Cosan said in a statement.

The current chief commercial and logistics officer, Marcos Marinho Lutz, was appointed as the new executive officer. He will take up office on Nov. 1. (Reporting by Inae Riveras; Editing by Christian Wiessner)"

Brazil's Latest Energy Auction Brings In New Gas Projects - WSJ.com

OCTOBER 15, 2009, 3:27 P.M. ET

SAO PAULO (Dow Jones)--Brazil's latest energy auction, scheduled for Dec. 17, has an ambitious total of 81 new energy projects on paper with more than half being for costlier natural gas rather than hydro power.

The auction is for around 19,168 megawatts of electricity to be sold to the grid starting in 2014, the Energy Research Company, EPE, said Thursday.

An EPE spokesman said that not all of the projects will see the light of day, especially the new 19 hydroelectric dams. None have received early study environmental permits.

Forty-nine of the 81 projects are for natural gas, for a total of 15,015 megawatts, compared with the 19 hydro projects electric generating capacity of 1,106 megawatts.

Brazil's electricity is mostly derived from hydroelectric power stations. Around 85% of the country is powered from massive dams like Itaipu in the south, which generates around 14,000 megawatts of power annually.

The problem with cheap hydroelectric power is that it depends on river water levels. When those levels are low, the power generated from the dam shrinks significantly and can even lead to dams being temporarily shut down.

Natural gas discoveries in the offshore Santos Basin and new liquified natural gas import terminals are making the costlier natural gas a popular back-up to hydro power that is susceptible to dry seasons, said EPE director Mauricio Tomalsquim.



-By Kenneth Rapoza, Dow Jones Newswires; 5511-2847-4541; kenneth.rapoza@dowjones.com"

Foreigners Acquired 72.5% Of Brazil's Rossi Share Offer - WSJ.com

SAO PAULO (Dow Jones)--Foreign investors purchased 72.5% of the shares offered by the Brazilian real-estate development companies Rossi Residencial SA (RSID3.BR) through a primary share offer on the Brazilian Stock Exchange, or BMFBovespa, the company said Thursday in a statement.

The company raised 928 million Brazilian reals ($545 million) from the offer. Rossi sold a total of 74.25 million shares, with each share priced at BRL12.50. Foreign investors acquired 53.86 million shares under the offer.

Credit Suisse, Bradesco BBI and Santander coordinated the operation.



-By Rogerio Jelmayer, Dow Jones Newswires; 55-11-2847-4521; rogerio.jelmayer@dowjones.com"

Odebrecht Sells $500 Million of 10-Year Bonds Abroad (Update1) - Bloomberg.com

By Veronica Espinosa

Oct. 14 (Bloomberg) -- Construtora Norberto Odebrecht SA, a Brazilian construction and engineering company, sold $500 million of 10-year bonds after boosting the size of the offering.

The company sold the bonds to yield 3.82 percentage points above U.S. Treasuries, according to Bloomberg data. Odebrecht initially planned to sell $300 million of the notes, according to a person familiar with the transaction. HSBC Holdings Plc, Banco Santander SA and BB Securities arranged the sale of the notes, which are callable in five years, said the person, who declined to be identified because he’s not allowed to speak publicly.

Brazilian companies are tapping international credit markets as a recovery in Latin America’s biggest economy boosts demand for the securities. Banco do Brasil SA, Latin America’s largest lender, sold $1.5 billion of perpetual bonds in the bank’s biggest debt issue yesterday. Banco Panamericano SA, a Brazilian bank controlled by media magnate Silvio Santos, also plans to sell bonds this week.

Odebrecht sold $200 million of five-year bonds in international credit markets in April. The yield on the 9.625 percent notes due in 2014 has tumbled to 5.17 percent from 9.72 percent on April 6, according to Bloomberg data.

To contact the reporters on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net
Last Updated: October 14, 2009 17:45 EDT"

Banco do Brasil Sells $1.5 Billion of Bonds Overseas (Update1) - Bloomberg.com

By Veronica Espinosa

Oct. 13 (Bloomberg) -- Banco do Brasil SA, Latin America’s largest lender, sold $1.5 billion of perpetual bonds in the bank’s biggest overseas debt issue.

The Brasilia-based bank issued the securities to yield about 5.19 percentage points above U.S. Treasuries, according to Bloomberg data. JPMorgan Chase & Co., Citigroup Inc. and BB Securities arranged the sale of the bonds, which are callable after 11 years. A spokesman at Banco do Brasil declined to comment.

Banco do Brasil’s bond sale is part of push by Latin American companies and governments to sell debt abroad after benchmark yields tumbled. Last month, Mexico sold $1.75 billion of bonds while Brazil issued $1.25 billion of notes abroad.

The extra yield investors demand to own emerging-markets corporate bonds instead of U.S. Treasuries narrowed to 3.87 percentage points on Oct. 9 from 9.59 percentage points at the end of last year, according to JPMorgan Chase & Co.’s CEMBI Index.

Banco do Brasil sold $500 million of perpetual bonds in January 2006. The 7.95 percent securities have a call date of January 2011.

Emerging-market bond sales may reach a record this year, surpassing the $173.4 billion sold in 2007, as governments tap debt markets to cover widening budget deficits, according to ING Groep NV.

To contact the reporter on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net
Last Updated: October 13, 2009 17:09 EDT"

Tullett Prebon in first LatAm move with Brazil purchase

FT.com / FT Trading Room: "

By Jeremy Grant in London

Published: October 13 2009 14:49 | Last updated: October 13 2009 14:49

Tullett Prebon on Tuesday became the latest British inter-dealer broker to highlight growing interest in the Brazilian capital markets by saying it would buy Convenção Corretora de Valores e Câmbio, a leading Brazilian inter-dealer broker, for an initial cash payment of R$20m (£7.3m).

The increasing significance of Brazil for international investors has acted as a magnet on the world’s inter-dealer brokers – brokerages that specialise in trades between big market dealers rather than individuals, typically operating with large volumes at low margins.

Tullett’s move also will give it a physical presence in Latin America for the first time.

It comes four months after rival BGC Partners completed the purchase of Liquidez, another Brazilian inter-dealer broker. In November last year, Icap bought Arkhe, an independent Brazilian broker it had dealt with for several years

Convenção was founded in 1973 by Eduardo da Rocha Azevedo, a former president of the Bovespa stock exchange, now part of BM&F Bovespa, the Brazilian stock and derivatives exchange.

The Brazilian firm is being sold by Mr Azevedo, Eduardo Nogueira da Rocha Azevedo, and Marcelo Taiar Arbex. The senior management of Convenção will remain with the company after the acquisition is completed, Tullett Prebon said.

In addition to the initial purchase price, Tullett Prebon has also agreed to pay “deferred consideration” of up to a maximum of R$30.3m (£11m), payable in cash “subject to achievement of future revenue and profit targets”.

For the year to December last year, Convenção reported revenues of R$21.9m (£8m).

Tullett Prebon said it planned to establish a presence “in key countries throughout the Latin American region commensurate with its position as one of the world’s leading inter-dealer brokers”.

The acquisition was conditional on approval from the Brazilian authorities, including the central bank, and was expected to complete in the second quarter of 2010.

Terry Smith, chief executive of Tullett Prebon, told the FT recently that the inter-dealer broking business had been “going onshore” in recent years, to places like Brazil, rather than automatically being done in the biggest financial centres in the northern hemisphere.

”If you’d gone back five years you would have found that the vast majority of [Brazil-related] business was conducted via New York. Increasingly it’s being done by brokers operating out of São Paulo. Some of those brokers have developed in to very credible operations; it’s by no means the wild west there.”"