More in store on the currency war

Dilma Rousseff has been banging the war drums over the flood of cheap money from developed markets in her trip to the US: the reverberations have already reached the ears of Finance Minister Guido Mantega. He seemed to float the idea of more macroprudential measures. Investors reacted, as they always do, by pulling out money and that has sent the real down once again, by nearly 1% yesterday.

The government has tinkered with capital controls this year but has not resorted to the extreme measures seen under former president Lula, which included taxes on long-term investments including private equity. The weapons used so far under Rousseff have been less blunt and dominated by intervention in the spot and futures market. Even so, the Ministry of Finance is keeping investors jumpy by not signalling its intentions. This is likely to be a deliberate strategy to cool the heels of short-term investors.

Despite Central Bank president Alexandre Tombini's reassurances that he will leave the Selic rate at 9%, a number of money managers are confident that rates will fall further. One of Brazil's top asset managers, Alexandre De Zagottis CEO at Advis Investimentos, told me he thinks that futures markets could be wrong in pricing in a leap in short rates at the start of next year. He argues: “It is hard to imagine rates increasing as rapidly as futures suggest, and if the external scenario worsens, rates may even come down”.

I'll be writing more about these issue for Absolute Return-Alpha magazine.

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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