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Sao Paulo Forum - April 10, 2014

Thursday, April 10, 2014  

Hosted by


HSBC Bank Brasil S.A. - Auditorium
Av. Brigadeiro Faria Lima 3064, 1º andar
São Paulo, Brazil

3:30 p.m. Registration  

4:00 p.m. Panel Discussion
Opportunities in the Emerging Markets
Constantin Jancsó (HSBC Bank Brasil) – Moderator
Rafael Guedes (Fitch Ratings)
Mario Toros (Ibiuna Investimentos)
Luiz Fernando Figueiredo (Mauá Sekular Investimentos)
Alexandre Schwartsman (Schwartsman & Associados)

5:00 p.m. Cocktail Reception  

Additional support provided by Fitch Ratings.  

Complimentary attendance for EMTA Members. Registration fee for non-members is US$495.

Former COPOM Directors Debate Brazilian Interest Rate Policy at EMTA São Paulo Forum

Former COPOM directors debated Brazilian interest rates at EMTA’s 7th Annual Forum in São Paulo on Thursday, April 10, 2014.  The event, hosted by HSBC, also featured discussions of the country’s debt rating and disappointing growth.  Approximately 100 EM market participants attended the Forum, which was conducted in Portuguese with simultaneous translation.

HSBC’s Constantin Jancsó steered the panel through a variety of topics.  Alexandre Schwartsman (Schwartsman & Associados) expressed frustration at official “complacency” towards lackluster growth and above-target inflation made possible politically by continued low unemployment.  Schwartsman argued that a return to the reform process was “urgently needed,” with tax reform the most crucial step to boosting the economy.  Infrastructure development was also needed to spur growth.  “We can’t continue to depend on commodities alone,” he concluded.

Jancsó asked speakers to outline potential economic policy differences in the next administration under each potential president.  Luiz Fernando Figueiredo (Maua Sekular Investimentos) stated that no matter who won, “next year will be a year of adjustments.”  If President Dilma Rousseff were reelected, the adjustments would be more gradual than in a potential Eduardo Campos or Aecio Neves administration, which would be more likely to take a “let’s go for it all now, take the pain now and people will see the benefit of the future” approach.  He emphasized that “it is not a matter of wanting to make adjustments… there is no way around them.”

Mario Toros (Ibiuna Investimentos) reflected a common view that little progress would be made before October, and thus the President-elect, whoever it is, would inherit a deteriorated economy.  He criticized “excessive bureaucratic regulation” that deters new investment.

Fitch Ratings’ Rafael Guedes believed that that macro economic stability would be maintained regardless of who takes office on January 1, 2015.  “Although Neves is the more market-oriented candidate, remember that there was some adjustment in Dilma’s first year, it is not something outside of her vocabulary.”  Guedes warned that Brazil’s slow growth rate would continue to undermine investor confidence.

Schwartsman suggested that, in a second-term Dilma administration, it was not a given that adjustment would actually occur despite her best intentions.  He also added out that, should the opposition win, they would not have a majority in Congress, necessitating deal-making.

Former COPOM directors Figueiredo, Toros and Schwartsman addressed speculation on whether the Central Bank was ready to end its rate-hiking cycle.  “I think it is most likely that the Central Bank has stopped now; they will probably hike again next year,” according to Figueiredo.  Schwartsman expressed disappointment with the Central Bank’s communication efforts – “to call it a disaster is, well, an insult to disasters!”

The panel also addressed election polls, the BRL/USD rate and Brazil’s credit downgrade.  Asked to list what, in an ideal world, actions the next government should take, in addition to taxation reforms, Guedes hoped for reduced government expenses, and the introduction of market-pricing to subsidized sectors of the economy.  “But there will be a price to pay for any movement, due to the political division in Congress,” he acknowledged.