Brazilian funds set up in debt-ridden Europe

Brazilian fund managers take an interest in Europe through equity investments at home, and by launching Ucits and Sif funds in Europe.

The euro debt crisis continues to leave global markets shaky as governments across Europe decide on austerity measures to control their debts.

But now is the time for emerging market economies to invest into Europe, says former president of the Inter-American Development Bank and Uruguayan economist Enrique V. Iglesias.

In March, he told a regional investment conference that the “cycle of one-way investment is over” between Latin America and Iberia.

Brazil’s fund industry in particular, which makes up about 80% of the hedge fund industry in Latin America, has remained healthy throughout the financial crisis.

July marked the second largest monthly foreign exchange net inflows into Brazil, totalling $15.82bn, with $9.57bn of that from investment inflows and $6.25bn trade-related dollar inflows.

The total is a sharp increase from the $713m in net inflows the same month the year before, according to central bank figures.

Despite global volatility, Brazil’s fund industry managed to raise $4.9bn in August, which made for a record high, according to the capital markets association ANBIMA.

As of the end of August, Brazil’s fund industry has raised a record $40.6bn, a 7.4% year-on-year increase.

Iglesias, who is now the secretariat for the Iberoamerican Cooperation, explains that Latin American nations like Brazil, with budget surpluses and a strong fund industry, are perfectly placed to channel capital flows to indebted nations like Spain and Portugal.

“The macroeconomic framework for investment is in place. All that is left is for companies to identify their most suitable and strategic partnership.”

He points out that Spain has had success with public-private partnerships in the past. “Of course, Latin American investment can come in the form of bonds. That is an option too, as long as it is mutually beneficial.”

Brazilian managers are launching Ucits and Special Investment Funds (Sif) in Europe and adding Spanish and Portuguese companies as positions.

They are familiar with the bearish scenes that confront them in Europe.

In europe’s shoes

Latin America, after all, knows what it is like to be in Europe’s shoes. In the early 1980s, it had a debt crisis of its own, and Spain and Portugal have already invested heavily in Latin America over the years through equities, with Santander, BBVA and Telefonica all having a strong presence in the region.

In fact, these investments have helped Latin American economies stay healthy while Spain and Portugal’s economies continue to bleed assets to stabilise their weak balance sheets.

“Latin American countries are clearly a very good future investment prospect for Europe since they haven’t been affected by the financial crisis as badly as Europe or the US,” said Angel Martinez-Aldama (pictured), the general director of Spain’s fund association Inverco.



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