From Scott Cutler: I recently returned from my second trip to Brazil this year. The country has seized upon the opportunity presented by the crisis to vault onto the global stage. When the B and C in BRIC come together, the world takes note. China recently invested $10B into Petrobras, and also just passed the U.S. as Brazil's largest trading partner. Capitalizing on this global opportunity, President Lula, as well as executives from the largest Brazilian companies, have been touring the globe in China, U.S., Europe and the Middle East, raising capital from investors who see the alpha in Brazil.
I gave a keynote at the 11th Annual National Meeting for Investor Relations and Capital Markets Professionals (IBRI/ABRASCA) to over 400 executives about financial reform, including the need for transparency, accountability, restoration of investor confidence, and regulatory harmonization in our financial markets. Brazil, as a student and now teacher of its own financial crisis history, is an exemplary case study for the rest of the world. The infrastructure of the current banking system was developed in a high-inflationary environment. These banks had to communicate real-time in a geographically dispersed and integrated manner. With this foundation, and only one financial regulator over the entire system, the Brazilian banks have responded to the crisis quicker, were more conservative in taking on risk, and are today some of the largest and best capitalized banks in the world.
After meeting with regulators, executives and investors, my takeaway is that Brazil, as a whole, is well positioned globally, and most expect will come out of the crisis earlier than other nations. Why? Three things: Counter-cyclical policies are already implemented and working through the system, the country is spending its energy looking forward and not back, and lastly, Brazil is thinking and acting globally, and is open to the world. These may sound like overly simplistic observations, but few nations have been able to get any one of these right in the last couple quarters.
With all that praise, the country still has major challenges related to wealth disparity, education and limited infrastructure, but the seeds of long-term growth have been planted. Commodities and natural resources are abundant, creating investment opportunities in mining, logistics, services and infrastructure. With one of the largest potential new oil field discoveries off the coast of Brazil, energy will be a driver for growth over the next 30+ years. The country has been energy independent for years, and is leading development of clean and renewable sources of energy. The 5th largest country in the world (over 300mm people), with the 10th largest economy, is surely to see opportunities in mobile, financial, transportation, consumer, technology and real-estate.
Finally, Brazil will continue to be a compelling investment opportunity for investors around the world. While I was there, Visanet raised approximately $4.2B in an oversubscribed IPO which was the largest in Brazil's history with 70% of the investors coming from outside Brazil. Our partnership with Brazil started in 1992, when Aracruz Celulose listed its ADRs in our market. Today, NYSE Euronext is home to 31 Brazilian companies with a combined market capitalization of $500B that trade over $4B of ADV here in the U.S. Vale, one of the largest mining companies in the world, and one of the most actively traded companies on NYSE Euronext, has an investor from every state in the U.S. Brazilian companies will be able to continue to tap foreign investors through aggressive investor outreach, transparency in financial disclosure, high standards of corporate governance and simple business execution.