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Foreigners Don’t Pay Capital Gain Taxes on Brazil’s Bonds Anymore

Latin American stocks advanced, with Brazilian shares getting a boost from some encouraging earnings news and the government’s move to exempt foreign buyers of government bonds from capital gains taxes.

Brazil’s Bovespa Index surged 1017.09 points, or 2.73%. Mexico’s benchmark Bolsa Index jumped 288.08 points, or 1.59%, while Argentina’s Merval Index gained 26.47 points, or 1.59%.

Brazilian stocks rallied, as investors were cheered by news that Brazil’s government, as expected, decided to exempt foreign buyers of government bonds from capital gains taxes.

The government published an executive order in the official Federal Register (Diário Oficial) that exempts overseas investors from the 15% capital gains tax and the 0.38% financial transactions tax.

Giving banking shares a boost, Unibanco said its fourth-quarter net profit jumped 35.7% to 509 million reais from 375 million reais a year earlier.

In other bank news, Brazil’s largest private bank, Bradesco, said it is creating an investment banking unit called Banco Bradesco de Investimento, or BBI.

Meanwhile, steel shares gained on solid earnings results from Arcelor Brasil. The company’s 2005 net consolidated profit dipped 3% on a pro-forma basis to 3.255 billion reais from 3.357 billion in 2004, but net revenue rose 7% to 13.341 billion reais.

"The 2005 results confirm the sustainable growth under way at Arcelor Brasil," the company said.

Mexico’s equity rebound continued, with shares witnessing their third-straight session of gains. U.S. shares were also upbeat on the day, thanks to a positive earnings report from blue chip Hewlett-Packard and a stronger-than-expected reading from the Philly Fed manufacturing index in January.

On the earnings front, conglomerate Desc SA said that its fourth-quarter net income more than doubled to 41 million pesos from 18 million pesos a year ago; although, sales slipped slightly to 6.33 billion pesos. Excluding certain items, sales rose 5%. Full-year net profit arrived at 308 million pesos, reversing a year-earlier loss of 203 million pesos.

Government-run airline holding firm Cintra SA, which was recently renamed Consorcio AeroMexico SA, said that the sale of Mexicana led to bolstered results in the fourth quarter. Quarterly net income jumped to 1.02 billion pesos, compared to 74 million pesos in the corresponding quarter a year ago.

Revenue rose 1% to 9.82 billion pesos. For the year, the net profit advanced to 1.45 billion pesos from 592 million pesos in 2004. Also, the government indicated that it is considering selling AeroMexico through a stock offering, as opposed to a bidding process.

In other corporate reports, cement firm Cemex said that it will invest US$ 220 million over the next three years to build a second kiln at its Balcones Cement Plant in New Braunfels, Texas.

Argentina turned higher today, as bargain hunters moved in following five- straight sessions in the red. Tomorrow marks the final day to exercise options contracts; although, the settlement for those contracts will continue into next week. Earnings news is also starting to trickle in.

Flat steelmaker Acindar SA posted full-year net profit of 549.7 million pesos, up from 545.8 million pesos in 2004. Net sales jumped to 2.54 billion pesos from 2.12 billion pesos in 2004, while operating profit slipped to 878.4 million pesos in 2005 from 893.3 million the prior year.

Oil and gas firm Petrobras said that its net profit for the full year ended December 31 was 613 million pesos. The firm’s main operating unit, Petrobras Energia, said that its net profit for the full year totaled 819 million pesos.

Thomson Financial – www.thomsonfinancial.com

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