Brazil Goes After Middle East Petrodollars

Dubai marina The São Paulo Stock Exchange (Bovespa) expects greater presence of Middle Eastern investment in Brazilian capital markets after the beginning of institutional actions by the sector in the region, like the seminar to take place in Dubai, in the United Arab Emirates, next week.

The event is organized by the BEST (Brazil: Excellence in Securities Transactions) initiative. Participation of the region currently represents just 1% of total foreign investment in Bovespa.

According to the joint project and foreign relations director at Bovespa, Cristiana Pereira, ever since a similar event was promoted in Asia for the first time, in late 2005, the presence of Asian investors in the stock market has risen from 1.5% of total foreign investors to almost 4%.

"We imagine that something similar should occur in the case of the Middle East, that the volume of investment should start to rise. But it is not possible to say how much," she said.

BEST is a joint program between the Bovespa, the Commodities & Futures Exchange (BM&F), the Brazilian Settlement and Custody Company (CBLC) and the National Association of Investment Banks (Anbid), with the support of the Securities and Exchange Commission of Brazil (CVM), the Central Bank and the National Treasury Secretariat. The objective is to promote Brazilian capital markets abroad.

Since the beginning of the project, each year meetings have been promoted in important financial centers, including the United States, Europe and Asia. Now the Middle East has been included in the agenda.

"We promote the road shows in places where we notice that demand has risen, and it has grown in the Middle East," stated Cristiana.

Dubai was chosen, according to her, as the importance of the Emirate as a financial center has been growing. In the past, according to the executive, a large volume of funds from the region was managed by European institutions, and to capture them it was necessary to travel to Europe.

"Today the decision-making process is in the Middle East itself, and Dubai has been growing not just as a financial center, but also in the decision making process," she explained.

Apart from showing the operation of the Brazilian market and the existing opportunities, the objective of the seminars is to learn about the desires of investors, their criticism and suggestions.

According to Cristina, around 30 people have already confirmed presence in the workshop in Dubai, but she hopes that the figure should reach at least 50 before the date of the event. The main focus is on institutional investors, like sovereign funds, private managers of assets, banks and brokers.

According to the experience obtained in Asia, she believes that decision-making regarding new investment should take a little longer. For there to be a significant growth in interest, in her evaluation, longer work is necessary, including new visits.

Cristiana says, however, that the existing potential may already be observed. In the first place, she says that the number of accounts opened by Middle Eastern investors in the CVM has been rising, mainly over the last two years. Apart from that, other institutions in the Brazilian market have been working on promotions in the region, and are even taking representatives of funds to visit the Bovespa.

She also said that financial institutions in the Middle East are more and more structured and that the appreciation of oil has caused an expressive increase in liquidity in the region, expanding the availability of funds for investment in capital markets. It is more and more necessary to join the dots. That is, to present opportunities to those interested in investing.

And the greater interest is reciprocal. Apart from the BEST initiative, other Brazilian institutions have expanded their actions in the Middle East. The Bank of Brazil, for example, is inaugurating an office in Dubai and other banks should follow the same route.

Cristiana commented that the CVM itself plans to promote a seminar about Islamic finance in Brazil in June. This area of business is growing very much among the Arab nations, but is not widely explored worldwide and in Brazil, except for institutions like ABC Bank, which has mainly Arab capital.

BEST, according to Cristiana, was born from the need that Brazilian capital market companies had to make a coordinated effort to promote the advances made in Brazil in recent years, including the new business infrastructure, more modern rules, great use of technology and higher levels of corporate governance.

"These changes were little known abroad and there was need for joint efforts," she said. "We needed to be a complete source of information for investors," she added.

Today, foreign investment represents around 35% of the average daily volume of business at Bovespa, which is around US$ 3.5 billion. Apart from the seminars, BEST makes information available on its website www.bestbrazil.org.br.

Anba – www.anba.com.br

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