The financial system of Brazil is the one of the largest and most sophisticated in the whole of Latin America. The capital market of Brazil is a highly developed one that offers not only a wide range of financial products and services but also a large number of investment opportunities. The Stock Exchange of the Sao Paulo state (BOVESPA) is the largest in the whole of Latin America.
The state of Sao Paulo stock exchange (BOVESPA) is the third largest equity option exchange in the world (and largest in Latin America) where different financial transactions are performed such as trading equities, forwards and options on trading equities and wide range of fixed income instruments. The foreign investors are exempted from Provisory Contribution on Financial Transactions for equity transactions conducted on the stock exchange. This exemption previously only applied to public offerings (initial or secondary) of listed companies. These factors make the environment favorable for foreign investors looking for investment opportunities in IPOs coming to BOVESPA.
The IPO activity on BOVESPA has achieved high levels of Corporate governance of BOVESPA, which means that companies offering IPOs on BOVESPA adhere to the highest level of transparency and corporate governance.
The Mercantile & Futures Exchanges (BM&F) is the world’s fifth largest futures exchange where different financial transactions such as trading futures forwards, flexible options, options on futures swaps, spot, government bonds and structured transactions take place. The BM&F also has a favorable environment to become a key player in the international carbon credit market. The BM&F carbon facility is equipped with a state-of-the-art electronic system designed to handle registration of Greenfield projects that generate carbon credits as per the standards and principles of the Kyoto Protocol. The next step for the Brazilian carbon credit market is to set up a carbon credit tapping environment, forward and spot market.
The modern banking system of the country is based on a sound infrastructure and a world-class payment system. Banks in Brazil have successfully faced hyperinflation in past decades by creating extensive networks that help draw the gains of float. The high level of capitalization has enabled the banks to survive the global credit crunch successfully. The Brazilian banks have experienced an increase in bank deposits despite economic slowdown globally, and are expected to maintain the progress in coming years.
The banking sector is expected to achieve a sizeable growth in coming years due to several favorable factors such as good ratio of long term to short-term deposits and low reliance on wholesale funding partnered with cautious credit policies.
There were huge demands for bank loans in the recent past and this provides great opportunity to tap the long repressed demand of loans in consumer finances. Corporate credit has also grown strong in recent years. There is strong demand for personal credit finances due to an increase in confidence based on prospects of continual macroeconomic stability.
The deposits with banks have remained unaffected from the worldwide credit crunch. Hence, people consider banks to be the safest place to keep their money and earn good returns. The deposit/GDP ratio of Brazil is high in comparison to both regional and international standards. The deposit/GDP ratio stood at an estimated 70% in the year 2008.
The banking and finance sector of Brazil is expected to play an important role in Brazil’s economy. Foreign investors can tap different opportunities in this sector by investing in IPOs, and the consumer finance sector that is likely to grow considerably in the near future.