Posted
Apr 30 2008, 03:28 PM
by
Vinny Catalano, CFA
According to news sources (which have not hit the major newswires as of yet), Brazil's government debt has been upgraded. This had been expected in the second half of this year. So, this announcement caught investors off guard and pleasantly surprised.
By raising the rating to investment grade, Brazil's cost of capital will almost certainly decline. Additionally, the upgrade opens the door for more capital that is restricted to investment grade only.
Recently, news re the large oil fields off the Sao Paulo coast of Brazil has stimulated much investor excitement. This excitement was tempered with comments re questions as to the size of the fields (as high as 40 billion barrels - Tupi and Sugarloaf/Carioca fields combined) and the complexity extracting the oil (up to six miles deep, among other factors).
Investment Strategy Implications
One of the investment positions in the Model Growth Portfolio* is ILF - Latin America 40, which is comprised predominantly of Brazilian issues, some Mexican issues (mostly energy), and a smattering of other Latin American companies.
More on this story as details become better known.