Better economic conditions in Brazil lead to capital market expansion

Thursday, October 12, 2017

Brazilian companies are tapping into the capital market in anticipation of an improving domestic economy and to take advantage of low interest rates.

Local companies raised a total of 176bn reais (US$55.8bn) between January and September, through the issue of shares and debts in the local market and also via overseas bonds, representing a rise of 32% from the same period of 2016, according to the Brazilian Association of Financial and Capital Market Institutions, or Anbima. The value of shares offered soared 236% in the period, totaling 26.9bn reais, Anbima said.

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The central bank has lowered the Selic base interest rate to 8.25% over several rate cuts. The Selic had been at 13.75% in January; the rate is now at its lowest level since May 2013, when it was 8%.

The increase in capital market activity is taking place amid positive forecasts for Brazil's economy. After two years of economic recession, with the country's GDP contracting 3.8% in 2015 and 3.6% in 2016, Brazil's economy is expected to advance 0.7% this year, according to economists.