Better economic conditions in Brazil lead to capital market expansion

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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.