Brazil will probably keep interest rates at record lows for another year as inflation stays within the central bank’s target and public debt shrinks, said Joaquim Levy, the head of Bradesco SA’s asset management unit.
“Low interest rates are here to stay, thanks to the reshaping of the Brazilian economy,” Levy, a former Brazilian treasury secretary who now manages 275 billion reais ($136 billion) at Bradesco Asset Management, said in an interview at the bank’s office in Sao Paulo. “Rates were high in the past because there were many doubts about Brazil’s economic policies. Now those doubts have been cleared up.”
Central bank President Alexandre Tombini cut the lending rate by 4.5 percentage points over the past year to 8 percent, seeking to revive growth in the biggest emerging market after China as Europe’s debt crisis saps the outlook for exports and foreign investment. Should the recovery speed up as Brazil bolsters spending on infrastructure, policy makers may raise the rate to as high as 9 percent by the end of 2013, Levy said.
Consumer prices as measured by the IPCA index rose 5.2 percent in the year through July, the fastest inflation rate in four months. The figure remains below the 6.5 percent ceiling of the central bank’s target.
Stocks including EcoRodovias Infraestrutura & Logistica SA, the Sao Paulo-based highways and ports operator, and Cia. de Concessoes Rodoviarias, Brazil’s biggest toll-road operator, should keep outperforming the Bovespa equity index as Brazilian President Dilma Rousseff relies more on non-government entities to take on infrastructure improvements, Levy said.
“Brazil needs more investments in ports, roads and railroads, which means those companies have scope to keep growing,” Levy said.
Bradesco’s Fia Infra Estrutura (BDSINFR), an investment fund that allocates at least 67 percent of its assests to shares of companies in the infrastructure industry, has advanced 20.6 percent this year, outperforming 90 percent of its peers in Brazil, data compiled by Bloomberg show. The Bovespa index has climbed 4.7 percent in the same period.
Brazil will sell licenses to build and operate roads and railways requiring as much as 133 billion reais in investments over 30 years, Transport Minister Paulo Sergio Passos said during a ceremony in Brasilia on Aug. 15. The government plans to sell licenses for private companies to operate 7,500 kilometers (4,660 miles) of roads and 10,000 kilometers of railways.
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