Brazil Real Climbs With Stocks on $9.1 Billion in Airport Bids

Brazil’s real gained along with stocks as companies made winning bids worth $9.1 billion to operate two of the nation’s busiest airports, agreeing to pay almost four times the minimum amounts set by the government.

The currency rose 1.1 percent to 2.2794 per U.S. dollar at the close in Sao Paulo, extending the rally over the past five days to 1.5 percent, its first weekly advance since Oct. 18. The real was the best performer today among emerging-market currencies tracked by Bloomberg. The Ibovespa equity index rose 0.2 percent to 53,800.74, paring its weekly drop to 1.2 percent.

In auctions testing Brazil’s ability to attract major operators and revamp infrastructure before the 2014 World Cup and 2016 Olympics, a group led by Brazil’s Odebrecht SA that included Singapore’s Changi Airport Group won with a bid of 19 billion reais ($8.3 billion) to operate Rio de Janeiro’s Galeao airport. The offer compares with the minimum required bid of 4.83 billion reais.

“There is an expectation of more dollar inflows once these concessions happen,” Pablo Spyer, a director at Mirae Asset Management in Sao Paulo, said in a telephone interview.

A group led by CCR SA, which also includes the operators of Munich’s and Zurich’s airports, agreed to pay 1.82 billion reais for the right to operate Confins airport in Belo Horizonte, compared with a minimum bid of 1.1 billion reais.

Sao Paulo-based CCR climbed 1.3 percent to 18.48 reais after earlier advancing 1.8 percent. Petroleo Brasileiro, the state-run oil producer, dropped 1.1 percent to 20.67 reais.

Itau Outlook

The drop in Brazil’s unemployment rate to the lowest level this year will make it possible for the government to cut its budget deficit before the 2014 presidential election and avoid a reduction in the nation’s credit rating, according to Itau Unibanco Holding SA.

“The government’s base-case scenario is that they can do enough on the fiscal side to avoid a downgrade while keeping unemployment low,” Ilan Goldfajn, Itau’s chief economist, said in an interview in Sao Paulo.

The national statistics agency reported yesterday that the jobless rate fell to 5.2 percent in October, below the 5.4 percent median estimate of 32 economists surveyed by Bloomberg.

Brazil auctioned credit lines today as part of a $60 billion intervention to bolster the currency and curb import price increases. The central bank also extended the maturity on $992 million of foreign-exchange swaps in a seventh straight session of rollover auctions.

The real has fallen 1.7 percent since Oct. 31, when Brazil reported that the September government deficit as a percentage of gross domestic product swelled to the largest since 2009.

Investor Outlook

Investors have never been more pessimistic about President Dilma Rousseff’s policies, with only 10 percent saying the country can avoid a credit-rating downgrade in the next year, a Bloomberg Global Poll shows.

Standard & Poor’s and Moody’s Investors Service lowered their outlooks this year on the nation’s credit rating, which both companies have at two levels above junk.

Brazil’s current-account deficit expanded to 3.7 percent of annual gross domestic product in the 12 months through October, the widest since 2002, according to a report today from the central bank. The gap in the current account, the broadest measure of a country’s trade in goods and services, was 3.6 percent in the prior month.

Foreign Investment

Foreign direct investment climbed in October to $5.4 billion from $4.8 billion in the prior month. The median forecast of economists surveyed by Bloomberg was for an increase to $5.3 billion.

Swap rates on contracts due in January 2017 rose four basis points, or 0.04 percentage point, to 12.09 percent today on speculation the central bank will raise the target lending rate to 10 percent this month to curb inflation. The swap rates extended their weekly increase to 26 basis points.

Inflation accelerated to 5.78 percent in the 12 months through mid-November, more than a percentage point higher than the central bank’s target, the national statistics agency reported Nov. 19.

Brazil has raised the target lending rate to 9.5 percent from a record low 7.25 percent this year, the most among 49 nations tracked by Bloomberg, in a bid to cool consumer demand and hold down prices.

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