The Brazilian real’s 25 percent tumble this year against the U.S. dollar has brought it to an attractive level to spur dealmaking, according to Hans Lin, Bank of America Corp.’s head of investment banking in Brazil.
The exchange rate “feels like it’s in the right place,” making assets cheaper for foreign investors who may take the opportunity to acquire companies or buy equities, Lin said in an interview Aug. 20 in Sao Paulo. The current account is moving toward a monthly surplus, and “that for sure is a good barometer of the price for the currency,” he said.
The real’s decline this year is the biggest among emerging markets after Colombia’s peso, as recession looms and a political scandal prompts calls for President Dilma Rousseff’s ouster. The uncertainty has all but wiped out the market for initial public offerings, and announced mergers and acquisitions targeting Brazilian companies have dropped by more than half, data compiled by Bloomberg show.
The real weakened 1.5 percent to 3.5542 per dollar Monday, bringing its decline to 36 percent in the past 12 months, the biggest drop among emerging-market currencies after Russia’s ruble and the Colombian peso.
Lin said there is some investment activity because foreign funds are buying. The bank helped carry out an $877 million block trade late last month in which Vivendi SA sold the rest of its Telefonica Brasil SA stake.
“At the right price, there’s demand,” Lin said, adding that the investment-banking business is also being hurt by political uncertainty and market volatility.