JBS Seen Gaining $3.6 Billion With Collapse of Brazil's Realby
Company making cash from $12 billion position in derivatives
Credit Suisse sees further currency depreciation ahead
JBS SA, the world’s largest meat producer, will probably post financial gains of 15 billion reais ($3.6 billion) from derivatives contracts betting against Brazil’s real, according to Viccenzo Paternostro, an equity analyst at Credit Suisse.
The Brazilian meatpacker held a nominal value of about $12 billion in contracts that short the real at the end of June, a 50 percent increase since December, as the company moved to fully hedge its debt and that of its units. That could lead to gains of as much as 11 billion reais just for this quarter, Paternostro said in an interview.
The real has tumbled 25 percent this quarter and is down 36 percent for the year, the worst drop among the world’s 31 most-traded tenders, as the economy heads to the longest recession since the 1930s. The real fell as much as 1.7 percent today to a record low of 4.2478 per dollar. Paternostro expects the currency to trade about 4.25 at the end of the year.
The real’s depreciation accelerated after Standard & Poor’s cut the credit rating on Brazil’s foreign debt to junk this month. The ratings company cited political gridlock amid calls to impeach President Dilma Rousseff, growing opposition in Congress to her fiscal austerity measures and widening fallout from a bribery scandal at Brazil’s largest state-run company. Brazil’s real has also been hit by a collapse in commodity prices and the prospect of the first increase in U.S. interest rates since 2006.