Brazilians Stretch for Yield and Get Stung by Unfamiliar Risks
Newcomers are often unfamiliar with the vagaries of the Brazilian corporate bond market, where it can be hard to recover losses or sell securities.
Gustavo Poletto bought 200,000 reais ($50,000) of bonds issued by a Brazilian road company in 2015, lured by their high yields and tax-exempt status. His broker told him it was a once-in-a-lifetime opportunity. Now the 39-year-old radiologist from southern Brazil expects to lose it all.
His pessimism is probably justified. The company that sold the bonds, Concessionária Rodovias do Tietê, is trying to restructure its debt and says it has few prospects for fully repaying its creditors. While Poletto says he’s learned his lesson, thousands of his fellow Brazilians remain enthralled by infrastructure bonds and other high-yielding debt. Many are in for a wake-up call.