Deuda emergente y Brasil

Sailesh Lad, gestor del fondo AXA WF Emerging markets Short Duration Bonds - Miercoles, 28 de Septiembre

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“Brazil: Corporates are ahead of the game” says Sailesh Lad, manager of the AXA WF Emerging Markets Short Duration Bonds

·         Positive sentiment risks fading, as fiscal challenges take centre stage

·         Optimism should be balanced with the challenges associated with achieving reform

·         Large corporates quicker to adjust to the new economic environment than government

“Brazil is emerging from a very challenging economic cycle, battered by both a political and a terms of a trade shock, but benefiting for the moment from a bout of favourable sentiment. President Temer has finally taken his place in the hot seat, ushering in the hope – if not the prospect – of real reform. 

“Optimism should be balanced with the scale of the fiscal task. Bringing down the budget deficit from an estimated 7.6% of GDP in 2016 and limiting upward pressure on government debt, forecast to breach 80% by the end of 2017, will take considerable political courage.

“Temer has the willingness to reform, but his ability may be limited. Executing fiscal reforms in a form that will support a turnaround in the debt trajectory will be extremely challenging. First, Temer lacks the 2/3 majority to make constitutional amendments, testing his negotiation skills. This will likely see reforms taking longer to implement, and increases the likelihood that they will be implemented in a watered-down fashion in order to reach agreement.

“Reforms include a proposal to cap expenditure growth, but this is unlikely to be enough given high structural spending. Social spending is above 17% of GDP, nearly double its peers like South Africa, Mexico or Chile. What is needed are structural reforms, including the labour market, pension reforms, privatisation and improving the business environment in order to get the economy growing again and debt coming off.

“Large corporates are well placed to ride the momentum. With a reduction in capex, well controlled costs and some liability management, large corporates have adjusted their balance sheets to the new economic environment faster than the government. We are positive on Petrobras’ turnaround story as they have begun to transform their financial profile. The lessons learned from Petrobras’ corruption investigations could translate to a leaner and cleaner private sector.

“We prefer names in sectors such as metals and mining, pulp and paper as well as protein producers. These companies have the advantage that not only do their revenues originate from exports but they have also benefitted from the depreciation of the Brazilian real. We have taken profits on some of these names that have reached our performance target and no longer look as attractive on a relative value basis.

“We have been constructive on the Brazil story since last year and welcomed the change on the political stage. Brazil is expected to return to positive growth in 2017, FX reserves remain robust at USD 366bn compared to USD 37bn of external sovereign debt. However, we are becoming more cautious about the new government’s ability to deliver fiscal reforms in the medium term.”

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