LATIN AMERICA Boom times are morphing Brazil into its own end market

Aug 01, 2007 | 07:17 AM |

RIO DE JANEIRO It may sound bananas to those unfamiliar with Latin America, but Brazil, following in the footsteps of a few of its leading corporations, such as Cia. Vale do Rio Doce (CVRD), Usinas Siderúrgicas de Minas Gerais SA (Usiminas), Votorantim Metais and Grupo Gerdau SA, is close to gaining investment-grade classification from international credit-risk agencies.

The upgrade should reduce the cost of credit for new investments in Brazil's basic industries, mainly steel and metals-using sectors, which are already counting on new spending from home and abroad of more than 1 trillion reais ($520 billion) by 2010, according to Banco Nacional de Desenvolvimento Econômico e Social, Brazil's development bank.

The new classification is expected as early as the first half of 2008, given the country's favorable debt profile, positive balance of payments since 2000 and currency stability since the 1994 introduction of the real. Credit Suisse recently slashed its country risk rating for Brazil to 150 basis points from 250 in one fell swoop—a far cry from the 700-plus figures in the 1990s.

Brazil's economy has again become international news—but on a much more positive note than the last time this happened, in the late 1980s, when it submerged in hyperinflation that caused the crash of four currency systems and a dozen or so finance ministers in a six-year period.

Unabashed by a succession of corruption scandals rippling through the nation's congress, President Luiz Inácio Lula da Silva triumphantly declared mid-June that "Brazil is enjoying its best economic moment since the country was declared a republic in 1889. Finally, we have managed to combine growth (of an expected 4.3 percent this year) with economic stability and inflation control."....