Huw Jenkins is former CEO of the investment bank UBS, and is now managing partner at BTG Pactual, Brazil’s largest independent investment bank. He spoke to China Economic Review about the potential for Chinese investment in Brazil.
Q: What interest in Brazil have you seen from Chinese investors, and how is BTG Pactual playing into that interest?A: There is clearly a very strong and continuous interest from China. That has two effects for us. The first is on our advisory business: With regards to resources and mining, agriculture and infrastructure, we think there’s a lot of room for involvement in advising Chinese or Brazilian corporations who are looking to raise Chinese capital. The second aspect is that we’ve launched our Brazil private equity fund. It’s tailored toward long-term investors who want exposure to the Brazilian growth story, and I think that works particularly well for Chinese investors.
Q: How has the global downturn affected BTG Pactual?A: It has had a relatively modest impact. Brazil has been reasonably insulated from the downturn because it is not only a good growth story, it’s actually an endogenous growth story. Quite often when we talk about Brazil we say that it’s like the US 50 or 60 years ago. It has a very positive demographic with a baby boom generation coming into the work force, and relatively low levels of domestic credit expansion supported by a stable banking system. There is therefore the potential for a significant increase in domestic consumption and middle-class growth. It’s more of an internal model of growth than an export-led, Asian model of growth.
Q: How has the downturn affected investor appetite for Brazilian investments?A: A lot of the potential investors that we’ve been looking to source have clearly become much more risk-averse and [their investments]have not generated the returns that they were expecting over the past three to five years. They’re much more cautious about investing new money. I think that’s beginning to improve as markets have stabilized. It has had some impact on our investor base, but because Brazil is a good, endogenous growth story, I think it’s is a place where investors – even though they may be risk-averse – are beginning to put their fresh capital to work. We’ve seen higher levels of FDI into Brazil over the past two years than we’ve ever seen before.
Q: What do Chinese investors in particular look for in Brazilian investments?A: What Chinese investors have indicated to us is that their specific interest, especially at this stage, is in oil and gas, agriculture and infrastructure. I think there’s the opportunity to develop more new funds that are focused on the interests of Chinese investors.
Q: How important are external investors to Brazil’s economy?A: Brazil has a very good domestic growth story. But in order for it to really achieve long-term growth, it needs foreign capital because it’s not generating the level of savings to complete the infrastructure investment that the country needs. It’s a growth story that is only sustainable with continuous foreign investment. Q: Where do you see the Sino-Brazilian relationship heading?A: I think this is going to become a really strong investment relationship. I think that there are very powerful benefits to both countries. Brazil has abundant fresh water, abundant quantities of oil, gas, iron ore and other natural resources, all of which China could happily consume. At the same time, China has the financial capability and the experience in delivering on infrastructure projects. China is Brazil’s largest trading partner. There’s no reason it shouldn’t also be the largest investor.
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