Main menu

#CouncilBR Recap: São Paulo Is Jumping on Investors' Optimism 

Mayor of São Paulo João Doria

Mayor of São Paulo João Doria (Photo: Mario Miranda)

May 12, 2017

Speakers:

  • João Doria, Mayor, City of São Paulo 
  • José Berenguer, CEO, J.P. Morgan Brasil 
  • Francisco Cestero, Partner, Cleary Gottlieb Steen & Hamilton 
  • Gonzalo Fernandez Castro, Managing Director, Private Equity Americas, Partners Group
  • Rafael Guedes, Managing Director, Fitch Ratings 
  • Zeina Latif, Chief-Economist, XP Investimentos 
  • Telma Marotto, Managing Editor, Bloomberg Portuguese and Spanish News Services 
  • Rodolfo G. Spielmann, Managing Director, CPP Investment Board 
  • Deborah Stern Vieitas, CEO, Amcham Brasil 
  • Matheus Villares, Managing Director, Temasek Holdings 
  • Ragnhild Melzi, Vice President, Public Policy Programs and Corporate Relations, Americas Society/Council of the Americas

“I am not afraid of talking about privatization,” said São Paulo Mayor João Doria, when presenting his administration's plan for public-private partnerships to address a financial downturn in the city. At Council of the Americas' Latin American Cities Conference in São Paulo, Doria criticized past governments in Brazil and pointed out how donations from companies he has received recently differed in that they were not based on tradeoffs, such as $100 million from CISCO in technology for schools. “I'm not a politician. I am not a presidential candidate,” said the former businessman-turned-mayor of Latin America’s largest city.

What Doria called “the largest public-private partnership plan in São Paulo’s history” is also a result of renewed enthusiasm among investors looking to Brazil. AS/COA's Ragnhild Melzi made a similar point in opening remarks to the conference, saying that "Brazil has turned the corner.” She noted the economic improvements the country has achieved so far, including an inflation rate that is now below the 4.5 percent government target—the lowest since 2010. Plus, foreign direct investment (FDI) in the first semester of the year is up 40 percent from the same period in 2016, said Amcham Brasil's Deborah Stern Vieitas, and international investors are noticing.

Economists agreed, in a panel discussion moderated by Bloomberg's Telma Marotto. According to Fitch Rating's Rafael Guedes, the stabilization of the economy is already translating to higher levels of confidence among investors and Fitch’s latest review of investment grades did not involve a downgrade of Brazil for the first time in four sessions. Still the current levels of FDI are not enough for an economy the size of Brazil that aims to grow 2 percent, he said. That's what makes fiscal measures such as pension reform so crucial, he added, by allowing the government to bring down its oversized debt.

For XP Investimentos' Zeina Latif, fiscal improvements do not stop with pension reform. The proposal would be the beginning of more austerity measures to eliminate risk in investors' eyes. The reform “doesn't just solve the problem of insolvency. It makes room for other important public policies," she said.  The government’s economic team has started on the right path, already producing results like lower inflation. “Brazil is a difficult and expensive country. But now it is not so risky [to invest].”

But, as the saying goes, it's important to see to believe it. An ensuing panel of investors operating in the country discussed the hurdles remaining and the opportunities surfacing among the economic rebound and corruption scandals. Temasek Brasil’s Matheus Villares said that if pension reform does not happen, “it will be disastrous.” J.P. Morgan’s Brazil CEO José Berenguer pointed out that the country’s infrastructure is the worst among emerging markets. And CPP Investment Board’s Rodolfo Spielmann cited issues on investing in green field versus brown field projects in Brazil: “a delay of two or three years to be able to invest is bad for investors,” he explained.

At the same time, there are high hopes about Brazil’s institutions. The panelists agreed that Lava Jato investigations, even though provoking a vacuum because they implicated large corporations, opens opportunities for smaller businesses. Spielmann said the fight against corruption through institutional channels makes the country attractive for investment in the long run. 
 

Doria closed the conference with a discussion about his efforts to streamline public administration management and speed approval for creative revenue ideas, which sparked applause from the audience. He asked businessmen in the audience to defend the country, “not letting a selfish minority silence support for necessary reforms.”