Did You Notice? Brazil Joins the Big Leagues
By Christopher Hancock
Standard & Poor's recently slapped the coveted international seal of approval on Brazil's credit. Now, with its score rising from BB+ to BBB-, Brazil's cost of capital will fall significantly - putting the booming nation on track to soar even higher.
Consider the investment-grade credit rating the global version of an American Express Black Card. With it, there is no limit. Just ask the American government.
The Bovespa, the Sao Paulo Stock Exchange, climbed 6.3%, to 67,868.46, on the news. We're not surprised to see the Bovespa react so strongly. We've seen this happen before.
When ratings agency Moody's raised Mexico's rating to investment grade in 2000, it sent the Mexican Bolsa IPC Index into a multiyear uptrend.
Want two more recent examples? Take the upgrades of Russia and South Korea. As with Mexico, the Russian and South Korean markets were rewarded handsomely.
The world's ravenous appetite for raw materials is the great driver behind Brazil's strong forex reserves - the principal factor behind Brazil's ratings upgrade. And this trend won't end anytime soon.
The Economist highlights a report funded by Rio Tinto. In it, Ross Garnaut and Ligang Song of the Australian National University conclude: "The increase in China's demand for metals during the next two decades may be comparable to the total demand from the industrialized world today."
Plus, now-unavoidable infrastructure replacement in the West should only add more pressure on limited supplies of copper, nickel, iron and zinc. As long as the world keeps demanding the bounties of the Earth, Brazil should continue to prosper.
Standard & Poor's recently slapped the coveted international seal of approval on Brazil's credit. Now, with its score rising from BB+ to BBB-, Brazil's cost of capital will fall significantly - putting the booming nation on track to soar even higher.
Consider the investment-grade credit rating the global version of an American Express Black Card. With it, there is no limit. Just ask the American government.
The Bovespa, the Sao Paulo Stock Exchange, climbed 6.3%, to 67,868.46, on the news. We're not surprised to see the Bovespa react so strongly. We've seen this happen before.
When ratings agency Moody's raised Mexico's rating to investment grade in 2000, it sent the Mexican Bolsa IPC Index into a multiyear uptrend.
Want two more recent examples? Take the upgrades of Russia and South Korea. As with Mexico, the Russian and South Korean markets were rewarded handsomely.
The world's ravenous appetite for raw materials is the great driver behind Brazil's strong forex reserves - the principal factor behind Brazil's ratings upgrade. And this trend won't end anytime soon.
The Economist highlights a report funded by Rio Tinto. In it, Ross Garnaut and Ligang Song of the Australian National University conclude: "The increase in China's demand for metals during the next two decades may be comparable to the total demand from the industrialized world today."
Plus, now-unavoidable infrastructure replacement in the West should only add more pressure on limited supplies of copper, nickel, iron and zinc. As long as the world keeps demanding the bounties of the Earth, Brazil should continue to prosper.
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