As usual, he outlines things brilliantly. I think he is saying in between lines or IOW, or my very personal take at least: Brazil is a dump, so best risk reward is buying companies ahead of the curve; because best balance sheets, not current eps, will endorse rich 15x valuations. Hence my pounding the table for top tier tier builders to merge to capitulate flippers faster.
Find it at BSBR yahoo homepage.
Seeking Contrarian Value In Brazil: Does Banco Bradesco Represent Value?
October 30, 2012 | about: BBD, includes: BSBR, C, ITUB
"risk that investors in Brazil need to be cognizant of are:
Growing signs that the Rousseff government is increasingly seeing government intervention as a valid tool for managing the economy. To date this has been focused on natural resources, land and manufacturing, but there are signs of increased pressure being applied to private banks to make credit cheaper and more freely available as part of a broader effort to stimulate the economy.
Brazil was rated in the Transparency International 2011 Corruption Perception Index at 73rd, out of a possible 182, where the higher the ranking the greater the perceived degree of corruption. I would also expect this rating to worsen in the 2012 index primarily because of the increasing political risk and governmental intervention in the economy.
Increasing signs that the government is attempting to shift a greater portion of the financial burden of its expansive social programs from the public sector to the private sector. It is doing this through increased taxation and other punitive measures. An example of this is the ongoing royalties and taxation disputes that Vale (VALE), Brazil's second-largest company, has become embroiled in.
With the economy in decline, taxation revenues have also fallen and this has seen the government move to increasing the taxation burden on the private sector through interventionist measures to increase the inflow of much needed revenue. This can be attributed to the financial pressures created by the government's ambitious social programs along with the funding requirements for the World Cup and Olympic preparations.
Brazil continues to suffer from poor infrastructure, and this is acting as direct impediment to economic growth.
There have been increasing incidents of social unrest and strikes, which are causing significant disruption to the economy.
Another broader based risk for banks, in general, is a lower global risk tolerance to credit and leverage. This is seeing greater regulatory pressure brought to bear on financial institutions, particularly with regard to regulation. This has seen Latin American governments become increasingly focused on ensuring their regulatory frameworks comply with international standards. All of which, adds to the regulatory burden and associated costs for banks."
ps. Good luck to East Coast longs GFA enduring Sandy...well, shorts too.