Proof of that is the rising number of Arab organizations registered at the Securities and Exchange Commission (CVM), so as to inject funds into the Brazilian capital market. Only one registration was made in 2001, and then two years passed by without new entries. In 2004, there were three new registrations, then five more in 2005, another five in 2006, twelve in 2007, and five so far in 2008.
Newly registered organizations include large sovereign funds, such as the Abu Dhabi Investment Authority (Adia), the world’s largest, the Kuwait Investment Authority (KIA), the Saudi Arabian Monetary Agency (Sama), which is the country’s central bank, the Dubai International Capital and the State General Reserve Fund, based in Oman.
“We are being contacted by different customers interested in the Brazilian market,” said the international director at the ABC Brazil bank, Angela Martins. The bank is run by the Arab Banking Corporation (ABC), based in Bahrain, a financial center in the Middle East.
According to her, wealthy countries were the ones most harmed by the financial crisis triggered by the United States mortgage crisis. As a consequence, the so-called BRIC countries (Brazil, Russia, India and China) began attracting the attention of leading international investors even more. “The Arabs already invest in Asia in Russia. Why not Brazil?,” stated the executive.
Along the same lines, the director at brokerage firm XP Investimentos, Kléber Hollinger, claims to not have “the slightest doubt” that the interest of Arabs in Brazil only tends to grow. “In the 1980s and 1990s there was the Yen boom, so the Japanese went to New York and bought a bit of everything. The same is happening today with the Arabs,” he asserted.
According to the executive, whenever the dollar depreciates, investors tend to seek new locations other than Europe, which is a traditional target for Arab funds.
Add to that the increased visibility of Brazil in the Arab world, and vice-versa, which took place in the last five years as a result of various efforts for diplomatic and commercial coming together, promoted by the Brazilian government and private sector; the improvement of the Brazilian economic scenario, which was acknowledged by credit rating agencies Standard & Poor’s and Fitch Ratings, which assigned “investment grade” to the country; the creation of a direct flight by Emirates Airlines between Dubai and São Paulo; and the growing availability of funds generated by petroleum in the Arab world.
Those factors are leading more and more Brazilian companies to look to the Middle East for capital. Such is the case of large banking institutions such as Banco do Brasil (Bank of Brazil), which has just opened an office in Dubai, and Itaú, which will soon own premises in Dubai and Abu Dhabi.
The Arabs are interested not only in the capital market, but especially in direct investment. The president of the Association for the Development of Real Estate and Tourism in Northeast Brazil (Adit-Nordeste), Felipe Cavalcante, claimed that real estate development in the region is attracting much attention from Arab investors.
Adit, in partnership with the Brazilian Export and Investment Promotion Agency (Apex), holds a campaign to attract foreign investors into real estate and tourist enterprises. Recently, the two organizations promoted an event called Nordeste Invest, in the city of Recife, which counted on the presence of a representative of Dubai-based real estate developer Nakheel. The representative, according to Cavalcante, announced that the company is interested in investing in Brazil.
To that extent, Adit aims to intensify its efforts in the Arab world by promoting a prospecting mission to Dubai and Abu Dhabi still this year, and participation in sectoral events in the two emirates in 2009. “Within three years, the region’s main groups should start arriving here. I am certain about that,” stated the executive.
With regard to direct investment, in addition to the real estate and tourism fields, Arabs are very much interested in the food sector, according to Angela Martins, of ABC Brazil. “Our clients are more interested in direct investment than in other types of investment, and the foodstuff sector comes first,” he stated.
The Arab Brazilian Chamber of Commerce is also being consulted by Arab companies interested in investing in Brazil. Such is the case of the Makaseb bank, based in the United Arab Emirates, which seeks deals in the food sector, and of the Jordanian group Munir Sukhtian, for cosmetics and pharmaceutical products, which is also willing to establish itself in the country.
Another company that sought the Chamber this year was the Elloumi group, from Tunisia, which wants to implement an electric wire factory for the automobile industry in Brazil.
Late last month, Saudi company HiTs Telecom announced the purchase, for US$ 62 million, of 49% of the capital of Unicel, a company licensed to operate mobile telephony services in the metropolitan region of São Paulo. In the beginning of the year, a foreign fund with Arab capital bought one of the towers at real estate enterprise Ventura Corporate Towers, in Rio de Janeiro, for US$ 422 million.
Another Saudi company, Amiantit, has been present in Brazil for longer. In 2002, it purchased Amitech, a maker of large-diameter pipes and connections based in the interior of the state of São Paulo. Last year, the company sold its majority stake in the company to the Colombian group Inversiones Mundial, but maintained a 30% share.
It is difficult to know exactly how much Arab capital is currently invested in Brazil, as official figures disclose only funds coming directly from the region, with no intermediaries.
According to Angela Martins, approximately 70% of the Arab capital that enters the country is invested by third parties, be they investment funds and asset management firms based in the United States or Europe, or subsidiaries of Arab companies located outside of the region.
The ABC Brazil bank is an example of that, as it is controlled by an Uruguay-based, wholly owned subsidiary of the Arab Banking Corporation.
Anba – www.anba.com.br