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BHP and Rio Tinto’s $140 billion iron ore joint venture has been good news for Brazilian iron ore giant Vale, according to a senior figure in Brazil’s asset management industry — one of the world’s top 10. “The fact of the merger will be seen as positive for Vale,” said Itau-Unibanco Asset Management global product specialist Mauricio Gutemberg. “The deal means there should be no intrusion on the pricing of ore. “Now you will have two big companies — BHP-Rio and Vale — who will fight for better prices for iron ore. So it’s a positive for Vale, not a negative.” Mr Gutemberg said that had Chinalco won a slice of Rio, iron ore prices might have fallen. “It would have been easy for them to push for lower prices in the market,” he said. “Now I don’t think there is any space for China to take within a producer of iron ore, to affect prices. For Vale, it’s good to have a merger between BHP and Rio.” Mr Gutemberg and officials of Itau-Unibanco are completing a second round of roadshows with big names in Australian institutional funds management, trying to attract them to Brazil and Chile where the global financial crisis has passed almost without notice. Brazil’s economy has needed a stimulus only half as big as Australia’s. Interest rates in Brazil have fallen to single digits for the first time in a decade, the banking system is in rude health and the stock exchange has risen 45 per cent so far this year. “With interest rates falling, investors are beginning to look more closely at equity investments in Brazil and elsewhere in Latin America as an alternative to the traditional fixed interest,” Mr Gutemberg said. Itau and Unibanco, Brazil’s second and third-largest private sector banks, merged in November to form the biggest bank in South America and one of the 10 biggest financial groups in the world. Its asset management division has funds under management of more than $US105 billion, with a Brazilian market share of more than 20 per cent. Mr Gutemberg said Australian institutions were sufficiently impressed to promise that investment professional would visit Latin America, as confidence about the prospects for global business returned. There is much to tempt them in Brazil, with inflation below 5 per cent, huge domestic demand that downplays the need for commodity exports and the government about to invite international oil companies to bid for concessions in Brazil’s enormous “pre-salt” oil fields as early as next year. Oil industry executives say these Brazilian fields will rival the North Sea in size and importance. They present huge operational challenges, as they lie trapped under several kilometres of seawater, rock and a layer of hard-to-penetrate salt. Yet they offer the possibility of large quantities of high-quality crude, which could turn Brazil into an important oil-exporting nation. |
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