Bloomberg News

Brazil Stocks Less Alluring Than Mexico, Henderson’s Cowley Says

March 01, 2013

Brazil’s sluggish economy and the government’s interventionist policies have made the country less attractive to stock investors than Mexico, according to Henderson Global Investors Ltd.’s Nicholas Cowley.

The Bovespa has dropped 6.7 percent this year, the third- worst performance among 94 indexes, as policies intended to spur growth eroded profits for some of country’s biggest industries including energy and utilities. Mexico’s IPC gauge of equities has risen 0.5 percent.

“Brazil is tough to get excited about in the short term,” Cowley, an investment manager at Henderson, which oversees about $100 billion, said in a phone interview from London. “What’s concerning people is the lack of a coherent message from the government and the central bank with respect to how they’re tackling inflation, growth and the exchange rate.”

As the economy grew at the slowest pace since a contraction in 2009 and inflation remained above the midpoint of the central bank’s target range, the government forced state-controlled Petroleo Brasileiro SA to charge below-market gasoline prices, pushed banks to reduce profits to “civil levels,” changed utility contracts to lower electricity rates and pushed down the real to help exporters.

The government has made it difficult for investors and companies to make long-term decisions, Cowley said. Mexico is the preferred market in Latin America because of its “robust outlook” and more predictability than Brazil, he said.

Cheap Banks

While Henderson views Brazil’s stocks with caution, the nation’s banks are cheap compared with Latin American peers, Cowley said. He has added positions in BR Malls Participacoes SA, the country’s biggest owner of shopping centers.

Since the beginning of the year, President Dilma Rousseff has reached out to investors, meeting with business executives including the billionaire Eike Batista and dispatching Finance Minister Guido Mantega this week to New York to seek financing for $235 billion in infrastructure projects.

“She recognized she needs to be more open to investment, to promote it more,” Cowley said. The infrastructure plan is “very coherent, good overall,” he said.

To contact the reporter on this story: Julia Leite in New York at

To contact the editor responsible for this story: David Papadopoulos at

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