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TO RUEHC/SECSTATE WASHDC PRIORITY 7419
INFO RUEHAC/AMEMBASSY ASUNCION PRIORITY 3094
RUEHBR/AMEMBASSY BRASILIA PRIORITY 8533
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RUEHCV/AMEMBASSY CARACAS PRIORITY 0550
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RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 8299
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RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
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UNCLAS SECTION 01 OF 02 SAO PAULO 000743 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/FO, WHA/BSC, WHA/EPSC, INR 
STATE PASS USTR FOR KATE DUCKWORTH 
NSC FOR TOMASULO 
TREASURY FOR JHOEK, DMCCORMICK 
 
E.O. 12958: N/A 
TAGS: ECON EFIN BR
SUBJECT: INTERNATIONAL FINANCIAL ANALYSTS BULLISH ON BRAZIL 
 
REF: SAO PAULO 709 
 
SAO PAULO 00000743  001.2 OF 002 
 
 
¶1.  (SBU) The Ambassador and US Treasury Attache met with 
Goldman Sachs, JP Morgan, and Credit Suisse on August 22 and 
23 to discuss the recent volatility in the financial markets. 
 The Brazilian financial markets have calmed down following 
worldwide financial turmoil earlier this month (reftel), and 
these leading international financial institutions remain 
generally bullish on the Brazilian economy citing a much 
improved public sector balance sheet as the primary reason. 
In fact, financial analysts from these institutions continue 
to expect strong economic performance out of Brazil.  In 
particular, Brazil's financial services industry appears to 
be well positioned to continue to experience rapid growth. 
 
¶2.  (SBU) This positive assessment of the Brazilian economy 
has led Goldman Sachs Brazil to expand its investments and 
operations in Brazil.  Goldman Co-Head Eduardo Centela told 
the Ambassador and Attache that in the past 18 months, 
Goldman has increased its local hires by five-fold and 
expanded across a broad range of financial services. 
Similarly, Ricardo Stern, Brazil Country Head for JP Morgan, 
stated that JP Morgan has begun investing heavily into 
Brazilian small and medium size companies to better position 
itself for future initial public offerings.  (Note: There 
have been 54 already this year and several more pending.  End 
Note.) 
 
¶3.  (SBU) The optimistic economic assessment continued during 
a meeting with Credit Suisse Brazil Country Manager Jose 
Pereira.  Pereira stated that Brazil has experienced 
significant growth in local capital market development and is 
therefore less vulnerable to financial market volatility 
because it no longer depends on foreign capital flows. 
Pereira further noted that the most important change taking 
place in Brazil's economy is the increased breadth and 
quality of business entrepreneurship.  For his part, Stern 
told the Ambassador he believes that the financial market 
volatility will continue to decline in coming months.  Stern 
also expects Brazil's equity market to remain much more 
robust than its bond market and anticipates strong growth in 
infrastructure and agriculture. 
 
¶4.  (SBU) In response to the Ambassador's query of how 
Washington can support efforts to maintain a robust Brazilian 
economy, the three financial leaders all agreed that the key 
variable is improved infrastructure.  They further stated 
that this area can be a major source of private sector 
investment and growth, but continues to be significantly 
hampered by public sector bottlenecks.  Pereira underscored 
that in addition to the growth barrier that poorly developed 
infrastructure creates, environmental regulations create the 
single most important barrier to investment.  Stern also 
shared the concern that project financing continues to limit 
high innovation sectors such as technology, and researchers 
are often reluctant to associate closely with the private 
sector.  They also focused on the labor market as a key 
growth constraint, especially the lack of a skilled labor 
force, and encouraged further expansion of English language 
instruction.  Despite the many challenges the private sector 
faces in Brazil, Centel believes Brazil's business 
environment is more navigable than China's. 
 
¶5.  (SBU) Comment:  Despite obstacles to private investment 
in Brazil, the country's economic outlook remains positive, 
and the fundamental economic conditions in Brazil are better 
today than at any other point in recent history. 
International investors are bullish on investing in Brazil 
and are expanding services and opportunities across many 
industries.  Further cooperation in line with the 
Ambassador's efforts to create synergies between the public 
and private sector would go a long way to help minimize these 
 
SAO PAULO 00000743  002.2 OF 002 
 
 
inefficiencies.  End Comment. 
 
¶6.  (U) This cable was coordinated by US Embassy Brasilia and 
the US Treasury Financial Attache. 
WHITE