U.S. Baby Boomers Could Look to
Brazil In The Future
by Elliot Uchitelle, President of Latin American Trade Specialists
Brazil's recent privatization of its remaining shares of its telephone company,
Telebras, was notable for its great success in obtaining a 64% premium over the
minimum bid price. And this privatization, the largest ever in Latin America, certainly
attests to the fact that major investors remain confident in the long-term prospects for
Brazil's economy.
But the most significant aspect of the privatization may very well have been the
widespread coverage the sale received throughout the United States. The business
sections of major newspapers throughout the United States highlighted not only the
ultimate sale of Telebras but also the incredible economic prospects in Brazil's
telecommunications sector as well as other sectors. And CNN, the twenty-four hour
U.S. news station, highlighted the sale of the Telebras and the fact that its shares on Wall
Street rose four percent the day after the successful privatization. It is this widespread
coverage throughout the United States that could have significant ramifications for Brazil
in the future.
Over the past ten years, U.S. citizens have been pouring money into securities
with the vast majority of this money buying U.S. stocks. And as the large segment of the
population known as the baby boomers begins to think more and more about retirement,
this trend is only expected to increase. People in the United States have begun to expect
a minimum yearly return on their investments of at least ten percent which leaves stocks
as the only viable alternative. Yet, many analysts are convinced that it will become
increasingly difficult to find U.S. stocks that will continue to yield an annual ten percent
return given that these U.S. companies are becoming increasingly overly valued. And
that is where Brazil's stock market, and its recent widespread exposure as a result of the
Telebras sale, could become significant.
To date, it is still principally the large investors that have bought Brazilian stocks,
but it is the small investors that control the bulk of the funds in the U.S. market. And if
these small investors were to start buying large shares of Brazilian and other Latin
American shares, the inflow of capital would increase dramatically. That was the real
significance of the Telebras sale. The American people had an opportunity to see the
great opportunities for investment in Brazil. If Brazil can continue its path toward
economic stability and growth, it only seems logical that small U.S. investors will start to
invest their retirement funds in Brazilian stocks. That would be excellent for the Brazilian
economy and the small U.S. investor. |
