Brazilian President Michel Temer (L) meets Japan's Prime Minister Shinzo Abe at Abe's official residence in Tokyo, Japan, October 19, 2016. REUTERS/Kim Kyung-Hoon
Japan on Wednesday agreed with Brazil to jointly explore Japanese infrastructure investment opportunities in South America's biggest economy as Brazilian President Michel Temer looks to foreign investment to pull out of a deep recession.
Under the agreement, Japanese and Brazilian officials will hold discuss cooperation in investment in areas such as transport, logistics, information technology and energy.
"Brazil represents a chance for Japan. In particular, there is a large investment opportunity in the area of infrastructure," Japanese Prime Minister Shinzo Abe told a joint news conference with Temer.
"I'm really glad we've managed to agree to launch talks on infrastructure development."
Details such as when the first consultations will be held had not been decided, a foreign ministry official said.
Temer last month launched a sweeping plan to auction off licenses to operate oil and gas, electricity and infrastructure projects in an attempt to boost private investment and pull the Brazil’s economy out of its deepest recession since the 1930s.
His center-right government plans to sell concessions for private companies to operate airports and railways and build roads and port terminals needed to ship out exports by the South American agricultural powerhouse.
Temer, making the first visit to Japan by a Brazilian head of state in 11 years, is also on a mission to repair ties frayed by his predecessor, Dilma Rousseff, who twice canceled official visits to Japan.
Earlier on Wednesday, Temer told a business lobby that there was "much potential" in investing in his country's airport, oil and gas sectors.
"By talking to Japanese business executives, I've learned that they are very interested in the investment partnership plan Brazil is promoting, and that they are seriously looking into participating," Temer told the same news conference.
Besides the aim of attracting Japanese investment in Brazilian infrastructure, Temer also hopes Japan's markets will be opened to Brazilian commodities such as beef and fruit.
Japan poured $23.59 billion in direct investment into Brazil as at the end of 2015, according to Japan External Trade Organization.
Currently, the import of fresh Brazilian beef to Japan is largely blocked. Brazil's Agriculture Ministry said on Tuesday it hoped to boost its share of Japan's beef and fruit market in mid-2017.
Separately, the Brazilian leader said his country was aiming to mend its national balance sheet and cap state expenditure, adding it was important for Brazil's central bank to stabilize prices and control inflation.
Temer's government has warned that Latin America's largest country could follow Greece's path to financial meltdown if spending is not controlled.
(Editing by Eric Meijer & Shri Navaratnam)
SAO PAULO – Brazilian opposition Sen. Jose Serra, the runner-up in 2002 and 2010 presidential elections, proposed Friday that the government partially break up Petrobras, which is mired in a massive corruption scandal, and sell some of the state-controlled oil giant’s businesses to private companies.
“Petrobras would have to be divided into autonomous companies, like a conglomerate. I’d have no problem with selling, listing shares, divesting, awarding or associating in different areas. The oil prospecting, extracting and production must be preserved, that heart must be preserved,” the senator with the centrist opposition PSDB party said in statements to a news portal.
The 72-year-old Serra, who was defeated by Luiz Inacio Lula da Silva in 2002 and by current President Dilma Rousseff in 2010, said Petrobras should not be involved in activities such as polyester thread or fertilizers.
Serra, who also was a Cabinet minister under former President Fernando Henrique Cardoso, said the company’s current size, including 300,000 outsourced employees, makes it “a monster impossible to govern.”
Petrobras lost its monopoly in the Brazilian oil and gas industry under Cardoso, whose 1995-2002 administration awarded concessions to private companies and also allowed more foreign capital to be injected into the state-controlled company, whose shares are listed on the Sao Paulo, New York, Madrid and Buenos Aires stock exchanges.
During his interview with the UOL portal, the senator from Sao Paulo state slammed as “megalomania” the current regulatory regime, which makes Petrobras the sole operator of each production-sharing agreement for pre-salt reserves and guarantees the company a minimum 30 percent stake in all pre-salt projects.
The pre-salt region is a massive offshore hydrocarbon frontier so-named because the oil and gas reserves it contains are located under water, rocks and a shifting, 1.2-mile-thick layer of salt at depths of up to 7,000 meters (22,950 feet) below the surface of the Atlantic.
Petrobras, which represents 12 percent of Brazilian GDP, is currently under investigation following disclosure of widespread corruption said to have cost the company billions of dollars since the mid-1990s.
The scandal, in which a cartel of construction firms purportedly paid kickbacks to the company for several years and money also was allegedly funneled to politicians, has led to the resignation of top company executives, including Maria das Gracas Silva Foster, who was replaced as Petrobras’ CEO by Aldemir Bendine, former chief executive of state-run bank Banco do Brasil.
Moody’s Investors Service on Tuesday lowered Petrobras’ credit rating by two notches to Ba2, two levels below investment grade, becoming the first of the big-three rating agencies to classify Petrobras’ debt as junk.
Moody’s said the downgrade of Petrobras debt reflects “increasing concern about corruption investigations and liquidity pressures that might result from delays in delivering audited financial statements.”
That was a reference to PricewaterhouseCoopers’ refusal to certify Petrobras’ accounts.
Moody’s also said that it expects “the company will be challenged to make meaningful reduction in its very high debt burden over the next several years.”
The downgrade also reflects “the challenges related to the corruption investigations, which create management distractions that may hinder efforts to improve operations as well as ongoing concerns about corporate governance and the need to sustainably improve internal controls,” the agency added.
As a result of the scandal, formal charges have already been filed against three of the company’s former directors and executives from several of the country’s leading construction firms.
Rousseff, who served on Petrobras’ board of directors from 2003 to 2010, said Wednesday that Moody’s ratings action was the result of ignorance about the company’s situation.
She expressed confidence that Petrobras will recover from the scandal “without major consequences.”
Brazilian hospitals and health clinics are drawing strong interest from global buyout firms after the government recently decided to allow foreign ownership of those facilities.
SAO PAULO: Brazilian hospitals and health clinics are drawing strong interest from global buyout firms after the government recently decided to allow foreign ownership of those facilities, although the suitors may find only a few promising targets.
Private equity tops a list of potential investors in a sector that represents 10 per cent of Brazil's gross domestic product and shows promise of growth but is hobbled by aging infrastructure, a dearth of qualified staff and rising costs. Since 2007, the number of hospital beds fell by 9 per cent while the base of insurance policyholders rose 35 per cent, according to government data.
The hunt for assets is already under way, but some funds want to understand the particulars of the market before making a move, said four people familiar with their plans.
Two of those sources said a proposal by Carlyle Group LP to pay as much as 2 billion reais (US$694 million, S$945 million) for a 30 per cent stake in Rede D'Or São Luiz SA, Brazil's largest hospital chain, is the only deal in an advanced stage. Carlyle and Rede D'Or, controlled by founder Jorge Moll and Grupo BTG Pactual SA's merchant banking unit, declined to comment.
Other funds such as Advent International Corp and KKR & Co LP are "walking on eggshells" as evidence of poor governance, high debt and eroding margins in some clinics and hospitals abound, one of the sources said. Beyond Rede D'Or, "only a handful" of hospital chains seem well-equipped to receive a significant influx of resources, the same source added.
President Dilma Rousseff's decision last month to end the ban on foreign ownership in the sector seeks to lure capital into Brazil's 6,800 private hospitals. Until now, foreigners could only gain exposure to the sector by buying health insurers the way UnitedHealth Group Inc did in 2012, when it paid US$4.9 billion for Amil Participações SA.
Ending the ban "was a milestone, but it's hard to see anything gaining traction in the short run," said Francisco Balestrin, president of Anahp, a group representing private hospitals. "Any new investors want to first understand the existing market asymmetries."
Curitiba-based Grupo VITA, Belo Horizonte-based Hospital Mater Dei, Recife-based Hospital Santa Joana and São Paulo-based maternity hospital Pro Matre Paulista have sparked some interest among potential investors, the sources said.
Yet the industry's crown jewels, non-profit hospitals owned by communities and philanthropic foundations, are not for sale. The most prominent, Hospital Israelita Albert Einstein, is controlled by Brazil's Jewish community and runs its own endowment.
"I don't see non-profit hospitals morphing into for-profit firms," Bradesco BBI analyst Rafael Frade said.
Einstein and peer Hospital Sírio Libanês would fit well into buyout funds' strategy of acquiring companies whose high degree of specialization allows them to charge more for services.
Mater Dei and VITA denied being involved in merger or acquisition talks. KKR, Advent and the other hospitals declined to comment.
Private equity involvement in Brazil's hospital industry could help restore profitability, Bradesco BBI's Frade said. Returns have stayed near record lows for the past two years due to accelerating inflation and strained capacity, data from industry watchdog ANS shows.
Hospitals look attractive because they stand to benefit from a growing number of elderly Brazilians in coming years. A 20 per cent slump in Brazil's currency over the past year has also made acquisitions cheaper, said Ricardo Gaillard, a partner at law firm Souza Cescon Barrieu & Flesch Advogados.
The rapid expansion in health plan membership in the last decade was not accompanied by an equivalent improvement in infrastructure, triggering a supply-and-demand mismatch that buyout firms may want to close in coming years, he added.
To ease the supply crunch, an additional 13,000 hospital beds are needed by 2017, Anahp's Balestrin said. Some funding for that increase, which could cost 7 billion reais, could come from private equity money, he added.
In addition, rising costs from the lack of scale are pushing up medical inflation. Average revenue per patient per day rose almost 2 per cent last year, Anahp estimates, well below overall inflation of 6.5 per cent.
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