Singapore wealth fund `hopeful' on ambitious Brazil pension plan

An electronic board shows the index chart at the Sao Paulo Stock Exchange (B3) in Sao Paulo, Brazil. (Photo: NELSON ALMEIDA/AFP/Getty Images)

By Gerson Freitas Jr.

(Bloomberg) — Singapore’s sovereign wealth fund GIC Pte has grown more optimistic about Brazil.

Latin America’s largest economy may offer investment opportunities in sectors from healthcare to education and gas pipelines if it keeps inflation under control and reduces interest rates, according to Lim Chow Kiat, the fund’s chief executive officer.

“I’m definitely more hopeful and positive,” Lim said in an interview in Sao Paulo. “The momentum looks good.”

Brazilian assets have jumped amid optimism about President Jair Bolsonaro’s administration, but could still be considered cheap if the government manages to push through its market-friendly agenda. So far, the rally has been fueled mostly by locals, with foreign investors staying on the sidelines even after Bolsonaro, who was the clear market favorite in the October runoff, won the election in a landslide.

The first step is the approval of a much-delayed overhaul to the country’s pension system. Last month, the economic team presented a proposal that would generate 1 trillion reais ($264 billion) in savings in the next decade, a plan Lim called “ambitious.” As the bill begins to make its way through Congress, the executive says he’s “cautiously optimistic” about approval chances. “We have to see how much they can get through,” he said

GIC, which has over $100 billion in assets, has invested in Brazil for almost two decades. In 2014, the firm managing Singapore’s foreign reserves opened an office in Sao Paulo as a way to boost capital allocation in the region. That was right before the country plunged into a major political crisis and an once-in-a-century recession the economy is still recovering from.

“The past five years were not easy for businesses and investors, but we managed to do some really good investments, partly because we stayed,” the 48-year-old executive said. “Some of our friends packed up and left. We never did.”

GIC invests 3 percent of its resources in Latin America, 32 percent in the U.S., 19 percent in Asia (excluding Japan) and 13 percent in the Euro-zone, according to a 2018 report. Brazilian companies in its portfolio include foodmaker BRF SA, private hospital chain Rede D’Or Sao Luiz SA and gas pipeline operator Nova Transportadora do Sudeste SA. It doesn’t break down how much of its portfolio is allocated to Brazil. Lim declined to give details on the fund’s positions.

Lim expressed concern about the global economy, adding that valuations are still high amid dimming growth prospects. A slowdown in the U.S. economy “is almost inevitable,” he said.


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