The Goldman Sachs Group Inc.
) plans to infuse more capital in its Brazilian unit, Reuters
reported on Tuesday. It strategizes to double capital to about $400
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The decision by this major U.S. Bank came on the heels of
fast-growing activities such as corporate lending and private
equity fund-related investments in Brazil. These activities are
yielding higher returns than equities and government debt.
To successfully execute its plan, Goldman intends to close down a
unit which is managing the administration of local investment
funds, having approximately $159 million under its management.
However, the bank will continue offering off-shore funds services
Previously, in September, Goldman planned to re-initiate its
private-equity (PE) investments in Brazil. The firm's plans are
based on the expectation of about 35% return from Brazil's
private-equity market. Specifically, Goldman plans to target
infrastructure, commodities and telecommunications sectors for its
Despite the uncertainty related to taxes and exchange rates,
transparency in regulations and improving macro environment in
Brazil will help Goldman achieve high returns.
With the ambition of consolidating its foothold in the country,
Goldman almost doubled its workforce over the past two years,
taking the total count to 300. In late 2009, it became a
full-service bank in Brazil.
Goldman's venture in the Brazil PE market ended in 2007, when the
investment of $196 million (400 million reals) of its own capital
in Santelisa Vale SA, a sugar-cane processor led to streamlining of
debt. Moreover, in the same year, Goldman invested in BRA
Transportes Aereos Ltda., an airline company, which went bankrupt
Based on well-developed agricultural, mining, manufacturing and
service sectors, Brazil's economy overshadows other South American
countries. Also, it is gradually increasing its penetration in
world markets. After reporting robust growth in 2007 and 2008,
Brazil was hit hard by the onset of the global financial crisis in
early 2009. However, the Brazilian market was the first to show
signs of recovery.
With the expectation of a potential long-term GDP growth rate and
conservative monetary policies, Brazil is a promising choice for
investments and is attracting foreign investors. Therefore, with
greater access to local knowledge and resources, the prospect of
participating in emerging markets is encouraging for firms.
Therefore, yielding returns on such investments will accelerate
Goldman's profitability and instill investors' confidence. Goldman
currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Among Goldman's peers,
) also retains a Zacks #3 Rank.