More Signs of Brazilian Recovery

Recommendations include AmBev (ABV), Vivo (VIV), Oi Participacoes (TNE) and Ultrapar (UGP).

Some days ago we wrote a note about some positive signs in the Brazilian auto industry. After 5 months of consecutive declines, in January it produced a total of 186,100 vehicles in Brazil, almost 100% more than in December 2008. Total vehicle sales in January reached 194,500 vehicles, 1.5% more than in December 2008.

Yesterday it was announced that car sales in Brazil increased 15.56% in the first half of February 2009 compared to the first half of January 2009, reaching a total of 109.258 units (just cars, not including buses or trucks). If we compare to the same period 2008, it increased by 7.4%.

Also some days ago we wrote about the positive numbers for the Brazilian wireless market in the last quarter of 2008. In fact, from September to December 2008, total wireless market increase by 6% from the previous quarter.

Yesterday it was also announced that in January 2009 total subscribers in the Brazilian wireless market grew by 0.86% from December 2008. Despite the global economic crisis, January 2009 was the second best month in terms of subscribers' growth in 10 years in absolute terms!

It seems that the Brazilian consumer market has not been that much affected by the crisis. Even better, the Brazilian Central Bank just started to cut rates in January 2009, 100 bps to 12.75% -- there is a long way down! Does it mean that the Brazilian benchmark Bovespa will outperform other international benchmarks? Maybe, just maybe.

Indeed, around 50% of the Bovespa represents commodity stocks, oil producers, mining companies and steel makers; those industries have more to do with the international economic environment than with domestic consumption.

We are still skeptical on commodity producers. That's why we have been saying that it is better to focus on companies that are more exposed to the Brazilian domestic markets. In this sense we continue to recommend AmBev (ABV), Vivo (VIV), Oi Participacoes (TNE) and Ultrapar (UGP).

Read the full analyst report on ABV

Read the full analyst report on VIV

Read the full analyst report on TNE

Read the full analyst report on UGP

Read the full analyst report on VIV

Read the full analyst report on TNE

Read the full analyst report on UGP

Read the full analyst report on ABV