Singapore’s GIC hopeful on Brazil pension plan

Lim Chow Kiat, the fund’s Chief Executive Officer, said that 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.

“I’m definitely more hopeful and positive, the momentum looks good, “added Kait.

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 favourite 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 BRL 1 trillion ($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

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 a once-in-a-century recession the economy is still recovering from.

GIC invests three per cent of its resources in Latin America, 32 per cent in the US, 19 per cent in Asia (excluding Japan) and 13 per cent in the Euro-zone, according to a 2018 report.

Brazilian companies in its portfolio include foodmaker BRF, private hospital chain Rede D’Or Sao Luiz and gas pipeline operator Nova Transportadora do Sudeste. It doesn’t break down how much of its portfolio is allocated to Brazil.

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

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