(Bloomberg) -- Jefferies Financial Group Inc., which opened its first office in Brazil last year, plans more hiring there and is exploring whether to open a brokerage in the nation to support local distribution of equity and debt offerings.
“Our clients asked us to open an office in Brazil, and we are very happy with the presence we built here since April last year,” Alejandro Guevara, the bank’s senior country officer for Brazil, said in an interview. Jefferies is “actively exploring the possibility” of adding a brokerage to its operations in South America’s biggest economy, he said.
Part of the plan is to add one more managing director to its 10-person investment-banking team in Brazil, which focuses on merger-and-acquisition advisory work and capital-markets services, including international equity and debt offerings, for Brazilian companies. The firm is also considering building a local debt capital-markets team to help originate dollar-denominated global bond transactions.
With 47 offices in 21 countries, Jefferies is expanding its global footprint, and since 2019 has more than doubled the number of managing directors outside the US and increased managing directors in the US by 58%, Guevara said.
In March, Jefferies recruited Rodrigo Lowndes, a former Bank of America Corp. executive with more than 30 years of experience, as a managing director in Brazil. And in June it hired four executives for its equity sales team that previously worked together at Canaccord Genuity Group Inc., including Leonardo Laport as managing director and head of Brazil equities.
Jefferies is expanding in Brazil amid a weak year for share offerings and M&A, as higher interest rates coupled with currency volatility have been hampering those businesses. Total equity issuance is down 13% so far this year, to 24.5 billion reais ($4.3 billion), according to data compiled by Bloomberg. There hasn’t been a single initial public equity offering from a Brazilian company since December 2021.
The Ibovespa index, the benchmark for Brazil’s stock exchange, has lost 6% this year. That means that the Brazilian index is currently trading at a discount of 16 times, on a price-to-earnings basis, to the S&P 500, Guevara said.
“I think the Brazilian stock market is relatively cheap,” Guevara said, adding that “when fiscal uncertainties decrease, the foreign investor will return.”
Jefferies already covers about 44 companies in Brazil and 113 stocks of broader Latin American companies after it bought independent equity research house Nau Securities last year. Jefferies made Nau’s chief executive officer, John Ferreira, head of Latin America equities
Jefferies is also collaborating with the Brazilian unit of Sumitomo Mitsui Financial Group Inc. to offer credit and credit-related products to its local clients as part of its global relationship with the Tokyo-based bank. Sumitomo boosted its equity stake in the New York-based investment bank to 15% from 4.5% last year.
Guevara declined to discuss deals, but people familiar with the matter said in February that Brazil oil driller PetroReconcavo SA has engaged Jefferies to advise on a possible merger with local firms. The bank is among coordinators of a cash tender offer from Brazilian payment fintech StoneCo Ltd. to buy all of its $500 million 3.950% notes due in 2028, according to a filing from StoneCo. It’s also advising Sinochem Group Co. on its plan to sell its 40% stake in the Peregrino oil and gas field off the Rio de Janeiro coast, people familiar with the matter said last week.
Guevara said he sees the infrastructure sector as promising and expects an inflow of capital to be deployed in segments such as sanitation, roads, railways, ports and urban mobility. Toll roads for example, have a pipeline of 125 billion reais in investments for the future, he said.
“Regardless of economic cycles, high interest rates or stock prices, Brazilian business people are real entrepreneurs and are always investing and looking to innovate,” he said. “They are committed to the country.”
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