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The Globe and Mail

Brazilian banker to set up private $1-billion fund

Visitors look at monitors at the stock market in Sao Paulo, Brazil, , Aug. 8, 2011.

Andre Penner/AP

One of Brazil's most famous bankers is to set up a private $1-billion (U.S.) investment fund, underscoring rising confidence in the country's long-term growth prospects even as the developed world struggles to fend off a fresh financial crisis.

Pedro Moreira Salles, chairman of Itaú-Unibanco, one of Latin America's biggest banks, told the Financial Times that the investment group would be funded by private capital, would only take long-term positions, and could target foreign companies in Brazil.

Wealthy individuals in the Latin American country have increasingly put up their own money for new investment vehicles and compliment a growing number of private equity groups, offering local companies a source of much-needed long-term funding.

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The announcement comes only days after Brazil's stock index lost 8 per cent in a single session amid turmoil on global markets.

However, Mr. Moreira Salles said Brazil was in a good position to withstand such pressure, adding that problems abroad could just make assets cheaper.

"We could be announcing this in the middle of a bonanza or when the world doesn't know what's going to happen … but because we are looking at the long term it does not make much of a difference," he said.

Hyperinflation during the 1980s and early 1990s in Brazil meant that long-term planning was nearly impossible, but the past decade of solid economic growth has brought a new sense of confidence to the country's investment community.

Dilma Rousseff, Brazil's President, said earlier this week that the country was better placed than it was in the global financial crisis of 2008, pointing to the country's foreign exchange reserves of nearly $350-billion.

"Investors are thinking about longer-term investments in Brazil like never before," said Pedro Bodin, another banking veteran who will help set up the fund. "They think about longer-term instruments in fixed income, about holding stocks for longer, about permanent investments."

Finance executives Marcelo Medeiros and Marcelo Barbará will also be partners in the new fund, named Cambuhy Investimentos after the farm in the São Paulo countryside where the four friends first came up with the idea.

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Cambuhy Investimentos is likely to team up with the growing number of private equity funds in the region to invest in large deals and could target listed companies in sectors such as manufacturing or consumer goods.

Brazil has recently become a hotspot for private equity, with volumes for private equity buy-outs in the country surging almost fifty-fold to $5.62-billion in 2010, from $115-million in 2005.

Blackstone, 3i and other large private equity groups have established footholds in the region and others are also looking to set up offices in Brazil as they turn to emerging markets to offset stagnant growth in the U.S. and Europe.

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