VTB Capital to Cooperate with Brazilian BTG Pactual

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Jun. 29 – Russian investment bank VTB Capital and Brazilian peer BTG Pactual have signed a cooperation agreement to explore opportunities between Russia and Latin America, the two banks said in a joint statement released last week.

VTB Capital and BTG Pactual have unveiled a strategic alliance to partner in several areas including investment banking, asset and wealth management, principal investments and private equity in a move underscoring the growing influence of regional emerging markets-focused securities firms in Latin America, Asia and Russia.

The groups did not expand on how the alliance would work.

“We are pleased to be working together to explore the growing trade and business links between Latin America and Russia,” BTG Pactual chief executive Andre Esteves said in a statement.

“This co-operation agreement … will allow VTB Capital and BTG Pactual to expand and establish a long-term presence in two of the world’s most promising regions,” the banks said in their statement.

“This cooperation is an important milestone in extending VTB Capital’s business internationally, especially in emerging markets,” said Alexei Yakovitsky, global chief executive of VTB Capital.

“This agreement demonstrates the growing strength and relevance of the banks based in markets of expansion and will also allow VTB Capital and Pactual to establish and expand, in the long term, their presence in the two promising regions,” BTG said in its statement.

The partnership also represents the latest chapter in the ongoing overseas expansion of BTG Pactual, which already has a tie-up with Chinese brokerage firm Citic Securities, which gives it a portal into the world’s second-largest economy.

BTG Pactual, which went public on the Sao Paulo Stock Exchange this April in a US$2 billion listing that was Brazil’s largest in three years, has rapidly ascended in the past few years from a small investment house into one of the world’s largest emerging markets investment banks.

Earlier this month, BTG Pactual agreed to pay US$52 million for Colombian securities firm Bolsa Y Renta SA. It also acquired Chile’s Celfin Capital in February.

Meanwhile VTB Capital, the investment banking arm of state-controlled VTB Group, has been on a hiring spree, beefing up offices in London, New York, Dubai and Hong Kong.

VTB Capital, founded in 2008, is already a leading debt capital markets bank in Russia, ousting international rivals that used to dominate that market.

Experts believe that the joining of forces by two of the fastest-growing emerging market challengers will help them to expand further and to more establish themselves as U.S. and European rivals.

“Strategic partnership” with Russia was first proclaimed in Moscow in 2005, where Brazilian President Lula met with his then-Russian counterpart Vladimir Putin. Since then, the two countries have started working together in the areas of space and defense technology. They are also bound to increase collaboration in the fields of reactor development and uranium exploration technology, where Russia could help Brazil develop its uranium industry.

Meanwhile, the largest emerging markets, including Russia and Brazil, whose economies grew more than four-fold in the past decade, are making losers out of everyone as their currencies post the biggest declines since at least 1998, Bloomberg reports quoting experts.

For the first time in 13 years, the real, ruble and rupee are weakening the most among developing-nation currencies. Investors are fleeing the BRICs markets, after Brazil’s consumer default rate rose to the highest level since 2009, prices for Russian oil exports fell to an 18-month low, India’s budget deficit widened, and Chinese home prices slumped. Investors are bracing for more losses as economic growth slows.

Investors withdrew US$6.3 billion from Brazil’s stocks and bonds in May, the most since at least 2010, central bank data shows. Russian capital outflows reached a net US$46.5 billion in the first five months of the year, including US$5.8 billion in May, which is “a lot” for the country, central bank Chairman Sergey Ignatiev told reporters in St. Petersburg on June 6.