Out of bondage.

For the first time in a long time, Brazil can report a good year in the bond market. The country sold US$5.50 billon in dollar-denominated bonds in 2004. It also sold $1.22 billion of euro-denominated bonds in September. The euro bonds carried an interest rate of 170 basis points below that of a similar issue by Brazil in 2002, in line with countries like Turkey, according to the J.P. Morgan EMBI Global bond index. Brazil is also a rather frequent issuer in sovereign bond markets, as is Mexico.

Cheaper interest rates in the United States have cut borrowing costs for the country. "We've scored a few good points. The Global 2034 issue at the beginning of the year was very well received, with low interest rates," says Joaquim Levy, Brazil's treasury secretary, referring to a 30-year bond sold a year ago that carried a spread of 376 basis points over U.S. Treasuries. The government applauded the issue and went out and sold more bonds throughout the year. "It paved the way for further issues, which has generated liquidity at the long end of the curve," Levy says.

The bonds were sold under the suggested interest-rate range, Levy says, and demand was strong. "Certainly, the response of the financial community to economic changes in Brazil has been really encouraging," he says. "In 2005, we'll continue to broaden our investor base with road shows in Asia. We'll also seek to deepen our relationship with the euro-denominated market, which we consider very important."

Brazil's economy should grow by 3.5% in 2005. Revenue from bond issues aside, heavy Asian demand for Brazilian soy, iron ore and other commodities is pumping billions of dollars into the economy.

Domestic interest rates, meanwhile, fell throughout 2004, although monetary policy authorities are holding them steady to keep inflation in check.