Brazil's Economy Leaves Others In Dust

Evidence of Brazil's growing confidence as an economic power is on display throughout the country. It can be found in swanky shops and drilling rigs and huge, successful agricultural enterprises. It can also be found in an office in the capital city of Brasilia, where the country's popular bonds are marketed.

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DAVID GREENE, host:

Well, while Britain, along with the rest of the world, struggles to revive its flagging economy, one country is proving the exception to the global recession: Brazil. Its economy isnt just healthy. It is on a tear, on track to grow by seven percent this year.

Chana Joffe-Walt, of NPR's Planet Money Team, now takes us to a windowless office in the capital, Brasilia. She introduces us to four men with one job description: Fuel the growth.

CHANA JOFFE-WALT: Here is a fact that everyone in the Brazilian treasury will tell you, as if it is inherently meaningful. It used to be that there was just a front office where they sold the government bonds and a back office where they did back office stuff. But now there is a middle office.

It wasnt until I heard this for the third time, from Rodrigo Cabral, in the middle office, that I really understood its meaning. The middle office is a symbol of Brazils coming of age.

Dr. RODRIGO CABRAL (Deputy Head, Public Debt Strategic Planning, Debt Operations Department): If you will see like less developed countries, in terms of debt management, you will always find a front office and a back office.

(Soundbite of laughter)

Dr. CABRAL: Because they have to issue and they have to (unintelligible) somehow. They have to calculate some statistics. An important step, like in a mature public debt department, I think is the creation of a middle office.

JOFFE-WALT: You only need a middle office if you have enough interest in your government bonds to require government bond salesmen: Rodrigo Cabral and his team leader, Andre Perreit(ph), thats them. Andre is a 30 year-old who looks 20, and is wearing a T-shirt with two men punching each other on it. His job is to convince the investors of the world that with Brazilian bonds...

Mr. ANDRE PERREIT (Manager, Investor Relations Office, Brazilian National Treasury): People can earn a lot of money with low risk. So its a good place to set your money in.

JOFFE-WALT: Andre is the first person to occupy this position. And when he began six years ago, the worlds investors didnt really know much about Brazil. Rodrigo and Andre had to teach them.

The middle office got a faster Internet connection, put together an e-mail list. Theyd travel to countries on Brazilian bond road shows and talk about how stable the government is now, talk up the growing middle class. And they'd hand out the government Annual Borrowing Plan and say, you see, theres a plan.

In 2008, the middle office won over the credit-rating agencies. Brazilian bonds were promoted to investment grade.

Mr. PERREIT: It means a lot because it opens the teachers' pension funds from California.

JOFFE-WALT: They never used to invest in you before.

Mr. PERREIT: Yeah.

JOFFE-WALT: The California teachers on board, things started to move.

Dr. CABRAL: We start to receive here, like investors that we didnt receive before, from all Asia, especially Japan but China, as well.

JOFFE-WALT: Bond investors now knew about Brazil. And whats more, they were asking sophisticated, hard questions. Even a small Irish pension fund was calling asking about some obscure possible change in the budgetary guidelines.

Dr. CABRAL: Things extremely specific that we dont see people here discussing. Its just surprising in a good sense.

JOFFE-WALT: Rodrigo and Andre had to know everything. Until, suddenly they didnt anymore. Andre says one day, just a couple months ago, the middle office guys were on one of their road shows in Washington, D.C., presenting to a packed room full of investors...

Mr. PERREIT: We were explaining what was going on here. Our team were explaining the fiscal stance and people just didnt want to hear it, just were not really concerned about the challenge we had on this side.

JOFFE-WALT: The investors werent concerned about inflation or political instability. They were interrupting the presentation to say: We know all this already - whens the next sale? Come on guys.

Mr. PERREIT: Thats right. Thats kind of funny actually.

JOFFE-WALT: Funny that Andre spent six years mastering every detail of the Brazilian economy. And once he finally got it down, the foreign investors already knew all that stuff.

Perhaps one step up from a middle office is not needing a middle office anymore.

Chana Joffe-Walt, NPR News.

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