Brazil sees limited impact of swine flu outbreak so far

 

 

Brazil is experiencing limited impact from the global swine-flu outbreak, with a few ups and downs possible in specific cases, but the situation could change dramatically.

 

While Brazil's pork industry could actually benefit from any worsening of the situation, its other commodities areas, such as grains for animal feeds, could be affected. Meanwhile, its airline industry is being hit.

 

"It's really too early to measure the broad impact of these overseas outbreaks of swine flu on local equities, but we are already seeing an impact on airlines," said Januario Hostin, an equities manager at the local Leme investment fund. "Shares of TAM airlines are suffering because of the company's high exposure to international flights, especially to the US," Hostin said.

 

Early Monday, TAM's shares were down 3.21 percent at 15.97 Brazilian reals ($7.26) on the Sao Paulo Stock Exchange, BM&FBovespa.

 

"I think the drop in TAM's shares is a little exaggerated, but it's a normal reaction," said Jason Vieira, an analyst at the local UpTrend consulting group. "Investors don't have much hard information about the swine-flu problem, so they tend to price in the worst-case scenario."

 

TAM's rival, GOL Airlines (GOL), is likely to be less affected because it has fewer international flights. TAM operates more than 85 percent of Brazilian-flag international flights, while GOL operates the rest.

 

GOL's shares were down 0.13 percent at BRL7.58 in early trading.

 

Brazil itself has reported no cases of swine flu.

 

 

"Effects in trade may happen and could eventually benefit Brazil, but I prefer not to speculate," said Pedro de Camargo Neto, president of Abipecs. Brazil's major pork and pork-product exporters are privately held companies.

 

Other Brazilian commodities, however, could suffer.

 

According to Carlo Lovatelli, president of the Brazilian Agribusiness Association, or Abag, the swine-flu problem is worrisome because it could hurt prices for leading Brazilian commodities such as soy and corn, products used in pork feed.

 

But, Lovatelli added, "The biggest problem is gossip, which hits the market first and hurts prices."

 

Where analysts see a major negative impact is on shares of Brazilian meatpacker JBS S.A. which controls leading beef exporter Friboi.

 

"JBS has a large exposure in the US because of its US operations," said Hostin. "Any possibility of reduced consumption of its products affects this company's stock."

 

In trading Monday, JBS share were dropping 8.06 percent at BRL6.39 on the BM&FBovespa.

 

JBS has a major presence in the US, where it acquired a number of assets in recent years, including the Swift brand.