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Brazilian Blues Jeopardise Azul IPO

Economic and social turbulence in Brazil could have torpedoed an IPO by Azul, the country’s third-largest airline. Azul had pencilled in a dual Brazil-US listing for July, but that plan is now on ice until global markets settle down, according to Reuters. The airline, founded by JetBlue’s David Neeleman, had hoped to raise about $500m for new aircraft and network expansion, a sum that now appears beyond the reach of investors spooked by...

Economic and social turbulence in Brazil could have torpedoed an IPO by Azul, the country’s third-largest airline.

Azul had pencilled in a dual Brazil-US listing for July, but that plan is now on ice until global markets settle down, according to Reuters.

The airline, founded by JetBlue’s David Neeleman, had hoped to raise about $500m for new aircraft and network expansion, a sum that now appears beyond the reach of investors spooked by ongoing public protests and a Brazilian growth spurt which has ground to a halt.

Furthermore, the Brazilian Real is down 10 per cent this year against the dollar – bad news for airlines, which pay for aircraft leases and purchases in dollars – and the stock market has plunged by almost a quarter.

Evidence is mounting, then, that Brazil’s listless stockmarket of 2012, which hosted the lowest number of IPOs for seven years, was no anomaly.

And while growth in the wider economy has improved from the appalling (for a developing nation) 0.9 per cent recorded in 2012, foreign investors have seen little from Brazil’s government to encourage them.

Haphazard state intervention via an ill-advised fiscal policy has let inflation climb and sowed uncertainty in the markets, a problem that has only been exacerbated by the recent protests.

Those have calmed somewhat this week, but president Dilma Rousseff’s conciliatory tone may not mean much to investors, who may struggle to grasp exactly what she will do to appease protesters given the nebulous nature of their demands.

One area she has promised to improve is transport infrastructure; sadly for Azul, that probably means buses and trains rather than major airports, which are not expected to complete vital upgrades before the 2014 World Cup.

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