In spite of a slight gain in the last trading day of 2011 the Brazilian stocks benchmark index experienced an 18.1% decline in the twelve months on concerns that Europe's debt troubles could lead to another global recession.
The benchmark Ibovespa stock index closed on Thursday 30 December at 56,754 points, a 0.39% gain from the day before Wednesday's close of 56,534 points. The index had ended 2010 at 69,305 points.
In Brazil, a price index showed a slowdown in inflation, giving policy makers room to continue cutting rates and reducing taxes to stimulate growth. But despite a drop in the IGP-M price index in December, the reading for the year stood at 5.1%.
Throughout the year we were rudderless, as money managers, economists and the government were not really able to determine what the outlook would be said Reinaldo Zakalski, director of BI Asset Management in Sao Paulo, adding that the uncertainty made investors reluctant to buy stocks. Add to that the weakness of the US economy, overseas investors fleeing, European bank problems and you have the strong retraction in stocks that we saw. Next year I see much of the same until we have more clarity about Europe.
The tone of caution for investors in Brazil was mirrored in this year's good performance by more defensive industries, such as phone companies and utilities, as well as makers of reliable consumer items, such as cigarettes and alcoholic beverages, compared with a decline in more capital-intensive industries that rely on robust growth, such as home builders and airlines.
Telephone company Tim Participacoes (TIMP3.BR) jumped close to 40% this year, while utility Cia Energetica de Minas Gerais (CMIG4.BR) added more than a quarter, placing them among the 10 most profitable stock investments in Latin America this year, according to the Economatica consulting firm. Tobacco company Souza Cruz (CRUZ3.BR) and Cia de Bebidas das Americas (AMBV4.BR), or AmBev, as the region's biggest brewer is known, both jumped close to 30%.
While consumer growth was a concern for many overseas economies, the relative strength of Brazil's domestic demand, as its middle class grows, helped lift credit- and debit-card processors Cielo (CIEL3.BR) and Redecard (RDCD3.BR).
Real estate developer Gafisa SA (GFSA3.BR) was among the biggest decliners on the Sao Paulo exchange this year, losing close to two-thirds of its value. Other big decliners were low-cost airline Gol Linhas Aereas Inteligentes (GOLL4.BR) and steelmakers Usinas Siderurgicas de Minas Gerais (USIM5.BR) and Cia Siderurgica Nacional (CSNA3.BR), which fell more than 40% each.