A year ago, the BDRs (Brazilian Depositary Receipts) became accessible to any investor, and not just the qualified or professionals, as determined, until then, the CVM (Securities Commission. The permission for anyone to invest in these stock certificates was hailed at the time as a release, as it has since been possible to diversify the portfolio not only by sector but also geographically.
This means that it is possible to give a resounding “bye-bye” to the Brazil risk, to the slipping economy and, above all, to the Ibovespa roller coaster. Those who have incorporated BDRs into their portfolio have nothing to complain about. Just this year, while the main index of the B3 suffered an 8% fall, the BDRX Index, which represents the BDRs listed on the Exchange, soared by 18%.
That it is past time for Brazilian investors to bet abroad, even Faria Lima’s posts are lacking in knowledge. But the most important question is whether it is better to invest abroad through BDRs, or by directly buying shares in foreign companies, through specialized brokers.
Pros and cons
The answer, however, is not simple and divides the experts heard by Money Times. According to the analyst at Toro Investments, João Vitor, direct investment only makes sense for more experienced investors. Regarding the tax issue, he does not see major impacts.
BDRs are not exempt from Income Tax, with a 15% tax levied on profits obtained from sales of any amount.
“I don’t see so much advantage in an individual opening an account abroad to invest. It will not generate a very relevant tax benefit. Now, more sophisticated structures, such as opening an offshore, would have some benefits to the detriment of BDRs. But, from the point of view of tax benefit, I don’t see that much difference”, he argues.
He also claims that declaring BDRs is easier compared to direct investment abroad. “Not all brokers give the document chewed up, which can increase the complexity of the process”, he adds.
Bruno Rosolini, from Great Investments, ponders that the investor who prefers to mount and unmount positions in a short period of time will suffer more from the fees. Also, keep in mind that when you buy a BDR, you are not buying a share, but a security that represents a share, which can lead to distortions.
Free way
The vision is reinforced by Rodrigo Lima, investment analyst at Stake. For him, investing directly abroad is no longer a problem, after the arrival of brokers operating abroad.
“We are past that moment. Other than access: we have less than a thousand BDRs available at B3, while abroad, there are more than 6,000 shares and ETFs that investors can access directly”, he compares.
For Lima, the biggest problem of BDRs remains low liquidity, even with the number of investors more than doubling in the last year, and with the trading volume tripling in two years.
“If you are going to execute a buy or sell order that is too large, you can suffer some very harmful spreads for your investment, which can greatly affect the performance of your portfolio”, he argues.
“Investing abroad, you have greater liquidity and a greater choice of companies, which gives investors a certain amount of security”, he says.
Next phase: BDRs on Ibovespa?
With numerous companies planning to go public in the US, such as Nubank it’s the Inter (BIDI11), B3 is studying the possibility of including BDRs with greater liquidity in the Ibovespa index.
Under the current rules of the Exchange, these certificates cannot be part of the IBOV, regardless of their trading volume. In the opinion of Vitor, from Toro, the review makes sense, as long as the criteria adopted by the other actions are met.
Rosolini, from Genial, disagrees with the initiative. “The Ibovespa should reflect Brazilian assets; if you put BDRs in the index, you can, in a way, make up, use the results of companies abroad to try to make our index go up. It gets a little confused: BDR is one thing; companies listed here are another”, he observes.
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
