S\u00e3o Paulo \u2013 The announcement of a default request by Dubai World, made last week, has not brought business in the emirate to a halt. In the opinion of Brazilians who live and work there, the bad press resulting from the decision was much greater than its actual impact on the economy.<\/p>\n
"To me, [the default] is not going to harm the [real estate] market any more than it has already. The market is now conservative, retracted," said businessman Omar Khaled Hamaoui, a partner of Engeprot, a Brazilian engineering firm that has a branch in Dubai and operates in the United Arab Emirates.<\/p>\n
According to him, the default \u2013 requested mainly to help real estate developer Nakheel, one of Dubai World\u2019s subsidiaries \u2013 made official a situation that was already known. The company had been facing problems ever since the worsening of the international financial crisis, in the second half of last year.<\/p>\n
The real estate sector, one of the driving forces behind the growth of Dubai in the last few years, was harmed by the shortage of credit in the international market and, according to the director of Bank of Brazil\u2019s representative office in the emirate, Renato Gerundio de Azevedo, the liquidity situation was even worse in late 2008.<\/p>\n
"This time, the capital market has taken the hardest blow. The banking system is operating normally. I am convinced that the banks here are solid and their leverage is low, so that they will not have problems," declared Azevedo.<\/p>\n
The perception is that Dubai World is in trouble, not Dubai itself, let alone the Emirates. The country has not gone bankrupt," said Guilherme Giffoni, of dairy company Itamb\u00e9. "Dubai is not moving somewhere else, and its success as a logistical hub stems from its geographic position. Whoever has operations here is not moving out," he added.<\/p>\n
It is also widely believed that negotiations between Dubai World and its creditors should result in a good outcome. \u201cBanks with some degree of exposure to Dubai World assets sustain mature enough relations with the company to manage the matter. [The default] should not be a big problem to these banks, because they have several other businesses to make up for it,\u201d said Azevedo. He underscored that the Bank of Brazil has \u201cno exposure whatsoever\u201d to the assets of the holding company.<\/p>\n
Along the same lines, Giffoni called attention to the fact that investors have their funds spread across different businesses. Both him and Azevedo stated that there is no fear concerning a shortage of liquidity in the financial system and that there has been no run on the banks, one of the reasons for which is that the Central Bank of the Emirates has made funds available to national and foreign institutions that may face problems because of Dubai World. The holding company is renegotiating a debt of US$ 26 billion. \u201cThis is the situation of one particular company, and it needs be sorted out,\u201d said Hamaoui, alluding to the fact that the emirate of Dubai has other large companies that do not suffer from the same problem.<\/p>\n
According to him, those in trouble right now are suppliers and companies hired by Nakheel, which, as a matter of fact, had already been getting delayed payments lately. To Hamaoui, next year, the Dubai real estate market should maintain a slow pace, and improvements should only take place in 2011.<\/p>\n
The businessman also reminded that Dubai is not all there is to the Emirates. \u201cAbu Dhabi (the capital of the country) is counterbalancing what is taking place in Dubai, which was too open to foreign capital and was hit by the [international financial] crisis. In Abu Dhabi, there are lots of local capital, and the companies operating there are able to partly make up for [the retraction of the Dubai market],\u201d he stated.<\/p>\n
Azevedo, in turn, claimed that the Middle East as a whole remains a market of strong potential, and has not lost its attractiveness due to the Dubai World default. He added that while some investors are wary, others regard the situation as an opportunity for purchasing bonds at a discount, knowing that there is \u201cno risk of a default\u201d in the future.<\/p>\n
\u201cIt is important to understand this as the case of one company, of an asset that had to be reviewed and refinanced, rather than as a failed plan,\u201d said the director of the Bank of Brazil. \u201cOther companies [in the emirate and in the region] have nothing to do with it, this is not a widespread situation,\u201d he claimed.<\/p>\n
Giffoni also asserted that trade, another important ingredient of the Dubai economy, shows no signs of losses. \u201cYesterday I went to the Dubai Mall, which is the world\u2019s largest shopping centre, and I was bumping into people in the aisles,\u201d he said. \u201cWhen it comes to trade, be it domestic or foreign, Dubai is doing fine, there is nothing to complain about,\u201d he finished off.<\/p>\n
*Translated by Gabriel Pomerancblum<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"
Holding company Dubai World\u2019s default request has not brought the emirate\u2019s economy to a halt. To Brazilians living and working there, it has only made a previously existing situation official.<\/p>\n","protected":false},"author":1454,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[91],"tags":[],"class_list":{"0":"post-33048","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-economy"},"wps_subtitle":"Holding company Dubai World\u2019s default request has not brought the emirate\u2019s economy to a halt. To Brazilians living and working there, it has only made a previously existing situation official.","_links":{"self":[{"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/posts\/33048","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/users\/1454"}],"replies":[{"embeddable":true,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/comments?post=33048"}],"version-history":[{"count":0,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/posts\/33048\/revisions"}],"wp:attachment":[{"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/media?parent=33048"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/categories?post=33048"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/tags?post=33048"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}