Mirroring cross-border activity, domestic issuance in Brazil picked up in the second half of 2003. But unlike the large banks and exporters that tap the dollar market, local issuers had to contend with an ugly interest rate environment. Fund managers stuck to yieldy treasuries and shunned what they saw as esoteric product. But as rates came down in the second half, issuers came out to play. Investors had to "manage money instead of throwing everything into treasuries," said one Sao Paulo source.

Most glommed on to a new vehicle that promises to invigorate the market even more in 2004. Receivables investment funds (FIDCs) came into their own last year, accounting for about R$1.8 billion (US$637 million) of public and private securitization issuance, according to data compiled by Fitch Atlantic Ratings. A much lighter tax treatment than other vehicles is what turned issuers on to FIDCs. Their appeal, players say, will only grow. "The horizon looks bright for [FIDCs]," said Patricia Bentes, managing director of financial consultancy Hampton Solfise. "There's lots of new issuance expected in 2004."

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