Real Rally End Signaled by Sex and City's Parker

By Adriana Brasileiro

Aug. 18 (Bloomberg) -- A glimpse of Brazilian television ads provides a who's who of Hollywood's biggest stars.

Sex and the City's Sarah Jessica Parker tells shoppers she loves to stroll through Sao Paulo's newest mall. Sylvester Stallone and Kiefer Sutherland hawk cars. Richard Gere peddles women's hair products -- in Portuguese laced with an American accent -- to the pulsating sound of ``Pretty Woman.''

Brazil is drawing U.S. celebrities at an unprecedented clip, contributing to a record current account deficit that is leading Wall Street firms from Goldman Sachs Group Inc. to Morgan Stanley to predict an end to the four-year, 83 percent rally in the real. The appreciation allowed Sao Paulo-based ad agency MPM Propaganda to land Parker for $600,000, less than top Brazilian entertainers charge, said Gal Barradas, a vice president at MPM.

``We brought in a star of a magnitude that was unheard of in Brazil,'' Barradas said. MPM signed Parker in April to the ad contract for Shopping Cidade Jardim, a four-story mall that squeezes stores such as Rolex, Hermes and Louis Vuitton around an open-air garden lined with palm trees and Brazilian bamboo. ``For the international stature that she has, it's a great deal. The exchange rate makes it possible.''

The real soared to a nine-year high of 1.5545 per dollar on Aug. 1 after a rally in the price of the country's commodity exports such as soybeans, iron ore and orange juice fueled 25 straight quarters of economic expansion. The real is the biggest gainer both in 2008 and in the past four years among the 16 most- traded currencies.

Commodities Rally

Brazil's currency is now showing signs of weakening as a decline in commodity prices cuts export receipts and adds to concern that the current account deficit, the broadest measure of trade, will keep widening.

The deficit ballooned to $17.4 billion in the first half of the year, the widest since the central bank began tracking the data in 1947, as imports climbed to a record. The country had a $2.4 billion surplus in the year-earlier period.

The real slid 4.2 percent in the past two weeks to 1.6283 as the UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials sunk 16.6 percent from July 2. Commodities account for about one-third of exports in Latin America's biggest economy.

By the end of 2009 the real will weaken 9.5 percent to 1.8, according to the median forecast of 14 economists surveyed by Bloomberg. The expected decline is the most of any of the major currencies. Goldman forecasts the real will depreciate to 1.7 in 12 months; Morgan Stanley sees it at 2 per dollar by the start of 2010.

Real `Overvalued'

``The real is overvalued,'' said Tony Volpon, chief economist at Sao Paulo-based brokerage CM Capital Markets. ``These signs -- the Hollywood stars on TV, the imported iPhones we see all over the place -- they are all micro evidence of what we are starting to see at the macro level.''

Imports totaled $154 billion in the 12 months through July, a 46 percent increase from the year-earlier period.

Volpon said he recommends clients close out bets that the real will gain. He predicts it will drop to 1.75 by year-end.

The length of the real's rally has surprised analysts and policy makers. Economists predicted in each of the past five years that it would decline over the following 12 months, according to the median forecast in surveys conducted by the central bank. Each year the real rose.

President Luiz Inacio Lula da Silva first expressed concern that the currency rally could hurt exports and slow economic growth in late 2004. He told Bloomberg News that November that he didn't ``want the real to become a very strong currency.'' The real traded at 2.742 per dollar then. He said he wanted it to weaken to between 2.9 and 3.1 per dollar.

1990s Ads

Brazil has brought in U.S. stars to film ads before. Sao Paulo-based brewer Cia. Antarctica Paulista, now part of InBev NV in Leuven, Belgium, hired singer Ray Charles and actresses Whoopi Goldberg and Kim Basinger to join soccer star Pele in an ad campaign that ran during the 1994 World Cup. Actress Sharon Stone and Olympian Carl Lewis also did ads in the 1990s.

``It wasn't as common then as it is now,'' said Barradas, who's worked in advertising for 20 years. ``Not even close.''

The $600,000 contract Parker signed in April equals 976,980 reais at today's exchange rate. Brazilian stars such as singer Ivete Sangalo demand about 1.2 million reais for similar contracts, according to Barradas. Parker's contract would have come to 1.8 million reais at the 3-per-dollar exchange rate four years earlier.

Brosnan, Stallone, Sutherland

Gere was paid $300,000, or 488,490 reais, for a 30-second spot for Rio de Janeiro-based Niely Cosmeticos, according to Rodolfo Medina, president of Artplan, the Rio-based agency that handled the contract.

Alan Nierob, Gere's publicist, declined to comment on the contract. Ina Treciokas, Parker's publicist, didn't return phone calls seeking comment.

``There was a time when hiring a Hollywood star was unthinkable,'' said Adriana Cury, who runs McCann Erickson Brasil, the local unit of New York-based Interpublic Group of Cos. ``Now they are not only affordable, they are actually cheaper than the locals'' in some cases, she said.

McCann hired actor Pierce Brosnan this year to shoot an ad in Sao Paulo for the Vectra Elite 2.0, a $47,000 sedan produced by the Brazilian unit of General Motors Corp. Cury declined to comment on how much Brosnan was paid. Liz Dalling, his agent, didn't return calls seeking comment.

`What Pretty Hair'

Sutherland also traveled to Sao Paulo to film for PSA Peugeot Citroen's local unit, said Carlos Castelo, a director at Euro RSCG Brasil, the company that made the commercial. Stallone filmed his ads for the Sao Paulo-based unit of Volkswagen AG alongside Brazilian model Gisele Bundchen in Los Angeles.

Parker and Gere filmed in New York. Parker's role in the ad mirrors her character in Sex and the City, Carrie Bradshaw. She sips a drink at a bar, tries on some dresses, checks out a guy walking by her and thinks out loud -- in English with Portuguese subtitles -- as she writes up a review of her day at the mall.

Sutherland, Brosnan, Stallone and Gere say little. Gere is the only one who speaks in Portuguese.

``What pretty hair,'' he tells Brazilian actress Carolina Ferraz as they dine at a restaurant.

His thick accent didn't deter shoppers. Niely sales soared 30 percent in the first quarter after the ad debuted in January, said company spokeswoman Danielle de Jesus.

``The Hollywood star is unique,'' said McCann's Cury. ``And we as consumers are moved by what's new.''

To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net