December 2008 | The Brink's Journal | Page 15 Brink's Global News Reductions in financial markets and a slowdown in economies threaten to cut output of rough diamonds by up to 40 percent by top miners, as banks slow lending and demand weakens, an industry official said on Monday. Freddy Hanard, chief executive of Antwerp World Diamond Centre, an organization representing the Belgian diamond industry, said the cut in financing would lead to the world's top miners, De Beers and Russia's Alrosa, slashing production of rough diamonds by up to 40 percent. " The diamond business is a very capital intensive business. That means they rely on a very high level of external funding," Hanard told Reuters in an interview in Singapore. " The banks usually finance two parts of a diamond business balance sheet, the re-ceivables and purchases - in these present circumstances, it is extremely difficult for them to finance both," he said. Antwerp, the world's diamond trading capital, han-dles around 80 percent of the world's rough diamonds and half of all polished diamonds each year. ABN AMRO, the world's biggest diamond financier, came under the Belgian government in October after its parent company Fortis Bank had to be bailed out. Another big diamond financier Antwerp Diamond Bank said last month the company was already seeing a recessionary impact on consumer spending and the capacity to service debt could come under strain. De Beers, which accounts for around 40 percent of global rough diamond supply and is 45 percent owned by mining group Anglo American Plc AAL. L: Quote, Profile, Research, said last month it will cut output at two of its new Canadian mines by 10 to 20 percent. Hanard however said reduced supplies will not cause a big change in polished diamond prices because consumer demand from the United States, which accounts for nearly 50 percent of the world's diamond consumption, was set to slow. Some observers anticipate a downturn in Brazil's jewellery market, in tandem with a slowdown in the US, the traditional source for export revenues. But when compared to other regions, expected strong domestic demand should keep the market reasonably buoyant. Economists still expect the Brazilian economy to expand by some 4.6% in 2008. Although some of the shine may come off the Brazilian mid- to- lower jewellery sector, mid- to- higher selections are expected to remain in demand, particularly for branded goods and fashion- related pieces. Where it comes to the Brazilian export market, there is a case for investment, as suppliers target the developing economies of China, Russia and the Middle East region. That strategy is expected to see margins at acceptable levels at a time when traditional markets in the US and Europe are seizing up. Exports of Brazilian gems and jewellery are officially estimated at US$ 1.5 billion for 2008, which represents an aggregate increase of 33% over 2007. The best-performing sectors are expected to be gold plating and jewellery. The president of the Brazilian Institute of Gems and Precious Metals ( IBGM), Hécliton Santini Henriques, said the better return for 2008 is partly due to IBGM's partnership with the Brazilian Trade and Investment Promotion Agency ( APEX- Brasil). Also, the price of gold has been rising fast on the international markets, reflecting a trend to diversify from paper investments to jewellery and its components. Meanwhile, the rising wealth in China, Rus-sia and the Middle East has kept demand for jewellery buoyant, even in tougher times. Brazilian jewellery is beginning to take on looks and characteristics that incorporate creativity and humorous design elements, helping to keep products to the forefront of retail sales campaigns worldwide. The highest concentration of gems and jewellery exporters in Brazil is in Rio de Janeiro, São Paulo and Minas Gerais. It's also not a very large sector, representing less than 1% of GDP - making diversified investment opportunities even more attractive. Top miners could cut diamond output by 40 pct- trade Brazilian jewellery market to beat global odds

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