a bright new dawn for the brazilian economy?
While it is difficult not to be caught up in the short termism surrounding the economic and political situation of the country, Brazil remains a global powerhouse and one of the critical growth markets in the decades to come.
It is true that we have seen 3 years of deep recession and ongoing political turmoil but the following facts put Brazil´s position in a more balanced perspective when looking to the future;
-)No country in the western hemisphere grew as much as Brazil in the past 20 years
-)Brazil´s recent 10 year GDP growth is second among the top 10 world economies despite this current recession. 2017 is seeing the resumption of this growth trajectory
-) Brazil is still in the top 10 most powerful global economies and *PWC* predicts it will become the 5th largest economy(currently 9th)by 2050 with a growth rate of 2.6% pa.
So what makes Brazil stand out amongst emerging economies?
-)large well established agriculture,manufacturing,mining and service sectors with broad industrial base creating a highly diversified economy
-)richness in natural resources,young workforce,unexploited domestic market
-)well settled democracy (free press,independent judicial system etc)
-)economic climate less volatile
-)increasing international trade favouring exports
-)business friendly on the whole ,no major cultural differences with U.S, Europe
-)highly urbanized compared to other emerging economies, 84% of the population live in cities.
-)whole country speaks one language
-)creative,flexible workforce and young population ( 24% under 14 - Only 7% above 65)
-)no major natural disasters
-)peaceful relations with neighbouring countries
-)tariff free access to neighbouring economies
-)immense reserves of energy,minerals,raw materials
-)close to self sufficient in oil and world leader in low emission fuels..
-)still significant market for 200 million consumers(worlds 5th largest population) fast growing consumer market,high growth potential. Many companies are undervalued and in need of restructuring,capital,technology.
What gives foreign investors in Brazil cause for optimism ?
Brazil is in a transition period to a freer more efficiently run economy
Income per capita has risen for 18 years running until 2014 and will resume in 2017
It´s the 4th primary destination for FDI (predicted at 60 billion USD + for this year)
Inflation coming down in 2017 (45%target) Now at 8% and falling.
Structural pro-business reforms in place
Budget controls approved to ensure long term fiscal balance
New more liberal approach to international trade
In summary there are plenty of positive precursors for economic success in the Brazilian economy if you are inclined to look for them. I for one err on the side of optimism and look forward to a realignment of forces towards growth and renewed prosperity..
*** The content of this article was taken in large part from the very informative Price waterhouse Cooper´s 2017 ¨Doing Deals in Brazil¨ report ***