Special Report


Investing in Brazil Special Report - out November 5th 2009

 

Brazil emerged largely unscathed from the global economic crisis, shrugging off a short recession to return to growth during the second quarter of 2009. The economy is expected to expand by at least 4 per cent in 2010 with some sectors reaching rates in double digits.

Unlike many other emerging economies, Brazil offers stability, a strong democracy and institutions and freedom from religious, racial or social strife. Its people are adaptable and friendly. It has enormous natural resources, beautiful countryside and a great climate. Economic stability, low inflation, rising wages and cheap but effective income-transfer programmes have brought millions into the consumer market for the first time, creating a robust domestic market that is the main driver of growth.

Foreign companies are eager to take part. Foreign direct investment was about $30bn in 2008 and in spite of the global crisis will be about $25bn this year.

But Brazil's path to growth is not yet complete. Reform of public spending and taxation will be needed to secure sustainable development. Poor standards of education are a drain on competitiveness, along with the poor quality of other public services. And there are signs that the government is shifting from an emphasis on the free market to one of state intervention in the productive sector, raising the risk of further drains on efficiency.

The report will examine which sectors are attracting investment and where in the world the money is coming from.

Among the main areas of interest are:

  • Agribusiness. Brazil is the world's biggest producer of coffee, sugar cane and oranges and the second biggest producer of soya, beef, poultry and other produce. It has more unused viable agricultural land than any other country on earth. 

  • Oil and gas. Brazil recently discovered potentially enormous reserves, enough to make it a major exporter. Oil companies and service companies are keen to take part but new regulations are controversial.

  • Mining and metals. Brazil is the world's biggest producer of iron ore. Investments in mining and steel are resuming after being stalled by the global crisis.

  • Aerospace. Embraer is the world's third biggest aircraft manufacturer. A large purchase of foreign fighter jets will bring technology transfer. New airports are being built and old ones modernised.

  • Transportation. More and more highways are being contracted out to private operators. A high-speed train is planned between Rio de Janeiro, São Paulo and Campinas.

  • The auto industry. Last year Brazil overtook France to become the world's sixth biggest maker of automobiles. More automakers are arriving as the domestic market returns to growth. 

  • Electrical energy. New power plants are being built to keep pace with demand and provide back-up to the hydro-electric system. Alternative energy sources, such as wind power and biofuels, are developing quickly.

  • Banking. Consolidation has produced some of the biggest banks in the Americas. Foreign banks, especially Santander, are taking an increasing share of the market. 

  • Capital markets. The recently-merged BM&FBovespa is doing deals with other exchanges to reach international investors, while foreign brokerages buy Brazilian ones.

  • Travel and tourism. Business was badly hit by the global crisis as foreign visitors stayed away. But the sector still has great potential and will be boosted when Brazil hosts the 2014 World Cup soccer tournament.

  • Insurance. The government's monopoly on re-insurance has been broken, opening space for foreign companies.

  • Franchising. The services sector performed best during the downturn and offers a direct play on Brazil's burgeoning middle class.

  • Construction. Falling interest rates have brought millions into the housing market for the first time. A government programme of subsidised loans aims to help build 1m homes.

  • Commercial real estate. As Brazil emerges from recession, it is one of the few markets in the world attracting foreign investment in commercial real estate.

For further information on the Special Report please contact John Moncure, Tel: 001 212-641-6362, Email: john.moncure@ft.com