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20 | Focus on Brazil
to continue in the foreseeable future as all eco-
nomic indicators point towards sustainable and
robust growth.
The Brazilian agriculture and farming indus-
...a peaceful country that enjoys a stable
try has also attracted significant international
investment. Private bankers and investment
democratic political system, with no political
funds have been buying aggressively in the
Brazilian stock and bond markets creating con-
siderable demand for the Brazilian real which has
enemies, no ethnic or cultural conflicts and
doubled in value against the dollar over the last
five years.
The Brazilian currency has been one of the no threat of terrorism or civil unrest
best performing currencies in the last couple of
years which has assisted in the reduction of inter-
est rates and the improvement of export revenue
from the sale of Brazilian commodities and agri- Fabio Kanczuk, professor of economics at the Brazil is sending out strong signals that it has
cultural products. Universidade de São Paulo said that Brazil will be embarked on a prolonged period of economic
The rising Real has also enabled the Brazilian attracting large investments from companies stability with strong prospects for sustainable
Central Bank to build up its foreign currency interested mainly in the domestic market and the growth. The present economic conditions in
reserves to record levels which has provided fur- Times newspaper reported that several leading Brazil demonstrate very favourable conditions
ther support to the Brazilian currency. A survey UK city financiers recommended Brazil as it rep- for investment, owing to a number of important
based on data from the International Monetary resented very good value for investors. f
Fund (IMF) shows that 2007 was a year of circle6
actors which include:
records in Brazilian foreign trade and FDI. Brazil Is Brazil immune to a US-style circle6
Inflation at an all-time low
has accumulated more dollars than any other recession? circle6
Falling interest rates and stable currency
emerging country in the world with its Foreign Deutsche Bank believes the emerging markets in circle6
Political and economic stability
No restriction on foreign investors for export-
exchange reserves jumping 110.77% - the equiva- general and Brazil in particular will weather the
lent of $94.7 billion. storm that’s hitting the US and other economies circle6
ing profits or disinvestment of capital
Solid democratic government institutions,
Brazil has not only paid its IMF and Paris for the following reasons: credible macroeconomic management and
Club debts, but also continued to buy back its 1. Significantly improved external solvency respect for foreign companies’ rights and
external market debts while eliminating the dol- 2. External liquidity remains abundant
lar component of its internal debt. The Brazilian Brazil is one of the major economies in the circle6
agreements
Firm fiscal policies and the gradual reduction
Treasury reported continuing fiscal and current emerging markets and the continued strong
account surpluses and reserves six times higher growth in its economy is likely to attract fur- circle6
of the Brazilian prime rate
than a year’s worth of external market debt ther foreign investment. circle6
Continuing reduction of public debt
repayments. 3. Internal Demand circle6
Projected strong economic growth
Significant increase in the number of commer-
With all these positive developments, Brazil Further growth in Brazil is mainly fuelled by
was able to issue bonds in its national currency, domestic demand, rather than external circle6
cial transactions
the real, for which demand has wildly exceeded demand. circle6
Positive balance of trade
supply, enabling billions of dollars to flow into 4. Improved macroeconomic policy regimes circle6
Better bond rating
Strong industries which include commercial
the country. Improved external solvency, liquidity and airplanes and cars manufacturing, steel indus-
Looking at long term growth, a Goldman effective macroeconomic policies have resulted try (8th largest producer in the world), chemi-
Sachs study predicted that Brazil will be one of in Brazil being less sensitive to external cal industry (7th in the world), shoe and
the top five economies in the world by 2050 and demand conditions. leather industry (3rd in the world) and the
Deutsche Bank confirmed that on the long run 5. Credible fiscal policies
the demographics of Brazil favour strong eco- The Brazilian government has put in place sus- circle6
textile industry
Energy and oil self-sufficiency
nomic growth because of the predicted increase tainable policies which resulted in lower infla-
in its working population. tion, external solvency and sustainable public Tourism
debt dynamics. Brazil has it all but it’s not until recently that it
Brazil is also protected from a has been discovered by foreign investors. The
GDP Growth world energy crisis as it no longer number of tourists visiting Brazil has increased
6.00
depends on any external petrole- considerably from about 2.5
um supplies because of its large million in 1997 to over 9 million today. The
5.00
production of ethanol, and as 85% relaxed pace of life, warm climate and absence of
4.00
of its total energy needs are met wars or political threats are attracting investors
from renewable energy resources. and holiday makers to Brazil like never before.
% 3.00
This protects it from oil price Brazil reveals an incomparable diversity of
2.00
fluctuations in the international landscape and culture and many attractions that
market, helps it to control infla- make Brazil a top tourist destinatio
1.00
tion and substantially reduce any circle6
n.
0.00
external supply problems that circle6
Plenty of sunshine
2001 2002 2003 2004 2005 2006 2007 2008
could seriously affect its growth circle6
Breathtaking scenery and un-spoilt nature
and disrupt its industrial circle6
Amazing culture
All year round warm and sunny tropical
Source: Rabo Bank
production. climate
November 2009 Investment International www.investmentinternational.com
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