Brazil Country Risk Report

Published 22 July 2015 | Quarterly

  • 58 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
$1,195.00
Brazil Country Risk Report

Core Views

  • Brazil is in the midst of an economic policy shift. A new economic team will begin reversing the fiscal deterioration seen in the last few years and the central bank is more strongly committed to reining in inflation. That said, these shifts will be slow to translate into stronger real GDP growth given a number of domestic and external headwinds.

  • We see little upside for Brazilian real GDP growth in the next few years. Significant headwinds to fixed investment and private consumption will see real GDP contract by 1.7% in 2015 before returning to growth of just 0.9% in 2016.

  • A greater commitment to tackling inflation will see the central bank hike the benchmark Selic target rate by another 75 basis points (bps) to 14.50% by end-2015. This will bolster the bank's inflation fighting credentials but will not succeed in bringing headline inflation back with its 4.5% +- 2.0% tolerance band this year.

  • The widespread public protests that took place in June 2013 marked a turning point for the Brazilian electorate. Public unrest will flare up intermittently until significant progress on promised reforms, including higher-quality public services and greater government transparency, begins to take shape. In line with this view, an ongoing corruption scandal at national oil company Petrobras will continue to drive public protests in the coming months.

Major Forecast Changes

  • We have downgraded our 2015 real GDP growth forecast further, to -1.7%, from -0.5% previously. Significant labour market deterioration helps to underpin this forecast change, as private consumption will be more subdued than we previously anticipated.

  • We have raised our end-2015 interest rate forecast to 14.50%, from 13.50% previously, as hawkish rhetoric from the central bank combined with above-target inflation suggests that further rate hikes are on the cards this year.

...
Macroeconomic Forecasts (Brazil 2013-2016)
Indicator 2013 2014 2015f 2016f
Executive Summary
5
Core Views
5
Major Forecast Changes
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Myriad Challenges Ahead For Rousseff
8
tab le: POLITICAL OVERVIEW
8
Long-Term Political Outlook
10
Economy To Dominate Policymaking
10
Chapter 2: Economic Outlook
15
SWOT Analysis
15
BMI Economic Risk Index
15
Economic Activity
16
Weakening Labour Market Will Drive Deeper Economic Contraction
16
table: GDP BY EXPENDITURE
16
Fiscal policy
18
Fiscal Tightening Will Weigh On Growth
18
table: Fiscal Policy
18
Monetary Policy
20
Tightening Cycle Not Over Yet
20
table: INFLATION AND INTEREST RATES
20
table: REGULATED PRICES IN IPCA INDEX
21
table: WEIGHTING OF IPCA INDEX, %
21
Balance Of Payments
22
External Account Stability Will Persist
22
table: Current Account Indicators
23
table: Financial Account Indicators
23
Exchange Rate Forecast
25
BRL: Depreciation Has Further To Run
25
Table: BMI Currency Forecast
25
Regional Outlook
26
Key Themes For 2015: H1 Progress Report
26
table: Key Themes For 2015
27
Chapter 3: 10-Year Forecast
31
The Brazilian Economy To 2024
31
Q415: Days Of Easy Growth Are Gone
31
table: Long -Term Macroeconomic Forecasts
31
Chapter 4: Operational Risk
35
SWOT Analysis
35
Operational Risk Index
35
Operational Risk
36
Table: Operationa l Risk
36
Market Size And Utilities
38
table: Latin America - Market Size And Utilities Risks
38
International Security Risk
42
Table: Latin America - Interstate Security Risk
43
Chapter 5: Key Sectors
45
Pharmaceuticals & Healthcare
45
table: Pharmaceutical Sales, Historical Data And Forecasts
46
table: Healthcare Expenditure Trends , Historical Data And Forecasts
47
table: Gov ernment Healthcare Expenditure Trends , Historical Data And Forecasts
47
table: Private Healthcare Expenditure Trends , Historical Data And Forecasts
47
Telecommunications
49
table: Telecoms Sector - Historical Data & Forecasts
50
Other Key Sectors
51
table: Oil and Gas Sector Key Indicators
51
table: Defence and Security Sector Key Indicators
51
table: Infrastructure Sector Key Indicators
51
table: Food and Drink Sector Key Indicators
52
table: Autos Sector Key Indicators
52
table: Freight Key Indicators
52
Chapter 6: BMI Global Macro Outlook
53
Global Outlook
53
Event Risk Mounting But Manageable
53
Table: Global Assumptions
53
Table: Developed States, Real GDP Growth, %
54
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
54
Table: Emerging Markets , Real GDP Growth , %
55

The Brazil Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Brazil. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Brazil's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Brazil's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Brazil's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Brazil, including currency volatility, the commodity price boom and protectionist policies.

The Brazil Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Brazil' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Brazil through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Brazil Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Brazil and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Brazil, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Brazil over the next 5-years?

BMI's Brazil country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Brazil Market - Political Strengths, Weaknesses, Opportunities and Threats facing Brazil.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Brazil's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Brazil’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Brazil's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Brazil?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Brazil against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Brazil’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Brazil will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Brazil's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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