Time of reforms

Structural changes in the economy can make Brazil even more attractive to international companies and investors 

By Sérgio Siscaro and Estela Cangerana

 

One of the ten largest economies in the world, with a Gross Domestic Product (GDP) of R$ 6.8 trillion in 2018 (around US$ 2 trillion) and consumer market estimated at 210 million people. It takes a quick look at statistics to see Brazil’s enormous potential for doing business with international companies and investors. But the largest country in Latin America may reveal even more positive surprises for those interested in taking a deeper look.

After going through times of political and economic instability in recent years, Brazil has resumed the path of growth, with stability, sustainability and a consistent agenda of structural reforms that will further consolidate its relevant position in the global scenario, as shown by several indicators. The International Monetary Fund (IMF) estimate for the expansion of Brazilian GDP this year is 2.1%, after rising 1.1% in 2018.

Foreign Direct Investment (FDI) has grown again. In 2018, it totaled US$ 59 billion, placing Brazil in the 9th position among the main destinations of these funds in the world, according to data from the United Nations Conference on Trade and Development (UNCTAD). In the first four months of 2019, FDI reached US$ 28 billion, an increase of 17.5% over the same period of last year, according to statistics from the Central Bank of Brazil. The expectation is that this year will close with another US$ 90 billion in direct investments.

In 2018, the 311 Brazilian listed companies on the B3 stock exchange registered total profits of R$ 241.1 billion – 106.8% more than in the previous year, according to Economática. Business involving domestic companies has been in the spotlight in the international press – such as Avon’s recent acquisition by Brazilian cosmetic manufacturer Natura, and the joint venture between Boeing and Embraer. In the global field, the country has just received official support from the United States government to join the Organization for Economic Cooperation and Development (OECD).

Internal potential

The data consolidate Brazil as an important global economic player. But it is also relevant to understand its huge internal potential. Brazilian climatic and geographical variation offers differentiated opportunities for wealth generation – such as agribusiness or mineral extraction, for example. The complexity of its economy favors a diversified industrial and service sector. In addition, Brazilian startups in many sectors, especially agritechs and fintechs, have been developing innovative solutions.

To accelerate the path of economic growth, pension and tax reforms are underway, in order to give private initiative the conditions to be more competitive. Other changes refer to the need to carry out strategic infrastructure projects, which are indispensable for a country of continental dimensions – such as the duplication of highways, the expansion of port facilities and airports, the recovery of the rail network and the execution of basic sanitation works.

The current moment opens up many possibilities for outside investors – and Canada is no exception. An example is the interest of the Canada Pension Fund Investment Board (CPPIB), which is already a controlling shareholder of Cesp energy company. The possible privatization of companies should further attract the interest of Canadian capital in Brazil.

Foreign trade between Brazil and Canada also has great potential for growth. In addition to exports and imports, in 2018 Brazilian trade chain registered US$ 421,120 billion, equivalent to 14.3% more than the US$ 368.5 billion recorded in the previous year. Its main foreign partners are the United States, China, Argentina and Europe – traditional markets for both the purchase and sale of goods and services. In this context, Canada emerges as an attractive market for Brazilian products and vice versa. The closer commercial relationship between the two countries brings with it the benefits of market diversification and the complementarity of products and services.

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