Brazil has been hot since it hosted the World Cup. But Brazil is more than just football. We all know the enchanting carnival in Rio. Or the kilometers long, snow-white beaches. But what is the economic situation for one of the protagonists of the successful BRIC story? Do you still have to invest in the South American giant or not?
A success story?
During the 2003-2008 period, the country experienced an annual growth in Gross Domestic Product of more than 5%. Due to the emerging middle class and the various measures taken by then President Lula, the country has attracted foreign investors. With a clear improvement in infrastructure as a result.
The need for additional infrastructure, however, remains a major challenge for the future. After all, Brazil has a fairly young population and there are several major events on the program, such as the Olympic Games in the summer of 2016. These provide a new flow of tourists and investors, with extra oxygen for the local economy.
Beautiful songs don’t last long …
Brazil has an incredible appeal. Nevertheless, purchasing power has fallen sharply in the last 2 years compared to that of our country.
The 2008 crisis and the revision of Chinese economic policy had a strong impact on Brazilian exports. After all, the Chinese economy evolved from an economic model with high exports and many imported raw materials to a model focused on domestic consumption and less imported raw materials.
Brazil is a country that mainly exports raw materials. The evolution of the Chinese economic model has therefore led to a slowdown in Brazilian economic growth. The result: purchasing power decreased and taxes rose for the emerging middle class.
According to our analysts, the explosive economic growth in Brazil was mainly due to the sharp rise in domestic consumption.
Investing in Brazil still interesting?
Our analysts remain convinced of the interesting challenges for investors in Brazil.
In the first place thanks to the considerable stock of raw materials and the expertise of Brazilians in various sectors. And due to the varied agricultural production, large companies such as Cosan, Rio Tinto and Ambev can export various local products (cane sugar, coffee, oranges, soy, beef, poultry, tobacco leaves, minerals).
According to our analysts, Brazil is also attractive for large shopping malls and specifically for the real estate sector. After all, the policy of former President Lula encouraged the purchase of a house for the emerging middle class (my house, my life).
How to invest
It would be unwise to ignore Latin America when putting together your investment portfolio.
At present, the possible re-election of President Rousseff is a source of discussion. Because the financial markets are a measure of good governance and a healthy trading climate, the elections could therefore herald an interesting period of volatility. After all, the nervousness in the financial markets is flaring up due to the expected social measures, which would have a detrimental effect on companies (more taxes, taxes and such).
In addition, investing in infrastructure also remains a priority, as current growth is stagnating due to a lack of investments. Our analysts therefore invite investors to focus on Latin American markets through temporary capital injections (3 months before and 3 months after the election, for example). After all, the revaluation of the Brazilian real offers interesting opportunities and the possibilities for medium to long-term investments are also increasing.