Business Monitor International


Brazil Business Forecast Report

Published 23 April 2014

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

Core Views

  • With persistent currency weakness and rising interest rates set to temper private consumption growth, and fixed investment to receive only a moderate boost from the June 2014 FIFA World Cup and final year of the PAC II growth acceleration programme, we expect Brazil's economic recovery to falter this year. Indeed, we forecast real GDP growth of 2.0% in 2014, down from 2.3% in 2013.

  • Elevated inflation will keep interest rates high in the coming months, and we forecast one more rate hike to 11.25% before the central bank pauses. However, we maintain our view that the bank will switch focus from reining in inflation to stimulating growth by year-end, in line with our end-2014 Selic rate forecast of 10.75%.

  • While the widespread public protests begun in June have largely subsided, we believe that this marked a turning point for the Brazilian electorate. As such, we anticipate that public unrest could flare up again should political progress on reforms stall.

  • With President Dilma Rousseff the candidate best positioned to win the October 2014 presidential election, we anticipate that major reforms are likely to be limited in the coming years, implying a modest reining in of expansionary fiscal policy and a continued piecemeal approach to improving the outlook for state-owned oil company Petrobras.

Major Forecast Changes

  • We have downgraded our 2014 real GDP growth forecast from 2.4% to 2.0%, as the potential for a more significant increase in interest rates than we initially anticipated, as well as persistent currency weakness will temper real private consumption growth this year.

  • A continuation of the Banco Central do Brasil's aggressive monetary tightening cycle saw us upgrade our short-term Selic rate target to 11.25%, implying 25 basis points of hikes from the current level. In light of more significant rate hikes in the short term, we increased our end-2014 interest rate forecast to 10.75%, from 10.50% previously.

  • Given a very weak...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Ratings
7
Domestic Politics
8
Rising Violence Highlights Operational And Security Risks
8
TABLE: POLITICAL OVERVIEW
8
Long-Term Political Outlook
10
Significant Policy Challenges Ahead
10
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Ratings
13
Economic Activity
14
Upswing In 2013, But No Return To Boom Years
14
TABLE: ECONOMIC ACTIVITY
14
Monetary Policy
16
Economic Recovery And Price Pressures Underpin Modest Rate Hike
16
TABLE: MONETARY POLICY
17
Exchange Rate Policy
19
BRL: Inflation Concerns To Limit Currency Weakness
19
TABLE: CURRENCY FORECAST
20
Balance of Payments
21
Stronger Trade Outlook Underpins Current Account Improvement
21
TABLE: CURRENT ACCOUNT
21
Fiscal Policy
23
Expenditures To Keep Fiscal Deficit Substantial In 2013
23
TABLE: FISCAL POLICY
23
Regional Economic Activity
25
What If We Are Wrong On Chinese Growth- Assessing The Regional Implications
25
TABLE: CHINA'S CONSUMPTION OF SELECTED COMMODITIES, % OF GLOBAL CONSUMPTION
25
Chapter 3: 10-Year Forecast
31
The Brazilian Economy To 2022
31
Imbalances To Unwind, Three Potential Scenarios
31
TABLE: LONG-TERM MACROECONOMIC FORECASTS
31
Chapter 4: Business Environment
35
SWOT Analysis
35
BMI Business Environment Risk Ratings
35
Business Environment Outlook
36
Institutions
36
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
36
Infrastructure
37
TABLE: BMI LEGAL FRAMEWORK RATING
37
TABLE: LABOUR FORCE QUALITY
38
Market Orientation
39
TABLE: LATIN AMERICA - ANNUAL FDI INFLOWS
39
Operational Risk
40
TABLE: TRADE AND INVESTMENT RATINGS
40
Chapter 5: Key Sectors
43
Autos
43
TABLE: BRAZIL AUTOS SALES BY SEGMENT - HISTORICAL DATA AND FORECASTS, 2010 - 2017
45
TABLE: FOOD CONSUMPTION INDICATORS - HISTORICAL DATA & FORECASTS, 2010-2017
50
Other Key Sectors
53
TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS
53
TABLE: PHARMA SECTOR KEY INDICATORS
53
TABLE: TELECOMS SECTOR KEY INDICATORS
53
TABLE: DEFENCE AND SECURITY SECTOR KEY INDICATORS
54
TABLE: FREIGHT SECTOR KEY INDICATORS
54
Chapter 6: BMI Global Assumptions
55
Global Outlook
55
Growth May Be Turning The Corner
55
TABLE: GLOBAL ASSUMPTIONS
55
TABLE: DEVELOPED STATES, REAL GDP GROWTH FORECASTS
56
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS (%)
56
TABLE: EMERGING MARKETS, REAL GDP GROWTH FORECASTS
57

The Brazil Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Brazil and 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-2017, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Brazil's economic and industry growth through end-2017.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Brazil's country risks against regional peers using BMI's country comparative Risk Rankings system.
  • Evaluate external threats to doing business in Brazil, including currency volatility, the commodity price boom and protectionist policies.

The Brazil Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Brazil economic policy-making and performance impact on corporate profitability over 2013-2017?

BMI provides our fully independent 5-year forecasts for Brazil through end-2017 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 Business Forecast Report features BMI's forecasts with supporting analysis for 2013 through to end-2017, 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 Rankings 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 exposure).
  • Global Assumptions - forecasts for each year to end-2017 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 Rankings evaluate 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 Rankings assess explicit short- and long-term risks to political stability; latest ankings, rankings 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.

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.

Business Environment

Business Environment Risk Rankings with SWOT Analysis - Business Environment Risk Rankings for Brazil, benchmarked against rankings for regional neighbours.

Country Competitiveness - Competitiveness of Brazil's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Rankings.

Key Sector Outlook

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

BMI's 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 with developments over 2008-2012, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2013-2017, using BMI's proprietary industry modeling technique, which incorporates all 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.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express