Brazil
Brazil combines both an optimism for increasing levels of foreign investment with a slowing growth figures and high inflation. Quite a mixed reading even by BRICS standards. Two weeks ago, BRIC PLUS reported on how in the southern state of Parana teachers were striking after remuneration was subject to a maximum 3.5% increase with inflation soaring at 8.34%.
Indeed 2015 does appear to be a year of reassessment and reflection for South America’s largest economy. Brazil has enjoyed impressive and consistent growth figures in recent years, but it appears the country is heading for a slowdown caused partially by a lack of confidence in both Brazilian politics and the nation’s banking system. Certainly, the Petrobras scandal has scared off potential investors and the national bank has lost 60% of it’s value.
The negative readings fail to stop there. Brazil’s stock index, Bovespa, also was subject to a dramatic fall whilst Eike Batista (up until recently one of the world’s richest men) is bankrupt. His company, OGX, became the largest corporate bankruptcy in Latin American history in 2013. Other BRICS members are not experiencing this level of corporate difficulty.
“There is pessimism in general and that pessimism surely has had a big impact on the stock market” said Fernando Lara, chair of the Brazil Center at the University of Texas. One key problem for Brazil’s immediate future is commodities. Brazil has benefited enormously from increased level of trade with it’s main trading partner, China. However with Chinese demand for Brazilian oil and soybeans seemingly falling, Brazil must diversify.
Prediction: The experts say the next few years will be rocky for Brazil. Recovery however is not doubted. The nation’s links to the other BRICS markets (China in particular) and opportunities it can offer foreign investors remains attractive. Huge multi-nationals looking to break into the Latin American market predominantly see Brazil as the perfect starting base. Jaguar are one example of a firm planning a long-term Latin America future starting in Brazil. Equally, the 2016 Olympic Games are just around the corner. However unlike the 2014 FIFA World Cup, Brazil may need the international event to be a financial success in order to speed up their recovery.
