Brazil is a very attractive emerging market for many of our clients. It is the second largest economy in the Western hemisphere – the largest in Latin America. The country has one of the fastest-growing economies in the world, and is home to many promising businesses. Our coverage – using our unique Total Analysis model – ensures that our clients make well-informed investment decisions in Brazil. Our teams keep them informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. We also provide in-depth analysis on 24 of Brazil's most important industries. Our winning combination of interactive data and forecasting, alongside our risk-assessed and results-proven analysis, will make sure that you, as one of our clients, are always ahead of the game in Brazil.

Country Risk

Brazil Country Risk

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Core Views

  • Brazil is on the cusp of an economic policy shift, with the appointment of an investor-friendly finance minister set to reverse the fiscal deterioration seen in the last few years and the central bank more strongly committed to reining in inflation. That said, these shifts will be slow to translate into stronger real GDP growth in light of a number of domestic and external headwinds.

  • We see little upside for Brazilian real GDP growth in the next few years, with growth set to accelerate to just 0.6% in 2015 and 1.3% in 2016, from an estimated 0.2% in 2014. Fixed investment will remain tepid in light of poor business confidence and a relatively weak business environment. Meanwhile, a deteriorating labour market and weak consumer confidence will constrain household consumption.

  • A greater commitment to tackling inflation will see...

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Brazil Operational Risk Coverage (9)

Brazil Operational Risk

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BMI View: Overall, the worst issues facing businesses considering entering Brazil stem from the extremely poor quality of the transport networks, and the numerous fiscal and trade barriers to investment. These issues are further compounded by the extremely high crime rate, which poses risks to the safety of foreign workers and business property. However, that is not to say there are not a number of advantages to investing in this leading BRICS nation - not least its abundant natural resources and large consumer market.

Alongside a well-developed financial market with good international ties, we also highlight the strong trade flows and future market growth potential, the minimal threat of interstate conflict disrupting the markets and the negligible likelihood of terrorist...

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Brazil Crime & Security

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BMI View: The most significant security risk facing Brazil is its high crime rate, particularly for violent crime. Indeed, while the rates of theft, assault and homicide per 100,000 people have remained steady or broadly declined in the last few years, coming in at 630.8, 364.7 and 21.8, respectively as of 2011, they still remain amongst the highest in Latin America. Crime affects all parts of the country, including affluent areas, although the urban centres of Rio de Janeiro and Sao Paulo are a major focus of security forces' efforts. In contrast, the risk from terrorism and interstate conflict disrupting business activity in Brazil is much lower, meaning that the country scores well overall in the BMI Crime and Security Risk Index. Brazil's score of 57.4 out of 100 places it relatively highly in seventh...

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Brazil Labour Market

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BMI View: The Brazilian labour force possesses many strengths, including a relatively large pool of workers with rising numbers of technical and science graduates. However, hiring Brazilian workers entails significant costs, with highly skilled staff in particularly high demand. Other drawbacks include very inflexible labour laws with strict legal protection for workers, and powerful and active unions. Overall, Brazil has a Labour Market risk score of 52.5 out of 100, placing it ahead of Trinidad and Tobago and behind Colombia, in 12th place...

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Brazil Logistics

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BMI View: Brazil's considerable market size offers plenty of opportunities for investment, but its economic growth remains constrained by the lack of development in its transport and utilities infrastructure, increasing operational risks and adding costs to supply chains. The utilities sector offers competitive costs, but soaring demand means it is overstretched, and droughts have led to frequent water and power shortages, compromising business activities in Brazil's main economic sectors, agriculture and mining. In addition, trade flows are reliant on a poor quality and congested road network, which is not able to meet supply chain needs, increasing the risk of delays. Although investment across utilities and transport...

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Brazil Trade & Investment

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BMI View: Brazil presents substantial opportunities to foreign investors, with abundant natural resources and a growing middle class consumer base. However, the business environment is hampered by significant bureaucracy, government intervention, and endemic corruption. The country is therefore placed in the middle of the overall BMI Trade and Investment Risk Index, in 15th place out of 28 Latin American states, with a score of 46.9 out of 100.

Following decades of being largely closed off to foreign trade and investment, Brazil began to liberalise in the 1990s by lifting import barriers, privatising key state companies, and clamping down on corruption. Foreign investment in Brazil has picked up...

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Brazil Industry Coverage (24)

Agribusiness

Brazil Agribusiness

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Agribusiness Market Value
BMI Market Value By Commodity (2010-2018)

BMI View: We believe that grains production growth over the next five years will slow relative to the preceding five. Nevertheless, we forecast strong grains production growth through to the end of our forecast period. We expect soybean output to outperform in the next few seasons and the price of the oilseed to remain elevated relative to corn. We also see strong growth in the livestock and dairy...

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Autos

Brazil Autos

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BMI forecasts a 1.8% drop in vehicle sales in 2015, as we expect the passenger car segment to drag down total sales despite a very slowly recovering commercial vehicle (CV) segment.

We forecast a 3.7% decline in passenger car sales in 2015 with sales reaching 2.41mn units for the year. This decline will come as growth in new passenger car purchases falls behind growth in consumer spending due to car sales tax hikes and tightening credit conditions weighing on demand.

In 2015, BMI expects to see 3.1% growth in light commercial vehicle (LCV) sales, a slowdown from strong growth in recent years and a 2.0% expansion in heavy truck sales. This slightly improving outlook for CVs is due to improving growth in key sectors such as Brazil's construction industry.

BMI is becoming more bearish on the country's domestic sales and export...

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Commercial Banking

Brazil Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Brazil Consumer Electronics

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BMI View: The hosting of the FIFA World Cup in 2014 provided additional demand for TV sets and smartphones in Brazil, partially offsetting the squeeze from a weak economic environment and currency depreciation. However, the market underperformed its potential and this is expected to continue over into 2015, with further real depreciation against the US dollar forecast. Even so, there still exist major growth opportunities such as 4G smartphones as operators expand the reach of networks and promote services, low-cost Android tablets, W...

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Defence & Security

Brazil Defence & Security

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BMI View: The Brazilian defence sector is set to continue to be one of the most active and open for foreign players, both with regards to imported goods from more established countries, and its relatively unfettered export market. In addition, the government's emphasis on creating a self-sufficient defence sector over the longer term is resulting in an ever-increasing number of partnerships and joint ventures on various development programmes between Brazilian companies and their foreign peers.

At present, the domestic defence sector is comparatively well developed, particularly with regards to small firearms, ammunition and aerospace products, and relatively diverse. However, the armed forces and police force lack advanced maritime, surveillance and rockets/missile capabilities and are keen to expand these areas. This is not only resulting in a ramping up of imports relating to these segments...

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Food & Drink

Brazil Food & Drink

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We expect real private consumption growth in Brazil to remain moderate in the coming quarters, in line with our full-year forecast of 2.3%, up from 1.7% in 2013. This is underpinned by or view that currency depreciation will continue to erode households' purchasing power and high interest rates will temper demand for credit ( see 'Weaker Consumer To See Economic Recovery Falter', February 21). We also expect weak consumer confidence to cap private consumption this year, with households less likely to spend in light of deteriorating economic prospects.

Food and retail consumption is likely to outperform among the country's private consumption items, and we project generally strong sales growth for the main companies in the sector. We also believe that a moderation in input prices (grains) could help margins for these companies to recover in the coming months.

Headline Industry...

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Freight Transport

Brazil Freight Transport

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We anticipate that growth in Brazil's freight transport volumes will outperform the Latin American giant's real GDP growth over our medium-term forecast period (2015-2019), across all modes. Brazil will remain mired in a period of low growth in the coming years, due to a slowing consumer story, persistent business environment challenges, and a weaker external environment. A more substantial contraction in real GDP in Q214 than we anticipated has prompted us to revise down 2015 headline growth forecast. Nevertheless, steady growth in mining and agriculture output will ensure that freight volumes keep growing.

Continued growth in the BRIC (Brazil, Russia, India and China) nation's mining and agribusiness sectors will ensure that the road, rail and ports sectors will continue to experience healthy expansion, while air freight will benefit from the growing demands of the country's expanding middle class. Further, the sector will benefit from...

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Information Technology

Brazil Information Technology

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BMI View: We expect the growth rate for IT spending in Brazil to remain stable at 8.2% in local currency terms in 2015. Although the economy is forecast to strengthen, we continue to highlight downside risk that will act as a drag on growth, including currency depreciation and fragile consumer and enterprise confidence. However, over the medium term, the growth outlook is positive - the Brazilian IT market is the largest in...

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Infrastructure

Brazil Infrastructure

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BMI View: Brazil's construction sector saw an overall contraction in 2014, as the industry suffered from a subdued domestic economy, an uncertain political environment in the run up to the Presidential elections in October 2014 and a drop-off in demand in the wake of the FIFA World Cup. Moving forward, the scale of projects in the pipeline means we are forecasting more positive growth in 2015 and beyond, although we note that over the longer term, this growth is largely unsustainable.

Brazil has instigated a substantial infrastructure investment programme under Programa de Aceleração do Crescimento (PAC) which is due to enter its third phase in 2015. The country has also set up a USD235bn concessions...

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Insurance

Brazil Insurance

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BMI View: Premiums in both segments are expected to rise over 2015, with solid single-digit growth forecast for the year as a whole. The economic slowdown (and fairly high inflation) appears to have had an impact. Pricing pressure in the motor vehicle insurance sub-sector is, and will remain, in a downwards direction. Nevertheless, it is easy to identify a number of strengths in both major segments.

As of late 2014, Brazil's leading insurance companies seem to have achieved solid growth in premiums in both the life and the non-life segment. Companies have achieved increases in premiums over 2014 that are well into double digits relative to the previous corresponding period. Nevertheless, we maintain our forecast that overall premiums in BRL terms will rise in single digits both in 2014 and 2015.

Already, it appears that the...

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Medical Devices

Brazil Medical Devices

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BMI Industry View:   Brazil has the largest economy and medical device market in Latin America, but per capita medical expenditure is still very low. The highest expenditure is in the large cities, such as São Paulo or Rio de Janeiro, but producers are moving into regional markets outside the major state capitals. The relatively low density of the medical device market means Brazil continues to offer considerable potential for expansion. Despite sluggish economic growth and a depreciating real which is making imported products more expensive, Brazil is forecast to be the fastest growing market within BMI's Americas region. The country has a well-established medical industry,...

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Metals

Brazil Metals

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BMI View: Metals production and consumption in Brazil will remain vulnerable heading into 2015 on account of persistently high energy costs and weak economic growth. However, accelerating growth in the years ahead, driven by gains in the automotive, construction, and infrastructure sectors, will underpin expansion in the metals sector.

Stronger Outlook By Latter Half Of Decade

Metals consumption and production will face headwinds into 2015 on account of modest economic growth ( see 'Growth To Disappoint Again In 2015,' November 5). We forecast real...

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Mining

Brazil Mining

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BMI View: Brazil's mining industry value growth to 2018 will not match that of the previous decade due to subdued mineral prices in the years ahead. Still, mine output will expand as both domestic and foreign firms continue to exploit the country's significant reserves of both industrial and precious metals.

Mine output growth in Brazil will remain solid, particularly for iron ore, despite weak prices. While we forecast iron ore prices will average lower year-on-year over the coming years, at USD75/tonne in 2015 and USD80/tonne in 2016, Brazilian firm Vale will continue to take advantage of its low unit costs and seek to increase its...

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Oil & Gas

Brazil Oil & Gas

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BMI View: Brazil's vast pre-salt reserves suggest substantial growth potential over the long-term, underpinning our bullish upstream view that crude, natural gas, and other liquids output will rise throughout our forecast period. In the near-term, we hold a more bearish view, as mandated fuel subsidies will propel continued consumption growth, increasing imported fuel costs on state-owned Petrobras' strapped finances. As such, despite tremendous...

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Petrochemicals

Brazil Petrochemicals

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The Brazilian petrochemicals industry is struggling to raise its capacity utilisation rates to sustainable levels in the face of fierce competition and declining domestic competitiveness, according to BMI's latest Brazil Petrochemicals report.

Chemicals production fell 4.7% year-on-year (y-o-y) from January to October 2014 with the average capacity utilization standing at 79%, three percentage points down compared to the same period in 2013. In the first 10 months of 2014, domestic sales by local producers fell 3.3% y-o-y while consumption rose 1.4% y-o-y.

Although the real is depreciating, rising production costs and a poor investment climate will continue to erode competitiveness. This along with the soaring costs of construction puts in doubt the Comperj project, which is set to add significant levels of production capacity by 2018.

Brazil is at the forefront of...

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Pharmaceuticals & Healthcare

Brazil Pharmaceuticals & Healthcare

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BMI View: A thriving pharmaceutical market, active improvements to regulatory practices, and the government's commitment to healthcare services will continue to make Brazil a regional outperformer. A growing population and strategies for improved clinical research will ensure the development of the Brazilian market. Continued domestic competition and the need for further regulatory change will still pose challenges.

Headline Expenditure Projections

Pharmaceuticals: BRL57.0bn (USD26.4bn) in 2013 to BRL62.0bn (USD26.6bn) in 2014; +8.8% in local currency terms and +0.8% in US dollar terms. Forecast has been maintained from Q414.

Healthcare:...

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Power

Brazil Power

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BMI View:  Brazil's power sector continues to offer significant investment opportunities due to its unmatched size, government's commitment to power capacity expansion and large prospective in renewables and natural gas-fired thermal sectors. However, the country's potential is hindered by its continued dependence on unreliable hydroelectricity, weak infrastructure and regulatory interjections. In...

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Real Estate

Brazil Real Estate

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BMI View:  Brazil's economy has struggled throughout 2014, even falling into recession during Q214. This has negatively affected investor and consumer confidence and weakens the country's economic position in Latin America. While our growth forecast for 2015 stands at only 1.5% we do foresee the long-term potential of Brazil's real estate market to be strong. Supported by a growing population and an increasingly advanced domestic economy, a number of real estate opportunities will emerge, particularly in retail and industrial segments.

The overall health of Brazil's economy has...

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Renewables

Brazil Renewables

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BMI View :  We are maintaining our 2015 forecasts for non-hydropower renewable energy generation in Brazil this quarter, but have revised up our long-term forecasts to account for the strong results of the reserve auction in 2014. Wind energy will continue to be the main driver of growth in 2015. Biomass capacity will also grow sizeably.

Key Trends And Developments

  • The Brazilian energy agency Empresa de Pesquisa Energética (EPE) announced that it had designed a special contract for solar photovoltaic (PV) projects for the reserve energy tender (A-5) to be held later in 2014.

  • EPE awarded 889.6MW of PPAs for solar capacity at the 2014...

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Retail

Brazil Retail

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BMI View: After sluggish growth rates were reported in 2014, our forecasts for the Brazilian retail sector are optimistic for the next four years, as we expect to see positive growth following a rise in total household spending bolstered by a growing and increasingly affluent population. In addition, as price remains important to purchasing decisions, particularly to lower-income households, the number of discounters in the Brazilian retail sector is burgeoning.

At present, the food and drink retail sector is comparatively well developed; inclusive of a range of retailers and retail formats which has led to relative saturation, and seen expansion of existing retailers and acquisitions more commonplace than new entrants. However, price sensitivity is becoming an ever-increasing consideration to purchases made in Brazil, particularly with those made by the lower-income demographics - which...

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Shipping

Brazil Shipping

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We predict steady growth in Brazil's shipping sector over our forecast period, although we will not see a return to the double digit growth seen in 2010 and 2011. Our more moderated view of growth in the country's ports is on the back of a cautious economic outlook for the country. Brazil will remain mired in a period of low growth in the coming years, due to a slowing consumer story, persistent business environment challenges, and a weaker external environment. A more substantial contraction in real GDP in Q214 than we anticipated has prompted us to revise down 2015 headline growth forecast.

We have grown increasingly pessimistic on Brazil's economic outlook, revising down our 2015 forecast to 1.5% from 2.1%, following a weak Q214 growth print. Real GDP contracted by 0.9% year-on-year (y-o-y) in the second quarter - weaker than our expectations and Bloomberg survey estimates of -0.6% y-o-y - on the back of an 11.2% y-o-y contraction in...

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Telecommunications

Brazil Telecommunications

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Brazilian telecommunications sector is expected to see a number of wide-scale acquisitions and consolidation next year, which is likely to see the structure of the sector reorganised. Brazil telecoms operator OI is looking for a potential merger deal with TIM Brasil , another local telecoms operator. OI is also looking for a merger deal with Portugal Telecom . Telefônica Brazil 's board of directors reportedly approved a capital increase to fund the takeover of Vivendi's GVT , while América Móvil 's is advancing with the merger of its three Brazilian subsidiaries...

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Tourism

Brazil Tourism

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BMI View : With the World Cup now behind, Brazil is likely to focus on completing planned infrastructure projects and preparing for the 2016 Olympic Games. However, key challenges for the tourism industry in 2015 include the recession in Brazil and the likely slowdown in tourist arrivals from Argentina.

The Brazil Tourism Report examines the significant long-term potential being offered by the local tourism industry, especially as the country will host the Olympic Games in Rio de Janeiro in 2016. However, the report also highlights long-term structural weaknesses facing Brazil's tourism market, particularly in the realm of national transport infrastructure and the shortage of hotels across the country. The latter issue indicates long-term development potential but could lead to supply shortages during the major sporting events. The report also...

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Water

Brazil Water

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BMI View: We have extensively updated and expanded our Brazil water forecasts, including those for non-mains, and agricultural consumption, water losses and wastewater treatment methods. Overall, we believe that the pressures stemming from the ongoing drought, in conjunction with rising industrial and agricultural water demand, will stimulate heavy investment into water reuse, wastewater treatment facilities and the expansion and improvement of the distribution and collection networks.

Irrigation water areas are rising, albeit gradually, from 4.5mn hectares in 2006, to 5.4mn hectares in 2008, and 5.8mn hectares in 2012. We now forecast agricultural water consumption to see steady growth over the coming...

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