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 key issues facing businesses considering entering Brazil stem from the extremely poor quality of 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 advantages of strong trade flows and future market growth potential, the minimal threat of interstate conflict disrupting the markets and the negligible likelihood of terrorist attacks due to Brazil's non-involvement in international wars. Moreover, the overall size and quality of...

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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 have remained steady or broadly declined in the last few years, they still remain among 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 performs well overall in the BMI Crime and Security Risk Index. Brazil's score of 57.4 out of 100...

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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 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 prices, 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 infrastructure is underway, the burden placed by economic and population growth will ensure that the risk of disruption to...

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Brazil Trade & Investment

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BMI View: Brazil presents substantial opportunities for foreign investors, with abundant natural resources and a growing middle class consumer base. However, the business environment is hampered by significant bureaucracy, government intervention in the form of onerous taxes, lingering corruption issues, and an overburdened judiciary. These factors increase the operational difficulties faced by businesses, but we note that Brazil offers such lucrative opportunities that many investors are prepared to overcome these barriers. Brazil is therefore placed 10th out of 28 Latin American states in the overall...

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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 forecast real private consumption growth at 1.3% in Brazil, down from 1.5% in 2014 and 2.6% in 2013, on the back of anaemic GDP growth. A less favourable external environment in light of an ongoing slowdown in Chinese growth, a poor domestic business environment and lack of export competitiveness poses significant headwinds to growth. Brazil is in the early stages of an economic policy shift with new Finance Minister Joaquim Levy set to reverse the fiscal deterioration of recent years and a central bank that is more committed to reining in inflation.

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 Data (local...

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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: In USD terms, the development of premiums in Brazil's dynamic insurance sector has been held back by the weakness of the BRL. The sluggish economy has also almost certainly meant that growth in premiums in some lines has been less than it otherwise would have been. Nevertheless, we remain confident that the very positive structural changes that are taking place will have a greater impact on the sector than the currently challenging economic and business environment.

As of early 2015, the overall environment in Brazil's insurance sector continues to be dominated by the weakness of the economy, the softness of the BRL and the rise in interest rates. In spite of the challenges, though, it is clear from the latest reports of the leading insurance companies, that many are achieving good growth in premiums. In the life sector, BB Seguridade, for...

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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 Sao 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. The country has a well-established medical industry, comprising local and multinational companies, which primarily serves the domestic market. The strength of the local manufacturing industry means that imports hold a lower share of the market...

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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 lower oil prices and decreased capex funds dampen upstream investment, weakening output growth beyond 2018. As such, despite tremendous below-ground potential, we maintain a relatively modest outlook, reflecting our view that the above-ground environment remains a considerable obstacle to the upstream and downstream segments due to weakening project economics, waning investor confidence, and a burdensome regulatory environment.

Headline Forecasts (Brazil 2013-2019)
2013...

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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: Continued regulatory improvements, growing pharmaceutical and healthcare markets, and increased favour for foreign investment will allow Brazil to maintain its position as the regional outperformer in Latin America. However, low affordability and increasing generic drug competition will hamper opportunities for innovative drugmakers as the country continues to develop its economy.

Headline Expenditure Projections

Pharmaceuticals: BRL62.0bn (USD26.3bn) in 2014 to BRL65.3bn (USD25.6bn) in 2015; +5.2% in local currency terms and -2.8% in US dollar terms. Forecast in local currency has been maintained from Q115 while US dollar growth ...

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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 vast size coupled with the government's commitment to expanding power capacity and the large prospective in the renewables and natural gas-fired thermal segments. However, the country's potential is hindered by its continued dependence on unreliable hydropower, weak infrastructure and regulatory interjections. In addition, Brazil's darkening macroeconomic trajectory has weighed heavily on our forecast for power consumption, while a protracted condition of severe droughts prompted us to downwardly revise our projections for hydropower generation.

Brazil's power sector will continue to grow in the coming years - driven by government commitment to power supply...

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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 continue to expect strong growth in both non hydropower renewable energy generation and capacity in 2015 and over the course of the next four years. While solar power will see the largest year-on-year (y-o-y) growth, wind power will dominate in absolute terms - a trend highly supported by the government and needed for the country's energy diversification requirements.

Key Trends And Developments:

  • For 2015, the government has set three auctions for long-term energy contracts, namely the renewable energy and A-5 auctions in April and the A-3 auction in July.

  • In February 2015, Spanish wind...

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Retail

Brazil Retail

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BMI View : As a result of increasing credit costs and inflation, we expect that most Brazilian retail sub-sectors will experience a slight contraction in 2015 as households restrict spending. Nevertheless, the country looks set to remain an attractive place for investment as incomes are expected to rise, bolstering the number of households falling into the middle-class bracket. Moreover, the countries promise to drive inflation into a long-term period of decline in 2015 supports our view that total household spending will show positive year-on-year growth in 2016.

Across all but three sub-sectors of the retail market we monitor, total household spending will contract in year-on-year terms in 2015. This is expected as a result of...

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Shipping

Brazil Shipping

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Despite a poor business environment, weak consumer confidence and a lacklustre external environment, the Brazilian shipping industry is set to perform well over both the short and medium terms. A nascent policy shift will gradually regain investor confidence following years of unorthodox economic policies, but will be slow to translate into a significant uptick in growth.

We are sticking to last quarter's forecasts for the Brazilian shipping industry, which we predict will perform strongly in 2015. Annual tonnage throughput gains will be strongest at the Port of Itajai at 7.2%, while box throughput will be at its highest year-on-year (y-o-y) levels at the Port of Salvador, which is pencilled in for double-digit growth in 2015.

This high level of growth is forecast to continue over our forecast period to 2019, although risks are posed from both Brazil's lagging freight transport infrastructure and...

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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 : Brazil's main goal for 2015 is to prepare for the 2016 Olympic Games in Rio and ensure that all sites are completed on time. However, in 2015 the country's tourism industry faces domestic economic uncertainty and a potential 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 analyses the growth and...

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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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