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.

Brazil Country Risk

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Core Views

  • Over the long-term, Brazil will only experience modest levels of growth as structural headwinds limit any quick economic solutions to the challenges faced from falling global commodity prices. Growth will only return to the economy following two consecutive years in recession in 2015 and 2016.

  • Widespread public unrest, sweeping corruption scandals and deepening polarisation will keep political risk elevated over the coming quarters, weighing on investor sentiment and contributing to extreme uncertainty in terms of policy direction. Over a multiyear timeframe, the Brazilian electorate will demand progress on promised reforms, including higher-quality public services and greater government transparency.

Major Forecast Changes

  • We expect Banco Central do Brasil will enact 100...

Brazil Operational Risk Coverage (9)

Brazil Operational Risk

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BMI View: As one of the largest economies in the world, with considerable opportunities for development in key sectors, Brazil holds huge appeal to foreign investors. However, the country's economic potential continues to be constrained by a difficult operating environment, characterised by complex regulatory and legal systems, high levels of government intervention in the economy, an inadequate logistics network, and exorbitant labour costs. In addition, investor sentiment is dented by the poor rule of law, with criminal gangs remaining prevalent in many areas and corruption scandals frequently rocking the establishment. Brazil's huge investment potential means that many companies are willing to overcome these substantial obstacles, but structural economic and legal reforms will be necessary before the country is able to offer a stable, welcoming and open operating environment. Consequently, Brazil is...

Brazil Crime & Security

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BMI View: The most significant security risk facing foreign workers and businesses in Brazil is its high crime rate, particularly with regard to violent crime and cyberattacks. While the rates of theft, assault and homicide have remained steady in the last few years, they still remain among the highest in Latin America. Powerful criminal organisations conduct activities in all regions, including affluent areas, although the urban centres of Rio de Janeiro and Sao Paulo are a major focus of security forces' efforts and have seen a reduction in criminal activity. The transition of criminal gangs into the digital sphere is also becoming one of the most pertinent security risks. In contrast, the threat of terrorism or interstate conflict disrupting business activity in Brazil is...

Brazil Labour Market

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BMI View: Brazil offers incoming businesses a sizeable and diversified labour pool with a rising number of university graduates from technical or science programmes, high female participation rate and large urban population. However, hiring Brazilian workers entails significant costs, even for low-skilled positions, due to mandatory minimum wages and labour taxes, while demand for highly skilled staff further pushes up the cost of employment. Other major drawbacks include inflexible labour laws with strict legal protection for workers, powerful and active unions, and increasing social unrest. Businesses therefore have limited flexibility with regard to setting wages and hiring and firing practices, and face a high risk of strikes and demonstrations disrupting production. Overall, Brazil has a Labour Market risk score of 47.7 out of 100, placing it in 32nd place among 42 countries in the Latin...

Brazil Logistics

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BMI View: Brazil's economic growth potential remains constrained by the lack of development in its transport and utilities infrastructure, increasing operational risks and adding costs and delays 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 rely 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...

Brazil Trade & Investment

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BMI View: Brazil offers numerous opportunities for foreign investors, with abundant natural resources and a growing middle class consumer base among the main attractions of the country's vibrant economy. However, significant bureaucracy, government intervention in the form of onerous taxes, lingering corruption issues, and an overburdened judiciary present obstacles to businesses operating in the country. In particular, the huge corruption scandal engulfing state-owned oil company Petrobras has plunged the economy into recession and heightened investor caution towards Brazil over the short term. Brazil therefore ranks 20th out of 42 Latin American states in the overall BMI...

Brazil Industry Coverage (22)

Brazil Agribusiness

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BMI View: We believe that grains production growth over the next five years will slow relative to the preceding five. Soybean production will outpace that of corn, as lower production costs for soybean relative to corn will make the commodity more attractive to grow. However, we see comparatively limited growth out to 2019/20 given the scarcity of area available for expansion, as well as high import costs for fertilisers. We hold a more positive view on the sugar industry now than we have held in the past, due to reforms in the ethanol sector. The eventual return of real weakness will be a net positive...

Brazil Autos

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BMI View: Brazil's new vehicle market will return to growth in 2016 but will remain at historically low volumes. Upward pricing pressures, tightening lines of credit, consumer and business deleveraging and general economic stagnation will continue to drag on market performance.

Passenger Car and Light Commercial Vehicle Sales
f = BMI forecast. Source: National Association of Motor Vehicle Manufacturers (Anfavea), BMI
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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

Brazil Consumer Electronics

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BMI View: Economic and political crisis in Brazil has hit consumer electronics spending hard, with steep declines in 2015 and 2016. The outlook is subdued as a result of a sluggish economic recovery that means a bounce back in device spending is unlikely, with the purchasing power forecast to be well below the 2013-2014 peak, even by 2020. Nonetheless, the device market is forecast to return to growth from 2017 as the economic environment at least becomes less hostile, and we identify the handset segment as the largest opportunity where there is still capacity for first-time smartphone purchases to drive value growth. However, for the market as a whole we now forecast that spending will increase at a CAGR of just 3.6% over 2016-2020.

Latest Updates & Industry Developments...

Brazil Defence & Security

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BMI View: We expect Brazilian defence expenditure to contract in 2016 amid the recession; however, it will remain at around 1.3% of GDP, and return to growth over the medium term as economic conditions improve. Defence spending will be driven by factors such as the country's efforts to reduce crime levels, prevent illegal activities in the Amazon, and contribute to international peacekeeping missions. Brazil has the largest defence budget in the Latin America region, and is able to invest significantly into procurement of military equipment and defence R&D. This enables the domestic defence sector to continue to develop, increasing export potential, and gradually allowing it to capture a large share of the Brazilian MoD's procurement contracts. Over the long term, therefore, we expect defence exports to grow at a faster pace than imports.

Headline Defence Expenditure Forecasts (Brazil 2015-2020)...

Brazil Food & Drink

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BMI View: Brazil's food and drink industry will experience a contraction in real terms, as we forecast food and drink spending to grow below inflation throughout 2016. Price conscious consumers will increasingly trade down price points, driving growth in economically priced categories. The cash-and-carry format will experience positive growth as consumers prefer to make bulk purchases in order to stem the effects of food inflation.

Food and Drink Spending

Brazil Freight Transport

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BMI View: We expect steady if lacklustre growth in Brazil's freight sector in the coming years, with tepid increases in mining and agricultural output ensuring demand remains elevated. We caution that a more robust expansion will be prevented by a slowdown in the consumer sector, weak global commodities and a lacklustre external picture. As a result, we expect the road and rail sector will display the largest gains.

Brazil's economy will remain in recession in 2016 after dipping below zero in 2015, for the first time in seven years. We forecast real GDP to contract by -0.8% in 2016 following a contraction of -2.7% in 2015. Major headwinds to private consumption and a fixed investment via a slow resolution of the corruption scandal at national oil company Petrobras will be the primary driver of the slowdown, with unemployment...

Brazil Information Technology

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BMI View: The Brazilian IT market contracted sharply in 2015, with further, albeit less substantial, decline forecast for 2016 due to a combination of political and economic factors. As the economy emerges from recession and the political situation stabilises we envisage a return to IT market spending growth from 2017, but we expect momentum to be weak. Our Country Risk team forecasts modest GDP and consumption growth, while in the IT market there are negative trends such as the cannibalisation of PC sales by smartphones. These combine in our core scenario for IT spending to increase at a CAGR of 4.6% over 2016-2020.

Latest Updates & Industry Developments

  • Computer Hardware Sales: BRL32.1bn in 2016 to BRL35.2bn in 2020. Outlook lowered as a result of the negative...

Brazil Infrastructure

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BMI View: The impeachment of former president Dilma Rousseff means Michel Temer will see her term out to 2019, which is unlikely prove enough time for his major structural changes to infrastructure policies to have a great effect, though they could be a long-term game-changer. In the near term, uneven growth will be driven by timid economic recovery, limited foreign investment and a semblance of political stability.

Latest Updates And Structural Trends

  • We maintain our construction industry value real growth forecast for 2016, with the industry expected to contract by...

Brazil Insurance

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BMI View : Brazil's insurance industry has continued to grow despite the combined effects of low economic growth and high inflation on the country's wider financial services sector. The core drivers of growth over recent years have been the expansion of the middle class, combined with an ageing population which, together, have supported demand for personal insurance products, such as life, health and motor insurance. We also noted a growing tendency towards savings and investment activity in the life insurance sector. For a country of its size, insurance penetration and density have remained relatively low, allowing for consistently high levels of premium growth over recent years, though this has also been due, in part, to...

Brazil Medical Devices

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BMI Industry View: The relatively low density of the medical device market means Brazil will continue to offer considerable potential for expansion, despite a contracting economy and a depreciating real, which is making imported products more expensive. We forecast that the import share, which is already lower than in other parts of Latin America, will fall still further over the longer term given the current drive to expand domestic production into new product areas through technology transfers. The recent decision to grant tax breaks to domestically-produced devices will provide an...

Brazil Mining

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BMI View: Brazil's mining industry will be supported by solid production growth in the country's iron ore sector over the next few years. Despite this, gold, nickel and tin production growth will slow due to continued price weakness.

Brazil Mining Industry Value Forecast (2014-2020)
2014e 2015e 2016f ...

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. However, production growth will be limited by lower oil prices and decreased capex funds. As such, 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)

Brazil Petrochemicals

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The depreciation of the Brazilian real is having a positive effect on the share of local petrochemicals production sold on the Brazilian market. Although recovery is expected from 2017, it will be slow and will lack the stimulus needed to significantly raise petrochemicals consumption to pre-recession levels. The industry will need to improve competitiveness if it is to survive going forward, which will entail maintaining low feedstock prices and ensuring an attractive business environment. Producers will be looking for greater political stability to ensure certainty.

The level of petrochemicals capacity utilisation stood at 80% for the first eight months of the year, one percentage point higher than in the same period in 2015. Although output and sales were up, petrochemicals prices fell 11.4% in 8M16 due to the effects of declining costs of naphtha feedstock as well as depressed prices on global markets. Demand rose...

Brazil Pharmaceuticals & Healthcare

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BMI View: Brazil's pharmaceutical market will become increasingly unattractive to pharmaceutical companies due to the growing fiscal tightening in the country. Multinational drugmakers will face the risk of revenue decreases, due to increasing generic competition and more intensified cost-containment measurements.

Headline Expenditure Projections

Pharmaceuticals: BRL62.0bn (USD26.4bn) in 2014 to BRL65.8bn (USD19.8bn) in 2015; +6.1% in local currency terms and -25.0% in US dollar terms. Forecast in has been revised down from Q415.


Brazil Power

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BMI View: , With the economy returning to growth in 2017 and the government committed to attracting investment in the power and renewables sectors, the Brazilian electricity market will offer opportunities to project developers and power sector investors. Wind, solar and natural gas will present the biggest potential to international investors, but we see opportunities also in power transmission and distribution via public tenders and the acquisition of local distribution companies. That said, weak power consumption and delays in project implementation due to high financing and import costs...

Brazil Real Estate

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BMI View: A redressing of the balance between supply and demand is characterising the real estate markets in Brazil in 2016, as large amounts of developments completed over the past years have resulted in over-supply. Therefore despite respectable demand, we do not see rental rates increasing over the coming year. We forecast transactional activity to pick up in 2017, off the back of the Olympic Year, which should see the nation's profile raise in time for new economic reform policy to be implemented, making Brazil a more attractive place in which to both invest and operate from.

With the economy headed towards recession, Brazil's property markets are under considerable pressure. We expect a rebound in the economy and the real estate sector to take hold from 2017 onwards. When the...

Brazil Renewables

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BMI View : As the wider economic downturn worsens, we expect growth in non-hydro renewables to decrease below previously forecast levels for 2015 and 2016. Although auctions in H215 showed stable interest, increasing obstacles such as high interest rates and a weakened currency have led us to further revise our already conservative overall estimates. Solar power has, nevertheless, experienced another upward revision for our long-run outlook; we now expect the sector to cross the 1GW capacity mark in 2017 - instead of...

Brazil Retail

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BMI View: A weakening labour market, elevated inflation and tightening credit conditions will to continue weigh on Brazilian retail sales over 2016, with the non-essentials segment suffering in particular. That said, the country remains the largest market in Latin America and we expect a more pronounced recovery in consumer sentiment from 2017 onwards.

Brazil's economy is poised to deteriorate even further in the coming months on the back of additional job losses and elevated inflation in 2016. Labour market rigidity had long precluded rises in unemployment; even as the economy began to weaken in 2014, unemployment remained below 5.0%. Since then, we have seen a considerable deterioration, with unemployment rising to nearly 8.0% as of October 2015. Moreover, the public sector has...

Brazil Telecommunications

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BMI View: We have made some minor downwards revisions to our Brazilian mobile market forecast in the Q416 report update. The revisions account for the negative growth in 2015 and H116. Furthermore, the challenging macroeconomic environment and the uncertain political outlook cast a long shadow over all sectors in Brazil, including telecommunications. Organic subscriber growth in the mobile sector will begin to taper off and 3G/4G adoption rates remain high, according to latest data from H116. We maintain that technological adoption will drive the mobile market forward. Nevertheless, ambitious national broadband expansion initiatives, plans to abolish the legacy geographic...

Brazil Tourism

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BMI View: This quarter will be key for Brazil's tourism market, as we expect the bulk of arrivals and receipts to be centred on the Rio Olympic Games in August. However, after this event we forecast a period of moderation for the industry, with a post-event lull combining with domestic economic weakness to lower demand and investment.

Key Forecasts (Brazil 2013-2020)
2013e 2014e ...

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 years...

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