Brazil Country Market
Insights and Opportunities
The Federal Republic of Brazil is the largest country and economy in South America, with approximately 189 million inhabitants. With a total area that is just slightly smaller than the continental U.S., Brazil shares borders with every South American country except Chile and Ecuador. Brazil enjoys a growing middle class, increasing internal demand for goods and services, and while being affected by the global economic downturn, seems to be at least somewhat protected from the dramatic economic downturns experienced by many other countries.
Brazil’s GNP (purchasing power parity) reached a historical US$ 1.665 trillion in 2008, and per capita nominal GDP grew 5.1% to R$ 15,240, or roughly US$ 6,750. During the past decade, the country has maintained sound macroeconomic policies to control inflation without sacrificing economic growth. This kept the inflation rate to 5.8% in 2008, and unemployment at 7.89%, an overall decrease as formal jobs have replaced informal employment. Interest rates, though high compared to rest of the world, are near their historical low of the last decade at the Central Bank rate of 11.25% (March 2009).
In 2008, the bilateral trade relationship between Brazil and the U.S. hit record levels, reaching US$ 53 billion, with U.S. exports at US$ 25.6 billion, and imports from Brazil at US$ 27.4 billion. Other main trading partners are China, Argentina, and Germany. Strong global demand for commodities, along with prudent fiscal policies and a burgeoning middle class, helped fuel Brazil’s economic growth. On April 30, 2008 Brazil earned Standard & Poor’s Investment Grade credit rating.
Since the onset of the global financial crisis in September 2008, Brazil's currency and its stock market (Bovespa) have significantly lost value, having fallen by 41% in 2008. Brazil also incurred a current account deficit in 2008 as world demand and prices for commodities dropped in the second half of 2008. As of February 2009, the Brazilian Central Bank lowered ’09 growth expectations to 1.5%. In comparison, overall economic growth world-wide for 2009 is projected to be 0.5%. The Government of Brazil has reacted to the crisis by injecting liquidity into the market, using reserves to shore up the local currency (Real) and pledging to continue investing in its Growth Acceleration Program (PAC) for infrastructure (which has been slightly reduced to US$ 280 billion).