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Brazil: awaiting reforms to return to the path of growth

Aitor Marieges, Relationship Manager of CaixaBank in Brasil

After more than two years living in Brazil, dealing with the challenge of opening the CaixaBank representation branch in Sao Paolo, I can state that the country is as exciting as it is complex and bureaucratic. Anybody considering a business or investment project here must see it as a long-term destination rather than a temporary experiment.

In 2017, the national economy grew by 0.9%, and for this year growth of 2.3% is expected

These figures contrast with declines of 3.8% and 3.6% in the two previous years. The forecast is for GDP to grow by an average of 2.4% until 2020. *

Social security reform is being negotiated between the political forces, but appears to be meeting with more obstacles than were initially expected. This situation led to the country's rating being downgraded to BB- due to the way the existing state pension system might affect the public coffers. **

In recent months, news in the country has been focused on the candidates for the presidential elections. The strongest candidate, Luis Inácio Lula da Silva, for whom 30% intend to vote according to opinion polls, faces a 12-year prison term over the Petrobras and Lava-Jato cases. The former president of Brazil could be blocked from standing in the elections, leaving the way clear to the other candidates.


In economic terms, the principal sectors of activity are agriculture, mining and transport, though Brazil has many attractions for investors. It is the country with the largest GDP in Latin America.

From a geographical point of view, there are three major centres of business activity: the states of Minas Gerais, Rio Grande do Sul and São Paulo. Of these, the last is the most important, accounting for a third of GDP. In any case, when talking about Brazil it should never be thought of as if it were a single market because, depending on the nature of the goods or services, different series of state regulations must be met, all of them obligatory.

Mention should also be made of the significant interests of Spanish firms in Brazil. Spain is the third-biggest investor in the country, only surpassed by the United States and the Netherlands. The strong point in relations between the two countries is direct investment, as firms like Telefónica, Abertis and Gas Natural are among the biggest investors in the country, but interests go far beyond this. In 2016, 5,800 Spanish companies exported to the Brazilian market, and the volume of trade between the two countries reached about 5,000 million euros. And the trend is only upwards. In the first half of 2017, this same figure has already passed 3,200 million, representing a 28% increase on the same period last year. ***

The current situation offers investment opportunities and is a good opportunity for Spanish businesses with the financial capacity to consider moving into this market.

However, anybody deciding to embark on this adventure needs good advice as, for all its attractions, Brazil remains characterised, at least in the short and medium term, by fiscal and bureaucratic complexity.


*CaixaBank Research

** Fitch

*** ICEX