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23/07/2013
Country risk

Brazil must address structural problems before it can return to the fast lane

Brazil must address structural problems before it can return to the fast lane

Coface economists say that Brazil is in a paradoxical situation with the lowest growth rate of all the BRIC nations (less than 3% in 2013 against an average 4.8% for other emerging countries) and persistent inflation because of the increased operational costs associated with doing business in Brazil. They contend that the ‘Brazil cost’ which applies in areas such as labour, transport and energy is a heavy burden on industry and harming competitiveness.

 

The Company’s Chief Economist, Yves Zlotowski, said: "The remedies for Brazilian stagflation are not to be found in economic policy but in education, health and infrastructure reforms. This is also in line with the demands coming from the middle class, which is no longer satisfied with mere consumerism. Even though President Dilma Rousseff claims that she is determined to respond to the situation, the results will only be seen in the long term."

 

Grant Williams, Risk Underwriting Director at Coface in the UK & Ireland added: “Coface has recorded a sharp rise in payment incidents involving Brazilian companies which have been adversely affected by slow growth and high interest rates and are having difficulty in paying their debts. Despite this, Brazil remains a promising market for Britain and is our largest trading partner in Latin America. Brazilian companies benefit from the strong support of the Government and resilient demand from the middle class, particularly in two areas that are doing well: the automotive industry, where investments remain strong, and retail trade”.

 

“Companies who want to explore opportunities in Brazil should take sensible precautions, including researching potential customers. Coface’s presence in Brazil means we have the expertise to advise UK exporters about the financial strength of potential trading partners in addition to providing credit insurance, business information and debt collection services”.

As well as detailed economic analysis Coface’s Panorama includes reports on key industry sectors: Chemicals, steel, automotive and retail sectors. It also features interviews with leading economists who give their insight into the current challenges facing Brazil: Cristiano Souza of Santander; Luiz Rabi of Serasa Experian; and Fernando Ferguieredo, Executive President of Abiquim, the Brazilian Chemical Industry Association.

Contact


Trevor BYRNE

Telephone:+44 (0)1923 478393
Email: trevor.byrne@coface.com

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