Economy

According to the Inter-American Development Bank, Over the last two decades, Brazil overcame a long period of inflation and implemented an effective macroeconomic management framework, based on fiscal responsibility and clear rules governing the relationships among the different levels of government, and on an inflation-targeting regime with a floating exchange rate. Poverty reduction policies, particularly the Bolsa Família program (PBF), have achieved significant results, lifting about 28 million Brazilians out of poverty and reducing the Gini income distribution coefficient from 0.59 to 0.54 between 2002 and 2009. In that period, economic growth attained a higher level (4.4% per year on average between 2004 and 2010), after over two decades of sluggish growth. With the international crisis of 2008-2009, the economy decelerated for two quarters, before recovering rapidly on the back of countercyclical policies, including a strong expansion of public credit. Inflationary pressures started to build as economic activity gathered pace, and this was aggravated by supply shocks and a readjustment in monitored prices in late 2010 and the first half of 2011. Since August 2011, the deteriorating global economic scenario has helped moderate inflationary expectations and led the central bank to embark on a new cycle of cuts in its base interest rate. For Brazil to take advantage of existing opportunities and continue the virtuous development of the last few years, many challenges need to be overcome. The level of infrastructure investment—which exhibits major deficits in the areas of transportation, logistics, energy, and sanitation, affecting the productivity of the economy as a whole—needs to continue rising on a sustainable basis, with greater private sector involvement, while also making it possible to strengthen regional integration. Long-term financing for public and private sector investments remains a problem to be resolved, along with the strengthening of an agenda to improve the business climate, productive and industrial development, promotion of science, technology, and innovation (ST&I), and an expansion of access to credit by micro, small, and medium-sized enterprises (MSMEs).

The Brazilian Capital Goods Market: Recent Development and Future Prospects

April 29, 2013 |

ABIMAQ | Brazil | Capital Goods | Process Equipment Manufacturers Association

Brazil is undergoing a rapid transformation from inward oriented national development to a fully globalized political economy whose government is quickly learning how to craft public policies to guarantee economic stability, growth, and an ever increasing list of private sector opportunities. Brazil still faces significant challenges, including stagflation (slow growth with inflation), but the current governing coalition is committed to a sustainable set of heterodox measures to further liberalize the economy while providing significant public investment, especially in energy and infrastructure, to insure continued growth in the coming years. This favorable scenario provides ample opportunities for United States headquartered capital goods manufacturers to increase exports to Brazil, increase investments in Brazilian manufacturing, and deepen and develop strategic partnerships with Brazilian firms and producer associations. These opportunities come with significant challenges; therefore U.S. firms and investors must carefully identify and assess an expanding list of opportunities as well as a resilient set of institutional obstacles, weighing present market conditions with sensible forecasts of future possibilities.

For more information and analysis on Brazil’s capital good marketplace and its import opportunities, read BrazilWorks briefing paper,

The Brazilian Capital Goods Market: Recent Development and Future Prospects here.

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