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Brazil Business Forecast Report Q1 2010

Published by: Business Monitor International

Published: Oct. 30, 2009 - 60 Pages


Table of Contents


Executive Summary
Emerging Stronger From The Crisis
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Meirelles To Greatly Enhance Rousseff’s Chances
We believe that a move into Brazil’s senate by central bank president Henrique Meirelles next year would potentially
set him up as a favourite running mate for Dilma Rousseff, President Lula’s handpicked successor.
Table: Political Overview
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
End Of The Recession, Keep An Eye On Inflation
Brazil’s recession is now behind us, and we have been particularly encouraged by the robust performance of private
consumption throughout the cyclical downturn.
Table: ECONOMIC ACTIVITY
Labour Market
Strong Labour Market To Underpin Recovery
Formal job creation has jumped back to pre-recession levels in August, in line with a strong recovery in industrial
capacity utilisation.
Monetary Policy
Inflation To Remain In BCB Comfort Zone
Brazil’s headline consumer price inflation continues to fall on the back of very low food and transport price growth.
Table: MONETARY POLICY
Balance Of Payments
EM Demand To Lead Export Growth
We revised up our 2009 trade surplus forecast to US$27.0bn from US$24.0bn, which takes our current account deficit
projection to just 0.9% of GDP, from 1.8% in 2008.
Table: CURRENT ACCOUNT
Investment Climate
Rio Olympic Win To Boost Investments
The successful bid to host the 2016 Olympic Games in Rio de Janeiro provides a unique opportunity for the Brazilian
authorities to attract investment into a wide range of sectors in the economy.
Chapter 3: 10-Year Forecast
The Brazilian Economy To 2019
What A New Government Can Bring
Vast natural resources, the emergence of an enormous consumer segment, and a prudent policy mix will keep investor
interest anchored to Brazil over the coming decade.
Table: Long -Term Macroeconomic Forecasts
Chapter 4: Special Report
The World’s Fiscal Conundrum
Table: WORLD GOVERNMENT EXPENDITURE INDICATORS
Table: WORLD GOVERNMENT REVENUE INDICATORS
Table: WORLD FISCAL BALANCE INDICATORS
Chapter 5: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Table: BMI Business And Operational Risk Ratings
Institutions
Table: BMI Legal Framewo rk Ratings
Infrastructure
Market Orientation
table: LATIN AMERICA, ANNUAL FDI INFLOWS
Table: BMI Trade Ratings
Operational Risk
Table: TOP EXPORT DESTINATIONS
Chapter 6: Key Sectors
Autos
Executive Summary
In 2009 the market continued to rally under the impact of the rescue package with total vehicle sales reaching
398,064 units, down by almost 9.8% y-o-y in the first two months of this year.
Table: Brazil Autos Sector — Histo rical Data & Forecasts
Shipping
Executive Summary
Recent data released for Brazil’s port throughput for January-June 2009 show a decline of 33% for the whole sector.
TABLE 1: MAJOR PORT DATA
Chapter 7: BMI Global Assumptions
Global Assumptions
TABLE: GLOBAL ASSUMPTIONS
TABLE: GLOBAL & REGIONAL REAL GDP GROWTH
Table: COMMODITY PRICES

Abstract

As Brazil emerges from recession and continues to see its investment climate boosted by growinglevels of global confidence - Brazil’s sovereign foreign currency debt now boasts investmentgrade from all three major ratings agencies - we examine how the economy will perform under thespotlight. Although many challenges remain, and look set to be inherited by a future administrationreplacing the government of President Luiz Inácio Lula da Silva in 2011, the still largely untappedeconomic potential is fast becoming the envy of emerging markets and G7 countries alike. As oneof the first economies to recover from the recession, global investors will be keen to enter thismarket, especially in view of the infrastructure upgrades required ahead of the FIFA World Cup in2014 and the Olympic Games in Rio de Janeiro in 2016.

With less than a year to go before Brazil’s general elections in October 2010, the race to replaceLuiz Inácio Lula da Silva is entering its final phase. Until now, Lula’s unshaken popularity has failedto rub off on his handpicked successor, Dilma Rousseff (the president’s chief of staff), and effortsare currently under way to leverage off the administration’s impressive economic credentials. Notsurprisingly, therefore, the person most directly linked to these achievements, Banco Central doBrasil (BCB) President Henrique Meirelles, is about to become the latest asset in Rousseff’s electioncampaign. The BCB president has announced plans to stand for governor of his home stateGoiás, and we believe that Meireilles could join Rousseff’s camp as a running mate in next year’spresidential race.

The release of Q209 real GDP data in Brazil confirmed our view that the economy is already ina robust recovery cycle, and that the technical recession was confined to Q408 and Q109. TheBrazilian economy expanded at a clip of 1.9% over the previous quarter in Q209, above the 1.7%anticipated by the market according to a Bloomberg survey. This marks a significant improvementover previous quarters, which saw real GDP drop by 1.0% in Q109 and a shocking 3.4% in Q408- a record contraction. On a year-on-year (y-o-y) basis, the economy contracted by 1.2%, againa more benign outcome than the market initially anticipated (1.4%).

The former Brazilian capital, Rio de Janeiro, has beaten contestants Chicago, Madrid and Tokyoto host the Olympic Games in 2016, following the International Olympic Committee (IOC)’s decisionon October 2. The announcement is certainly a major boost of confidence for Brazil, not leastbecause Rio will become the first South American city to ever host the Olympic Games. Thereis no shortage of symbolism here, as the Brazilian economy, emerging from years of chronichyperinflation, stagnant growth and underinvestment, has now become the envy of many G7 anddeveloping economies, posting one of the most robust economic recoveries following the deepestglobal economic downturn since the US Great Depression

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