Brazil in 2015
Published 5 January 2015
© Crown copyright 2015
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/brazil-in-2015/brazil-in-2015
0.1 Summary
Prospects for Brazil’s economy in 2015.. Growth forecast to be 0.5%, buffeted by US monetary tightening, Chinese slowdown and concerns about emerging markets. 2015 should bring necessary reforms and improved efficiency in public spending.
0.2 Detail
Economic performance
The federal government will have to cut spending for the first time in a decade.The Workers’ Party (PT) has been elected four times on a platform of social spending, but the budget surplus target has fallen from 4.5% of GDP in 2003 to 1.9% of GDP (missed) last year. Agencies have lowered Brazil’s credit ratings; S&P to one notch above junk.
With sluggish growth and inflation stuck around 6.5%, the government knows its economic model needs to change. President Dilma’s technocratic new team has already proposed reforms to unemployment benefit and pensions. The Government needs to promote social development and poverty reduction. That means less, spent better. The President emphasised education at her inauguration.
Tighter US monetary policy will increase financing costs. Low commodity prices and slower Chinese demand will undermine Brazil’s principal source of export earnings. A low global oil price will benefit consumers. Overall, the country is vulnerable to investors’ fears about emerging markets. Brazil’s stock exchange was the most volatile of the 20 tracked by Bloomberg in 2014; volatility will continue.
Petrobras
The scandal concerning Brazil’s state-run oil and gas company will dominate headlines. . This is an opportunity for Brazil’s institutions to demonstrate that they can tackle corruption, particularly the Supreme Court.
On the commercial side, Petrobras will issue contracts more slowly and with closer scrutiny. Petrobras suppliers and partners will find it harder to do business in 2015, although the country will benefit if tenders become more open in the long term.
Politics
Most of Brazil’s political and economic activity occurs outside the capital. Sao Paulo will run out of water in 2015, unless it rains much more than usual or people consume less. Rio will celebrate its 450th anniversary and look forward to the 2016 Games, while worrying about the effects of the Petrobras slump on employment and tax revenues.
A weak economy will hinder our exports but help Brazilian investment in the UK. Brazil remains interested in our science, our education and Olympic expertise.
0.3 Disclaimer
The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.