Ever since I was a child, l have heard that Brazil will be the country of the future. I am almost 32 now, so I have seen difficult periods in recent years, crises, controversial economic and political policies, and a tremendous inflation. In a child’s or a teenager’s perspective, such difficulties could be explained by the necessity of going to the supermarket once a month to buy as much food as families could stockpile. Food is just one simple example. During this period, I used six different currencies: the cruzeiro, cruzado, cruzado novo, cruzeiro, cruzeiro real and finally the real, on July 1, 2004.
I have to say that we have a different scenario now; and it really is getting better. Inflation has been controlled by government, poverty has been widely reduced, unemployment has diminished and a large middle class has been emerging, which has been driving consumption.
So my question is whether the country of the future is finally arriving, with Brazil becoming a prosperous country, with international influence and global respect. It seems we are getting there, and eyes from all over the world are focusing the country. It was very clear (read related story) during the Brasscom Global IT Forum, held last week by the Brazilian Association of Information Technology and Communication (Brasscom) at The Economist’s Brazil Summit.
The event mixed economical and ICT perspectives, with member from The Economist Intelligence Unit noting the opportunities Brazil has. In addition, Brasscom brought to the event a delegation of foreign enterprises, including major companies from the U.S., with the intent of showing them the potential of Brazil and its vendors.
Indeed, Brazil has been doing good work, and recent numbers can show that. However, during this conference, specialists said that Brazil’s performance this year would not match last year’s. “In 2010, Brazil had a phenomenal year, but the country will be lucky to do half that growth this year,” said Leo Abruzzese, global forecasting director at The Economist Intelligence Unit.
The slow growth will continue next year through many countries, including other emerging markets such as Russia, South Korea, Turkey and India, where industrial production is dropping. In addition, Abruzzese said, Europe will fall into a recession next year: “In the eurozone, the crisis has moved into a new and more dangerous phase. There is a 45% chance of eurozone breakup.”
However, there is a tremendous interest in Brazil, thanks to conditions in job creation, credit, investments and wage gains. In Abruzzese’s opinion, Brazilian growth in the short term will come in at about 3% to 3.5% this year and 2012, with an average closer to 4.5% to 5% in 2013-2014.
The Economist Intelligence Unit’s predictions are similar to those presented last month by Gustavo Loyola, a former president of Brazil’s central bank, during a SAP news conference. Brazilian GDP may increase at a rate of 3.3% to 3.6% between 2011 and 2013, Loyola said. During this period, the inflation might be stable at 6.6% to 6% and the unemployment rate is expected to decrease slightly to 6.2%.
“Brazil has good foundations, with a positive macroeconomic scenario. We have a solid financial service (with lower risks) and political and economic stability,” Loyola said. “However, it is still too much expensive to manufacture in Brazil.”
In fact, the big issue — one that could break Brazil’s growth — is related to costs. Dubbed “Custo Brasil” in Portuguese, it refers to the high operational costs associated with doing business in Brazil, which is more expensive compared with other nations because of excessive layers of bureaucracy, high tax burdens and expensive labor costs.
On the other hand, the Brazilian government has been making several changes to become more attractive for foreign investments, as well as incentive national manufacturing. “Brazil is prepared to do that, but we have issues to deal with,” said Antonio Carlos Gil, Brasscom’s executive president.
Related story
– Brazilian ICT market could reach $400 billion by 2022, Brasscom says, but country must improve its competitiveness
– Brazil: Challenges with data, opportunities on the worldwide stage
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