All signs from the latest news about the Brazilian economy point to a good start to the year. Employment has risen, inflation fallen and appetite for investment in Brazil from foreign entities continues to be high. Furthermore, Bloomberg claims Brazil will be “the real poster child of 2017”.
Brazil’s President Michel Temer believes he has reasons to be optimistic about the Brazilian economy over this year. Speaking to international analysts in mid-March, he underlined how his government policies were starting to bear fruit.
Employment in Brazil received a welcome boost in February when over 35,600 jobs were added to the payroll. The same month saw inflation rise by just 0.33%, the lowest amount for February since 2000. This latest rise brings the year-on-year increase in inflation to 4.76%, the lowest since September 2010.
Emerging market surge
These figures for the Brazilian economy came on the back of a surge in emerging markets. The influx of investor interest in emerging market assets and credit led to a sharp rise in the MSCI Emerging Market Index in mid-March bringing it to 14% above its 5-year average. Analysts attributed this to the uptick in the US economy and a softening of the US dollar after interest rate rises.
The latest Bloomberg consensus outlook places Brazil near the top of the chart along with Argentina and claims both economies are poised to move into expansion in 2017. The outlook predicts a 4.4% increase in year-on-year growth for Brazil during the year.
Investors bet on Brazilian economy
After a 3-year absence, initial public offerings (IPOs) are back on the cards for the Brazilian stock market. Analysts forecast at least 12 IPOs this year led by XP Investimentos, whose R$4 billion float on the stock market debut is backed by several international banks including JPMorgan and Morgan Stanley.
Other IPOs expected this year include Netshoes and the Brazilian airline Azul. The car rental company Movida and the healthcare Instituto Hermes Pardini have already started raising funds. Their combined amount of US$425 million is, according to the New York Times, the most since 2011.
Another sure indicator of renewed confidence in the Brazilian economy came in the recent announcement by American Airlines of investment to the tune of US$100 million in an aircraft maintenance centre in Sao Paulo. This will be the first such centre for the airline in South America. According to the Brazilian Investment Partnerships Minister Wellington Moreira Franco, the move shows that “the company believes Brazil’s market will go strongly”.
This opinion appears to be shared by investors in Brazilian airports. The auction held in March to grant operating rights to four Brazilian airports attracted almost double the minimum bids. The massive investor interest prompted Temer to call the auction an “absolute success”.
Analysts’ views on the Brazilian economy
The Bloomberg consensus outlook perhaps sums up investor sentiment on Brazil when it says “look to Brazil as the real poster child of 2017”. For Bloomberg, “Brazil is now benefiting from rising commodity prices as President Temer tries to shore up the country’s finances and boost private-sector activity”.
Another of the world’s leading economic analysts, The Economist, featured Brazil on its front cover in March. The issue for the magazine published on 16 March is titled “On the up” and Brazil is one of the seven rising economies.
Moody’s too appear to have confidence in Brazil. The ratings agency raised its expectations for Brazil in mid-March. The country received a Ba2 stable rating, up from negative.
“The Brazilian economy is certainly on the right track,” says Dies Poppeliers, Managing Director of BRIC Group. “Government reforms plus a solid consumer market auger well for 2017.”
An investment company specialising in global real estate opportunities, BRIC Group is currently developing The Coral resort, in Northeast Brazil, a luxury beachfront resort. BRIC Group also offers US real estate investments including turnkey properties in Florida and Houston, and land plots in Florida. BRIC Group has been creating wealth for its clients since 1996 and has offices in Brazil, Dubai (consulting office), Hungary, Spain and the US.
(Sources: Bloomberg, New York Times, Moody’s)