ABOUT BRAZIL | SECTION 2
Bolsonaro’s Win Heralds a New Beginning and Prospects for Greater Economic Growth `
Selected Economic and Financial Indicators 2014 6,755.2 0.5%
2015 6,500.6 -3.8%
2016 6,266.9 -3.6%
2017 6,329.6 1.0%
2018F 6,424.5 1.5%
GDP Growth by Component Personal Consumption Business Fixed Investment Exports of Goods & Services Imports of Goods & Services Government Expenditures
2.3% -4.2% -1.1% -1.9% 0.8%
-3.9% -13.9% 6.3% -14.1% -1.1%
-4.2% -10.2% 1.9% -10.3% -0.6%
0.9% -1.9% 5.7% 5.5% -0.6%
2.3% 3.8% 3.3% 7.4% -0.2%
Industrial Production, Total Consumer Goods Capital Goods
-3.0% -2.3% -9.3%
-9.4% -10.5% -27.0%
-5.2% -4.4% -8.5%
2.5% 3.2% 6.0%
2.1% 3.3% 9.2%
Capacity Utilization: Manufacturing, %
81.1%
78.7%
77.0%
77.3%
77.9%
6.2%
11.3%
6.6%
3.0%
4.1%
92,004 1,372
92,216 212
90,539 -1,677
90,495 -44
91,800 1,305
Gross Domestic Product (bil. 2016 R$)
Consumer Prices (INPC) Employment, All Industries and Net change (thousands) Consumer Credit Outstanding and Net Change (billions)
R$ 758.9 R$ 792.9 R$ 802.3 R$ 823.4 R$ 887.0 R$ 42.9 R$ 34.0 R$ 9.4 R$ 21.1 R$ 63.6
Unemployment Rate
6.8%
8.3%
11.3%
12.7%
11.9%
Merchandise Exports (bil. US$ fob)
$225.1 -7.0%
$191.1 -15.1%
$185.3 -3.1%
$217.8 17.6%
$241.8 11.0%
Merchandise Imports (bil. US$ fob)
$229.1 -4.4%
$171.5 -25.2%
$137.6 -19.8%
$150.7 9.6%
$179.4 19.0%
($4.0)
$19.7
$47.7
$67.1
$62.4
2.35
3.34
3.48
3.19
3.72
11.6%
14.2%
13.7%
7.0%
6.5%
$97.18 39.5%
$74.72 -23.1%
$77.79 4.1%
$70.69 -9.1%
$65.00 -8.0%
$363.6
$356.5
$365.0
$374.0
$387.0
Trade Balance (bil. US$) R$/US$ Exchange Rate Interest Rates (SELIC, Effective Rate, year-end) Foreign Direct Investment, Net Inflows (bil. US$) International Reserves (bil. US$, year end)
Sources: Banco Central do Brasil; IBGE; Associação de Comércio Exterior; Confederação Nacional da Indústria; Comitê de Datação de Ciclos Econômicos; South Florida Economic Services LLC F=Forecast
22
B
razil’s US$3.2 trillion economy is the 8th largest in the world according to the IMF and the largest in Latin America, accounting for nearly 40 percent of the region’s economic output. The country is a magnet for international investment given its huge domestic market comprising nearly 210 million consumers, easy access to abundant raw materials, its economic diversification making it less vulnerable to international crises, and a strategic location that allows easy access to other South American countries. Geographically, Brazil is larger than the landmass of the contiguous United States, and borders every country of the South American continent except Ecuador and Chile. Defining the country’s geography are the Amazon Basin, a vast tropical rain forest; the Cerrado, a tropical savannah and Brazil’s main agricultural region; and the Brazilian highlands, a narrow strip of land between the mountains and the coast and home to the majority of the country’s population and economic activity. Brazil is the world’s largest producer of both sugar cane and soybeans, and the third largest of iron ore, which together form the pillars of Brazil’s commodity exports. It possesses the world’s 15th largest crude oil reserves and was the world’s 9th largest crude oil producer in 2017 at 3.1 million barrels per day. Brazil is also home to aviation giant Embraer, the third largest manufacturer of commercial aircraft in the world and one of the country’s most profitable exporters. Brazil’s São Paulo Stock Exchange ranks 19th in the world with over $US1 trillion in market capitalization while its benchmark Bovespa Index has been one of the world’s top performers over the past two years. Following a nearly three-year recession that ended in December 2016, Brazil embarked on an economic recovery at the beginning of 2017, but which has gained little momentum thus far in 2018. A combination of external forces – an investor retreat from emerging markets, global trade war fears, and a strong US dollar – combined with election year uncertainty, all signaled caution for Brazilian businesses and investors. This prompted some businesses to put their spending plans on hold while investors awaited clarity on the election outcome, both of which materially slowed the pace of the economic recovery. Additionally, over much of this year, rising interest rates and strong economic growth in the US funneled global investment away from emerging markets, including Brazil, and into dollar-denominated assets. Nevertheless, the upswing in Brazil’s economy has become more widespread this year with a modest resurgence in consumer spending and business investment. The acceleration in these sectors is being reinforced by falling interest rates, low inflation and a modest rebound in commodity prices. Lower interest rates in particular are underpinning consumer spending and fueling renewed demand for consumer credit. Industrial production is on an upward path, especially output of consumer durables, such as automobiles, and capital goods such as business equipment and industrial machinery. The current economic recovery is being further underpinned by the government’s pro-business reforms, especially labor reforms, which took effect late last year. The improved economic operating environment