Forestry Investment Blog

Brazil has been attracting a lot of attention lately from major multinationals who want to ride the wave of Brazil’s economic boom that has been fuelled by oil and agriculture. They are attracted to Brazil’s stable, growing, middle-class and increasingly IT-literate workforce.

Still it did come as a surprise when Goldman Sachs introduced Brazil into the collective of Russia, India and China to form the BRIC economic opportunity. Unlike the others in this collective Brazil has had steady economic growth especially when compared to China’s stratospheric growth. But what gives Brazil the advantage over the rest is its progressively increasing population of middle income families, a (now) stable political environment and a gateway to the Latin world. On top of this Brazil has a booming oil industry as well as substantial mineral and agricultural resources so it is not hard to see why Brazil is favoured by expanding international companies.

By 2050 Goldman Sachs predicted that the BRIC economies would be worth more than the original G6 (US, Japan, Germany, UK, France and Italy) combined. It should be noted that when this prediction was made the oil, mineral and agricultural resources in Brazil were not apparent. The implications of this, I believe, are obvious.

In 2007 foreign direct investment in Brazil came to approximately nearly $35 billion, according to The Economist. According to the Brazilian agriculture ministry half of the country’s exports come from agriculture and Brazil is a major exporter, with some $150 billion in exports, which is a third more than it imports.

But it wasn’t until recently that Brazil really came into its own. As the world’s fifth largest country with 190 million people, Brazil was very poor until the last quarter of the 20^th century where it went through rapid economic growth. Financed in the main by debt this was put paid to by the recession and rising inflation.

Now Brazil is riding an oil wave of economic growth with the discovery of huge Tupi oil fields, which have transformed Brazil into an oil superpower. Petrobras, the state controlled oil company has recorded record oil prices and is expected to bring windfall profits to the Brazilian treasury. The Brazilian President Lula has promised that profits from the new reserves will be invested in the eradication of poverty and education.

According to the Bloomberg news agency, President Lula stated: “We’ll turn perishable wealth, such as oil and gas, into a permanent source of wealth for the Brazilian people.”

In 2006 a quarter of Brazilians lived in poverty according to the Institute of Applied Economics Research in Brasilia.
“Our economy is growing at over 5% a year and is predicted to continue at this rate until at least 2011. But you cannot put this down to oil alone. Our economy is sustainable, inflation is low and the internal market is growing at a healthy rate,” explains Mauro Cruzeiro, Country Manager for Orange Business Services. “Every year we see more multinational companies coming to Brazil for its business opportunities and because it can be a gateway to the rest of Latin America.”

Beyond oil and crops, Brazil is developing a niche as a source of offshore application development and customer service. “Many U.S. companies like being in the same or similar time zone, and we have a lot of skilled IT staff here,” explains Cruzeiro. “English is taught in all schools and, since the 1990s, it’s been common to learn Spanish as well, so we’re seeing lots of off-shoring coming to Brazil.”

For more information on investing in Brazil please click here

This entry was posted on Thursday, May 6th, 2010 at 2:35 PM and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.