Brazil: Macroeconomic Country Outlook
- GlobalData forecasts the GDP growth and household consumption expenditure growth to slow down to 1.2% and 3.2%, respectively, in 2022.
- Brazil was ranked 91st out of 136 nations in the GCRI Q4 2021.
- According to GlobalData, the total international tourist arrivals by air, land and sea in Brazil grew by 107.5% in 2021 and is forecast to grow by 61.5% in 2022.
PESTLE Summary
- Political: Improving international relations. The country is a part of the Organization of American States (OAS). Brazil is an active participant in international groups such as G20, the United Nations (UN), and World Trade Organization (WTO). The country was also a member of the UN Human Rights Council. Brazil guaranteed its seat for another mandate of three years on the UN Human Rights Council in election of the Human Rights Council, which was held in October 2019. In April 2021, Brazil, along with Argentina, Paraguay and Uruguay, signed the Mercosur Agreement on ECommerce, which will facilitate trade in goods and services through electronic means among countries of the bloc.
- Economic: Brazilian economic recovery remains prolonged. The Brazilian economy contracted by 4.1% in 2020 on the back of severe economic activity crunch in the first half of 2020. Although the government has taken steps to ease restrictions, resurgence in the number of cases in both domestic and international markets threaten recovery. The real GDP growth rate of Brazil expanded by 4.7% in 2021, according to GlobalData forecast. It is further forecast to rise by 1.2% in 2022 and 1.6% in 2023. The Central Bank of Brazil increased the policy rate (SELIC) to 9.3% in January 2022, from 7.8% in December 2021 to tame inflation, this may deter investors sentiment and slowdown growth.
- Social: Low gender equality in the country. According to the World Economic Forum’s Global Gender Gap Index – 2021, Brazil is ranked 93rd out of 156 countries, which is a lower rank compared to Argentina (35th), Peru (62nd), Bolivia (61st) and Chile (70th). Brazil needs to implement more policies to improve the economic participation of women in the country. The country was ranked 89th out of 156 countries in terms of economic participation and job opportunities in the Global Gender Gap Index – 2021. The low female labor force participation rate acts as an impediment to the overall growth of economy.
- Technology: Growing ICT sector. In November 2021, the country raised $8.5 billion in its 5G spectrum auction, according to the Brazilian government. The main mobile operators of the country, which include Vivo, Claro and TIM, Algar Telecom and Sercomtel secured 5G spectrum. In addition, new entrants that secured licenses in the auction are Winity II Telecom, Brisanet, Fly Link, Neko Serviços e Comunicações and Entertainment and Education, Consórcio 5G Sul and Cloud2U Indústria e Comércio de Equipamentos Eletrônicos. In December 2021, Algar Telecom launched the first commercial 5G network in the country with initial coverage reaching some 40 districts in Uberlandia, Uberaba and Sao Paulo. All the cities of the country are expected to get 5G network by July 2022. According to the Global Innovation Index 2021, Brazil was ranked 57th among 132 countries.
- Legal: Use of subsidized coal as an energy source. On December 13, 2021, the Senate of Brazil approved “just transition law”. In January 2022, according to the just energy transition law, the country announced to use subsidized coal as a source of energy until at least 2040. The objective of Brazil’s new law is to support nations, regions, industries, communities, workers along with consumers related to the coal industry. The extension of new law for next 18 years might keep Santa Catarina (due to three large coal plants in the state) state away from adoption of climate-friendly clean fuel benefits. Therefore, the law also introduced “just energy transition council” in order to shift Santa Catarina region away from coal.
- Environmental: Brazil continues to invest in renewable energy programs. According to the US Energy Information Administration, the country generated electricity from various renewable sources, which include hydropower (66%), wind and solar (11%), biomas (8%), fossil fuel-fired plants (12%) and nuclear power (2%) in 2020. In June 2021, the country started commercial operation of 716 MW Lagoa dos Ventos wind farm with an investment of $750 million. The farm consists of 230 wind turbines and will be able to generate over 3.3 TWh per year. According to the US Energy Information Administration, nuclear reactor, Angra-3 is under construction, expected to get operational between 2026 and 2027 with generation capacity of 1,340 MW. According to the government, renewable sources will account for most of the additionsto installed power capacity expansion by 2030.
Key Fundamentals
Macroeconomic Outlook
- Agriculture is one of the principal bases of the Brazilian economy. According to the OECD-FAO 2021–2030 Agricultural Outlook report, Brazil is expected to dominate the livestock production in the world. Brazil has prioritized sugarcane production within its borders under the Renovabio program. The higher production of sugarcane is expected to consolidate Brazil’s position in the ethanol markets.
- On March 12, 2021, the government approved emergency aid package of $8.0 billion in order to support the impacted sectors from COVID-19. As of January 2022, the government announced total COVID-19 stimulus packages of $244.0 billion since March 2020.
- In May 2021, the ministry of infrastructure of Brazil envisaged investing $40 million by the end of 2022 for the development and modernization of nation’s highways, railways and airports. The investment is expected to curb the soaring debt level and rising unemployment rate in the country.
- In April 2021, investors poured nearly $10 billion for various projects, which include 22 airports, five ports, a rail line linking the country’s east coast with the western agricultural interior along with road works. The investment will continue to attract international investors in Brazil.
GlobalData Country Risk Index (GCRI) - Q4 2021
Brazil was ranked 91st out of 136 nations in the GCRI Q4 2021. The country’s score is in the manageable-risk nations band (less than 50). Brazil’s overall risk score is higher than the Latin American countries and the world average in GCRI Q4 2021. The country had an overall score of 49.7 and performed well (compared to the Latin American average) in the political and environmental parameters. However, its risk score was relatively higher in macroeconomic, technology and legal parameters.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy and future expectations.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Latin American nations in this publication include Venezuela, Mexico, Ecuador, Peru, Colombia, Brazil, Argentina, and Chile.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Brazil PESTLE Insights - A Macroeconomic Outlook Report
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