Economic rise of Brazil and segmentation of investment opportunities

Brazil has lived a unique economic situation in the past decades, after an economic boom at the end of the sixties and beginning of seventies (known as the economic miracle), when the country passed from an agricultural based economy to an industrial based economy. Such transformation and growth came with high inflation rates, and after the first and second oil crisis the country over went great period of stagnation at high inflation rates until the nineties, when many economic reforms brought inflation control and market opening.

Around 2000, Brazil started to grow more vigorously, maintaining its inflation rate under control. This scenario allowed the country to receive considerably economic indicators, such as the reduction of poverty of its population from 35.2% to 21.4%. Millions of people rose to middle class, creating with this a rise in consumption of goods as the primary factor of stimulation to the country’s growth, minimizing the impact of financial crisis from the developed world in its economy and, according to data published by the World Bank, managing to achieve economic growth at the rate of 7.49% in 2010.

Along with the economic growth and rise of the population to middle class, Brazil diversified its trading partners, establishing significant commercial relations in the Middle East and Asia, lessening its dependence on the US and European markets, and limiting the impacts of international crisis in its own economy.

Another relevant factor of today’s growing interest from international players in the Brazilian market is the upcoming international events to be hosted in the country such as the 2014 Worlds Cup and 2016 Olympic Games, attracting considerate investments, improvement in its infrastructure, stimulating economic dynamics and opening doors to international tourism. Such scenario brought many opportunities for entrepreneurs in many sectors. We have listed below the most significant ones:

Sectors connected to domestic consumption
Because of growing purchasing power and easier access to credit, Brazil shows higher consumption indicators and so increasing opportunities in retail.

Infrastructure, logistics and telecommunications
With growth of exports and of its economy, new opportunities are found in the concession of roadways, public transportation, and distribution logistics such as with current expansion and consolidation of national railroad systems in response to the need of transporting growing internal production from rural areas to cities and ports. Also, because of upcoming international events such as 2014 World Cup and 2016 Olympic Games, and also growing digital inclusion of lower income population, investment opportunities for expansion and implementation of necessary telecommunications infrastructure for growing access to broadband networks.

Renewable energy technology
Brazil is known for its majorly clean energy matrix due to favorable natural conditions for hydroelectric generation. However, in order to expand and diversify its energy matrix and technical capacity, recent public policies and governmental funding programs have stimulated market development for other renewable energy technology such as thermal and wind for the past decades and currently extending its policies to stimulate solar and ocean technology development.

Heavy machinery for manufacturing and civil construction
With easier access to credit and governmental incentives for industrial production and value-added exports, manufacturing units are increasingly undergoing infrastructural and technology improvements such as incrementing production growth through modernization of manufacturing facilities and expansion of production capacity. Much of current demand for heavy industrial machinery is being met with imports, because of scarce in-country machinery production.

Agribusiness
As world population grows especially in Asian countries such as China, incapable of meeting its internal food demand, and also considering the Brazilian historical capacity for agricultural production and commodities exporting, business opportunities in the food supply chain are found today with less technical barriers like the ones seen in European and North American markets. Also, ethanol production is attracting increasing investments because of current growth in the use of biofuels in Brazil and in the developed world, as it lowers the dependency of such countries in the oil industry.

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