INVESTMENT IN BRAZIL

Investment in Brazil

Background of the economy

Brazil's GDP is about $2.5trillion and a population of 195m people. In terms of GDP and population Brazil is the 6th largest economy in the world and the largest economy in Latin America. Brazilian industry consists of 6% Agriculture, 25% manufacturing and 68% services (Country Watch, 2012). The long term credit ratings of the country are also stable. In the last decade more efforts were diverted towards securing a sustainable macroeconomic environment. Increased sustainability has lead to robust growth till 2010 which was 7.6%. However, recent economic conditions across the globe have deteriorated the growth. Brazil is expected to take-off in terms of growth at the rate of 5% in 2013. In the long term it is expected that Brazil will not be able to pace up with growth rate of 2013 and the average growth rate will hover around 3.9% from 2012 to 2013. The ongoing world economic crisis including Eurozone crisis has led to depreciation of Brazilian Real (BRL). This depreciation of currency has helped in boosting the exports of the locals due to cheap prices in international markets.(Oxford Economics, 2012)

Growth and other economic indicators

Brazilian economy was growing at rate of 7.6% till 2010 which then declined to 2.7% in 2011 1.5% in 2012. The forecast suggest that the economy will revive itself and the projected growth rate for 2013 is 3.8%. Mexican economy had grown at greater rate as compared to Brazilian economy in 2011 and 2012. The projected growth rate for Mexican economy is 4.1%. Both of these economies are emerging economies in Latin America and Caribbean region as expressed by IMF. IMF growth tracker displayed that Brazilian economy was contracting at an increasing rate in Jan 2009. However in 2010 the economy was above trend and rising. After below trend and moderating growth previously the economy showed below trend and rising growth in July 2012.

The GDP in 2012 is projected to be 1522 billion Real as compared to last year's 1460 Billion real. The projected GDP for 2013 is 1582 Billion and for 2014 is 1649 Billion real.

The growth in real GDP has declined in Latin America. The reason for the decline is mainly Brazil, due to its policy tightening to control inflationary pressures. The acceleration projected in emerging economies is mainly driven by China and Brazil. Both of the economies are easing the macroeconomic policies in order to stimulate the economic activities. The Brazil's fiscal policy is aimed for stimulating the demand of goods and services in the country.

Debt as a percentage of GDP in 2009 was 41% and then it continuously declined over the period.

In 2012 it was 33% and for 2013 it's projected that it will be 31%. Debt in terms of national currency increased throughout the tenure from 2009-2012. This reason for the increase is mainly because of reduction in GDP growth over the as compared to the growth of net debt.

Inflation in 2009 was ...