Brazil: A Cautionary Note

“Curb Your Enthusiasm” is not just the title of a popular HBO television series but an astute advisory to those engaged in, or contemplating, trade, investment or commerce with Brazil. To be sure, Brazil continues to be the most attractive and “user-friendly” BRIC in which to do business. However, the irrational exuberance displayed by so many (those who have not lived or worked there) must be tempered by both macroeconomic and operational realities.

To begin with, Brazilian economic growth is heading downward. In the fourth quarter of 2011 Brazil’s economy dodged a recessionary bullet. Consumer spending cushioned a continued decline in manufacturing; and despite slowdowns in China and India, the demand for commodities also served so curtail a further slide in the Brazilian economy. Clearly, Brazil is not growing near its full potential, despite rising commodity prices and inflows of foreign direct investment. An overvalued currency has been a boon to importers, Brazilian consumers, services, restaurants, and Brazilian shoppers traveling abroad. (Retailers in Miami, New York, and Los Angeles surely believe now that Deus é um brasileiro…..or brasileira.)  However, the strong real is contributing to what many claim is the de-industrialization of Brazil, as local manufacturers of auto parts, apparel, textiles, and electronics are experiencing a competitiveness meltdown, as cheaper imports—and not just from China—eat into their customer base. The government is attempting to cushion the blow through program such as “Brasil Maior,” which offers a combination of tax cuts, financing, and trade-related measures to level the competitive playing field somewhat.

Read : “Brazil: A Cautionary Note” an article by Latin Business Chronicle

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