Doing business in Brazil and the current scenario

I was reading some posts and news about the current crisis and diverse opinions about possible turnarounds, about the consequences in developing countries, some trends and forecasts, different perspectives and evaluations and the usually wizards’ visions of future, some with the Armageddon perspective and others with an optimistic vision of short-time crisis.

What make me develop this article was to contradict the people that suggest the worst scenario for our future.

I will confine my comments to the Brazilian macroeconomic environment. I will also not get into the current stage of development of the business and social environment in Brazil, because to really understand it, one needs to come here, especially to Sao Paulo, to see, feel and negotiate.

With around 20 million people living here, Sao Paulo has one of the most sophisticated gastronomy worldwide, shopping centres, theatres, infrastructure and business centres with the same sophistication as in any top capital of Europe or USA. Obviously, it has also serious problems with security, identical to any large city, New York, London or Paris.

We have global companies like Vale do Rio Doce, a mining company, operating in five continents and with more then 100 thousand employees, we have Embraer that is one of the largest aircraft manufacturers with more than 20 thousand collaborators, and here we can also find almost all of the transnational companies and banks as Santander, HSBC, Citi, J. P. Morgan, UBS, Siemens, Bosch, Mercedes, Mittal, Telefonica, TIM, Telmex, IBM, Microsoft, HP, Dell, Google, Samsung, Motorola, and so on.

Despite the predictions of bad times for developing countries, and before give some important figures about Brazil, I would like to suggest, that before assuming as a truth any opinion or prediction, to check the source of information and if there isn’t any other interest of the writer. Example: If it isn’t connected with any investment fund.

So, the sources of information that I will use are from Brazilian government finance minister and central bank.

Brazil had, from 2004 to 2008, a sustainable average economic growth rate of 5%.

The Public Sector Net Debt is 38% of GDP.

It has around 200 billion dollars in international reserves.

The crisis impact on Brazilian car manufacturers’ production in January 2009, related to January 2008, was -8%, in USA -36%, Japan -19%, Germany -14%, Italy -32%, Mexico -28%.

Brazil is not a very open market so the exportation represents only around 14% of the GDP and the universe of customers are not only in developed countries.

The currency is stable, despite recent events, it sustains its value and the inflation is estimated at level of 4.5% in 2009.

The internal market maintains a good level of consumer confidence and the demand did not diminish to the extent it did in the developed countries. Industrial activity in January 2009 already reflects improvement in some sectors.

The Brazilian Central Bank is still working with a prospective GDP growth rate of 3% in 2009 and the private banking system is working with a 1.5% growth rate.

According to the Basel rules about security assets’ level of the banking system, the suggested level is 11%, in Brazil the average is 14%.

We could continue with more figures, to demonstrate that in Brazil the economic environment is controlled, but the already exposed figures give a perspective of a balanced situation. Obviously the crisis has arrived here, but the shock wave is mitigated and the consequence will be far from dramatic as in developed countries or in economies structured to supply services, commodities or products that don’t have a strong internal market.