Luis Henrique da Silveira, governor of the state of Santa Catarina, discusses the remarkable growth achieved by Brazil and the enormous potential that still lies ahead.
It's a whole new world in Brazil. Long gone are the days of hyper-inflation and economic instability. Today the most populous nation in South America is an economic dynamo, fueled by a new entrepreneurial spirit and strong demand from a burgeoning middle class. With vast natural resources, Brazil has achieved energy independence. On almost all global surveys, it is ranked as a high-opportunity country, sometimes on a par with China. In this panel, policy-makers, entrepreneurs and businesses leaders discussed the challenges and opportunities of investing in Brazil.
Luiz Henrique da Silveira, the governor of the State of Santa Catarina, began with a brief talk that heralded Brazil's successes of recent years, including its political reforms, higher quality of life, abundant natural resources and high human capital. "Brazil today is one of the most attractive countries for tourism and business," said the governor. Speaking specifically of Santa Catarina, he said that economic growth rates are higher than the national average, 50 ports are currently under construction, and the state open to new partnerships. "You are welcome in Santa Catarina," he told the audience. "I repeat, you are welcome."
Ana Vigon of AIG Capital Partners in São Paulo reiterated Brazil's positive attributes, citing controlled inflation, sustained external debt and higher consumption as a consequence of those political reforms and better management. There is a booming middle class, she said, as well as increased credit consumption and low unemployment. Sustainable growth is a result of not only commodities but also from domestic consumption, she said.
Vinicius Lummertz da Silva, the secretary of foreign affairs of Santa Catarina, said that as a consolidated democracy with a multiparty system, Brazil is situated for sustained growth. Brazil is much richer that China and India, he asserted, and has a growing internal market. He added that although government expenditures are high, at 30 percent, this spending has helped stabilize the economy and move people into the market.
"I am an unabashed supporter of Brazil," said Arthur Byrnes, of Deltec Asset Management. "But they have been lucky." Offshore oil discoveries, hydroelectric capabilities and vast resources have been economic drivers. Da Silva agreed, adding that that Brazil continues to be politically stabile, compared to some of its neighbors, and citing its lack of racial, religious and urban tensions.
When asked about the risks of investing in Brazil, Byrnes said politics do remain a concern for him. "The country's institutions aren't strong enough yet to stand a bad president," he said. Also mentioned were high taxes, corruption, poor infrastructure and red tape. Vigon cited the large number of ministries, higher government spending and the recent increase to 70,000 public servants.
"I think people start to differentiate countries now," she added, noting that the Brazil has not suffered from the negative perceptions associated with its neighbors. Despite this, she said, it is still a challenge to persuade American investors to enter Brazilian markets. "We have to explain how things are different in Brazil," she said. Da Silva added, "We can't expect (Venezuelan President Hugo)Chavez to exist in Brazil. The preconditions for someone like Chavez were gone a long time ago."
Byrnes also cautioned that contract laws are weak, but improving. "Brazilians are good at getting things done," he explained. "The free market has overhauled some of the old practices in a good way." He stressed the importance of investing in the middle class, and Vigon added that many opportunities exist in education because the president is supporting postgraduate education and people are looking to invest in that sector. She also added that the best-performing stocks last year were banking stocks.
"Brazil has the second-largest development bank in the world," said da Silva. "If we improve the regulatory system and bring in private equity, I think we are going to have large and sustainable growth."
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