Brazil is one of the world’s largest food producer and exporter and the largest trading partner by value for Dubai and the UAE in Latin America.
Brazil has been passing through economic reforms and aims at opening its economy in the next years to global competition in order to attract investments, improve its logistics, gain productivity and get broader access to international markets through free-trade agreements.
Brazil experienced a period of economic and social progress between 2003 and 2014, when almost 30 million people left poverty and inequality declined significantly. The income level of the poorest 40% of the population increased by an average of 7.1% (in real terms) between 2003 and 2014, compared to a 4.4% increase in income for the population as a whole, creating a dynamic middle class with increasing purchasing power. With favorable global prices, Brazilian dynamic agribusiness sector managed to increase its productivity and gained important market-shares, becoming one of the top suppliers of products like soybean, sugar, poultry, beef, orange juice and so forth. Since 2015, however, the pace of poverty and inequality reduction has stagnated as the country faced one of the most severe economic recessions of its history, with its GDP plummeting 8.2% in 2014-2016 period and unemployment reaching 14%. After former President Dilma Rousseff’s impeachment on April 2016, Vice-President, Mr Michel Temer, took over, managed to dodge prosecution for corruption for two times and approved a 20-year spending ceiling to counter public deficit and a Labour Reform to reduce costs for businesses, which, among other things, ultimately led to low inflation and interest rate. On 2018, Jair Bolsonaro was elected to push for pro-business economic reforms, delivering a drop from 14% to 8% in unemployment, the privatization of the state electricity company, new regulatory frameworks for public sanitation and gas sectors. However, the government failed in properly address Covid-19 and fostered a radical ideological bigotry never seen before, and ended up facing a pandemic-induced recession in 2020 (-3.9% y/y). Only by 2021 the economy bounced back (+4.6% y/y), supported by the services sector. The sizeable countercyclical fiscal response implemented via social protection programs in 2020 mitigated the impact of the pandemic on poverty, but this also increased households’ dependence on public transfers and raised the primary deficit and the Government’s Gross Debt. The uneven labor market impacts increased preexisting vulnerability profiles as higher job losses were concentrated in low-skilled and highly insecure jobs, though Brazil’s labor market is displaying significant signs of recovery, with the unemployment rate reaching 8.9% as of September 2022.
In Brazil, structural bottlenecks led to a meagre GDP average growth (0.3%) over the last decade, despite favorable demographic conditions. Challenges include low productivity growth, a complex tax system and business environment, slow human capital accumulation, ineffective sectoral state intervention policies, low savings, and compression of public investment to accommodate higher current spending and increasing pension obligations. The COVID-19 pandemic gave Brazil one of the highest tolls globally in terms of lives lost, but a rapid vaccine rollout since mid-2021 is supporting a return to normality. As of September 2022, Brazil had applied the first dose of the vaccine to 85% of the population, and 80.5% of the population has a complete initial vaccination protocol. With a newly elected government, Brazil is facing the challenge of striking the right balance between protecting the poor and ensuring sustainable public finances, including at subnational levels.
Supporting the transition to a greener and more resilient growth model also remains a key challenge. Brazil is home to more than 60% of the Amazon rainforest, the largest tropical forest in the world and has a high share of renewables in its energy matrix, but high exposure to climate risks and deforestation call for a strong reform agenda to address these challenges.
Due to the increase in deforestation emissions, Brazil is not on track to meet its NDC targets (a reduction of GHG emissions of 37% by 2025 and 43% by 2030, relative to 2005) and has yet to develop an integrated long term national strategy to achieve its climate goals. Recent reforms in the infrastructure sector, together with the new administration’s renewed interest in the climate agenda, provide sound opportunities for Brazil’s green recovery and for lifting millions of Brazilians out of poverty.
All these challenges also offer business opportunities for international companies that are interested in navigating in a complex yet wealthy market of a continental country full of natural resources, land to explore in a sustainable way, a huge population open to new cultures, products and services and – a newly elected government that puts its focus on trade & investments as a tool to boost economic growth for the future.
Source: http://www.worldbank.org/en/country/brazil/overview and Dubai International Chamber – Brazil Office
Dubai and the UAE represent important gateway markets for Brazilian companies looking to expand into MENA region and Africa. As one of the world’s largest producer of agricultural commodities and with a dynamic manufacturing sector, Brazil offers a large market to explore (200-million people) and a supplier of quality products with a good cost-benefit.
In 2022, most of FDI assets in Brazil were allocated in sectors like:
- Oil & Gas
- Automotive
- Financial / Auxiliary Services
- Commerce
- Electricity
- Chemical products
- Pulp, paper & paper products
- ICT
High potential sectors for investments include:
- Agribusiness (commodities, slaughterhouses, farms, silos)
- Logistics & Infrastructure (concessions & privatization of ports, airports, roads, railroads)
- Tourism (beach resorts, mid-to-high end hotels)
- Sustainable Energy (wind & solar)
- Technology (fintech, agritech, healthtech)
Brazil is UAE’s largest partner in the Latin America region, and its 23rd global partner with a total bilateral trade value of USD 3.1b for 2021. Imports from Brazil reached USD 2.7b, and consisted of mainly of meat with a value of USD 860m, followed by gold and precious stones (USD 712m) and sugar (USD 315m). Exports to Brazil remain largely underdeveloped, with only USD 369m in 2021. They consisted of items such as machinery and electronics, aluminium and plastic articles. Opportunities for Dubai exporters include unwrought aluminum (HS:7601); aluminum waste/scrap (HS:7602); plates, sheets and strip (HS:7606); mineral or chemical fertilizers (HS:3105); glassware of a kind used for table, kitchen, indoor decoration (HS:7013); carboys/ bottles/ flasks/ jars (HS:7010); ethers (HS:2909); polymers of ethylene (HS:3901), and polymers of propylene (HS:3902); new pneumatic tires, of rubber (HS:4011).