Brazil proves tough nut to crack

Brazil can no longer depend on consumption-fuelled growth and must address the structural problems that led to stagflation and recent social discontent, according to Coface.

Further to the recent extensive coverage in the national media on these recent events in Brazil, Coface’s latest comprehensive Panorama Report looks at the difficulties faced by the world’s second largest emerging economy but finds some reasons for optimism for UK exporters.

Coface economists say that Brazil is in a paradoxical situation with the lowest growth rate of all the BRIC nations (less than three percent in 2013 against an average 4.8 percent for other emerging countries) and persistent inflation because of the increased operational costs associated with doing business in Brazil. They contend that the ‘Brazil cost’ that applies in areas such as labour, transport and energy is a heavy burden on industry and harming competitiveness.

Grant Williams, Risk Underwriting Director at Coface in the UK & Ireland says Coface has recorded a sharp rise in payment incidents involving Brazilian companies that have been adversely affected by slow growth and high interest rates and are having difficulty in paying their debts: “Despite this, Brazil remains a promising market for Britain and is our largest trading partner in Latin America. Brazilian companies benefit from the strong support of the Government and resilient demand from the middle class, particularly in two areas that are doing well: the automotive industry, where investments remain strong, and retail trade.

“Companies who want to explore opportunities in Brazil should take sensible precautions, including researching potential customers.”

Elsewhere, Euler Hermes has published its summer 2013 edition of ‘Intelligence’, with a lead article around the issue of examinerships as a corporate tool unique to Ireland whereby a company can petition the court for protection from creditors for a period of up to 100 days.