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Brazil Investment in Expansion Phase

Investment in Brazil is up. Quarterly growth in the Brazilian economy is up. And so are retail sales. Just-published statistics show that the last quarter of 2009 was an excellent one for Brazil.

The actual figures - recently released by Brazil's Statistical Agency (IBGE) - read as follows: 6.6% increase in investment in Brazil, 2% GDP growth and 7.7% rise in household consumption expenditure. And all three figures are remarkable.

The 6.6% increase in investment in Brazil (real estate, petroleum, mining, agriculture etc) during the last three months of last year is part of what the President of Brazil's Central Bank, Henrique Meirelles calls "a vigorous expansion phase". This expansion is reflected in industrial activity, which also rose significantly last quarter (4%).

The 2% growth in Brazil's GDP during Q4 2009 is, according to Bloomberg, the fastest economic expansion in two years. The continued trend of positive figures - Brazil's GDP grew from April to December last year - confirms that Brazil's economy is back on track for high growth. When the figures were released, Brazilian Finance Minister, Guido Mantega said "I can say today that the Brazilian economy has left the crisis behind".

On the back of the Q4 results, Roberto Padovani, senior strategist at WestLB do Brasil and quoted by Bloomberg, believes that this year "the Brazilian economy will have a strong first quarter". Many economic analysts are expecting four strong quarters - the Brazilian government is predicting over 5.7% this year with most other forecasts hovering between 5.5% and 6%.

The 7.2% increase in household consumption expenditure is the 25th consecutive quarterly rise in a row, a statistic few other countries can lay claim to. The continual rise in household spending is due to the constant rise in real salary volume and the greater availability of personal loans.

Linking to increased personal spending is the rise in retail sales. These grew by 2.7% in Q4 last year, an increase that took many analysts by surprise. While most expected a rise, few believed that the global economic climate would permit it to be over 1.5%. The 2.7% rise is the highest since retail sales tracking began in Brazil in 2000.

With the first quarter of 2010 almost over, Obelisk predicts that Brazil is well on its way to an excellent year. We firmly believe that Brazil will fulfill the predictions of at least 5.5% GDP growth because all the ingredients are in place - high investment levels, strong employment, a booming construction industry and two prime sporting events clearly visible on the horizon. All of which make for a very promising investment destination.

 

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