An exporter’s guide to Brazil as trade mission starts

Exporter’s Guide to the Brazilian Market: Enterprise Ireland Trade Mission

In light of the Enterprise Ireland Minister-led trade mission to Brazil starting today, Clear Currency provides an exporter’s guide to the market.

Brazil’s Growing Economy and Resilience

The Brazilian economy is now sixth largest in the world and showed a solid performance during the 2008 financial crisis.

Its strong and early recovery, including 2010 growth of 7.5pc, have contributed to the country’s transition from a regional to a global power. GDP growth is forecast to be 1.9pc in 2012 and 4pc in 2013.

Managing Currency Appreciation and Inflation

Concerns regarding global economic conditions drove the central bank to reduce interest rates to a record low of 7.5pc from 8pc to help kick-start the economy.

In recent years prolonged high interest rates have attracted foreign currency inflows that have driven up the value of the Real. However in an effort to limit the appreciation, the government had increased dollar reserves and introduced capital controls.

Unemployment rates are low at 5.3pc (as of August 2012), however due to a weakening global economy annual inflation fell below 5pc for the first time since 2010, close to the central bank’s target rate of 4.5pc.

Attractiveness to Foreign Investment

Brazil is generally open to and encourages foreign investment. It is the largest recipient of foreign direct investment (FDI) in Latin America, and the US is traditionally the top foreign investor in Brazil.

Since domestic savings are not sufficient to sustain long-term high growth rates, Brazil must continue to attract FDI, especially as the government plans to invest billions of dollars in off-shore oil, nuclear power, and other infrastructure sectors over the next few years.

Trade Statistics between Ireland and Brazil

According to the Central Statistics Office, exports between Ireland and Brazil amounted to €19m in July 2012, compared to €24m a year earlier, while imports climbed from €15m in July last year to €68m a year later.

Brazilian Real information and restrictions

  • Free-floating currency
  • Fully deliverable onshore but offshore trade are non-deliverable
  • Onshore market is liquid with daily spot turnover of USD5.6bn
  • Over the last decade the Central Bank and National Monetary council have been lifting restrictions on Foreign Exchange however in periods of strong appreciation they have stepped in, for example, in September 2011 authorities imposed a financial transactions tax on trades that increase long BRL positions via onshore derivatives.

More information on Clear Currency can be found here.

Sorcha Corcoran