INVESTING IN BRAZIL
FOR THE FUTURE
General information and key figures
1. With the 9th World GDP, Brazil is still a giant with a huge market and a diversified economy.
Fifth country in the world by land area (8.5 million km²) and population (203 million inhabitants, 82% in urban areas), Brazil is an economic giant with the 9th World GDP (1770 billion USD in 2015 ).
Brazil remains a strong market with a middle class representing over 100 million, the result of a redistribution of political leadership under the presidency of Lula (2002-2010), during which 31 million Brazilians out of poverty.
Diversification of the economy remains a major asset of the country. The primary sector makes Brazil an agricultural giant, (6% of GDP in 2014) enabling it to be the 4th World agricultural exporter. The country remains the world's largest producer of coffee, orange juice, sugar, soybeans and 2nd of beef and poultry. Brazil is also the second largest exporter of mining products with abundant and diverse resources (iron, aluminum, precious metals ...) and according to the International Energy Agency, Brazil could become the sixth largest oil producer in 2035 ( potential of 6 million barrels / day).
Brazil also has a diversified industry (machine tools, energy, transport equipment, automotive, aerospace, electronics) whose flagships are Embraer (4th global aircraft manufacturer) and oil giant Petrobras and a modern service economy has also sectoral giants (in the banking, insurance, distribution or construction)
2. However, the country is in a deep economic crisis marked by two years of recession in 2015 and 2016.
After strong growth of 3.5% per year over 2003-2013, driven by a highly efficient primary sector and the expansion of domestic consumption, Brazil is in recession since late 2014 -the GDP fell 3.7% in 2015 and is expected to contract by the same amount in 2016. in addition, the real has lost more than 50% of its value in a year against major currencies. The economic downturn stems from a combination of factors:
Externally, the fall in commodity prices (soya, minerals, meat, oil) strongly penalized the country with over 50% of exports are agricultural and mineral raw materials, contributing to the contraction of the Brazilian Foreign Trade (a first trade deficit was recorded in 2014 and 2015 was marked by a 14% contraction in exports in value). The exhibition of Brazil to changes in Chinese demand, which accounts for 18% of Brazilian exports, reinforces this vulnerability. The impact of the oil price fall reflects negatively on the level and profitability of investments of Petrobras, particularly in the Pre-sal. Group debt reached, beginning in 2016, 127 billion USD while its revenues are in sharp decline and its market value has declined significantly.
Internally, the main drivers of growth have gradually éteints.L'investissement has dropped nearly 15% in 2015 as a result of acute crises, related to the case of the "Lava Jato" sectors construction and energy (Petrobras was forced to reduce its investments by 40%) but also a marked environmental degradation macroéconomique.La resurgence of inflationary pressures (6.5% in 2014 and 10.7 % in 2015) has led the Central Bank to operate a net tightening of monetary policy (interest rate at 14.25% in early 2016) penalizing investment, as well as the increase in tax row with the lack of control of accounts public (see below). In this context, some sectors such as industry (industrial production drop of 8% in 2015), already penalized by the traditional elements of the "Brazil cost" (taxation, bureaucracy, quality of infrastructure and manpower ) suffer particularly, amid sluggish domestic demand.
For similar reasons, household consumption, the main engine of growth, lost steam due to the high cost of credit, reduced purchasing power and rising unemployment, the rate has doubled in one year, from 4.3% end of 2014 to 6.9% of the active population end 2015. the banking sector, exposed to household indebtedness, restricted its credit supply due to the increase in non-performing loans that limiting the recovery in consumption. In 2016, however inflation should recede while remaining above the upper target of 6.5% due to the inertia of indexation mechanisms of the Brazilian economy.
3. Public finances are in a critical situation, in connection with the political crisis.
The year 2015 resulted with a record deficit of 10.2% of GDP (1.9% primary deficit) and soaring debt to 65.1% of GDP (57% of GDP against a year before). This fiscal slippage earned Brazil to be degraded to "speculative grade" by two major rating agencies end of 2015. Several factors explain this change: falling tax revenues in a context of recession (-6% of tax revenues 2015), rigidity and structural upward dynamics of public spending and the level of expenses related to the cost of debt interest, which account for over 8% of GDP. In this context, public banks, including BNDES, which historically finance the economy at subsidized rates, reduce the wing not to aggravate the budget deficit, obérant any revival of short-term investment policy.
If fiscal consolidation is still necessary, it is conditioned to the evolution of the political situation. In 2016, an adjustment of 100 billion BRL is expected thanks to a capital repatriation law held in tax havens, the potential reintroduction of a tax on financial transactions, a reform of the tax on industrial products (IPI ) and the end of certain sectoral tax exemptions. The effective implementation of these reforms, however, requires an improvement in the political climate, whose instability is now the main reason of country risk, because of recurring tensions between the executive and Congress.
Some indicators, however, remain more reassuring: the debt is 75% owned by résidentsce which limits the risk of external debt, and the level of foreign reserves remains therefore to 369 billion USD, allowing the Central Bank to manage risk exchange.
4. The bilateral economic relationship remains strong in trade and investment.
France and Brazil maintains particularly old and dense economic relations. France remains the fifth investor in stock in Brazil with 37 billion USD invested. In 2015, while Brazil remained the 5th global destination for FDI (62 billion USD received in 2015), the French FDI flows accounted for 2.8 billion USD, ranking France 7th among investors. French companies have 850 subsidiaries in Brazil, employing around 500 000 people in a diverse number of sectors: distribution, automotive, aerospace, building materials, oil and renewable energies, cosmetics, hotels, banking, food processing etc.
Trade amounted to USD 6.6 billion in 2015 against USD 8.7 billion in 2014, down 20%, directly related to the recession. In detail, France is the 9efournisseur Brazil with 4.4 billion USD from exports in 2015, and his client 21st with Brazilian imports into France of 2.2 billion USD. The share of France market was 2.5% (2.7% in 2014) and the trade surplus reached 2.2 billion USD in 2015 (2.8 billion USD in 2014). The structure of French exports is mainly composed of transport equipment (30%), mechanical equipment and electronics (23%) and chemicals (17%), whereas Brazilian exports to France are largely made products primary: soybean complex (35%), minerals (15%) and the wood complex (10%).
-INVESTING IN INNOVATION-
SERVICE TAX EXEMPTION
How to make a tax saving by investing in Brazil?
Why conduct an audit to identify opportunities to invest in Brazil in accordance with your financial situation?
How défiscaliser intelligently?
wealth management professionals keep repeating it: investing in the only concern to reduce taxes is a miscalculation. Smart tax exemption allows a tax savings while increasing investment performance.
Through financial and tax audit, Brazil Partner enables its customers to identify the best investment options in Brazil in accordance with their cash and their financial situation.
This process will achieve great tax savings by implementing various corresponding custom actions to the needs of each.
This solution allows all natural or legal persons having a tax burden to position themselves in different types of investment by achieving tax savings while increasing the performance of their investments.
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