Brazil: Strengthening its Economic Backbone
by Steve Lescohier
Across Latin America's largest country, bulldozers are moving, tracks are being laid, roads are being graded, ports are being expanded and energy facilities are being built or improved. What has sparked this massive effort is a confluence of forces—political, economic and social—beginning around 1994. Estimates of the investment needed for planned infrastructure improvements and projects already underway are expected to exceed $500 billion by 2015. Government funding alone cannot support such a large infusion of capital. Private investment—both domestic and foreign—is therefore required. American businesses see the possibilities for investment and expansion in this booming culture and are eager to invest in this profitable market.
Measuring the size of the overall infrastructure development efforts provides a picture of the magnitude of potential opportunities in Brazil. A recent World Bank study of 155 countries' infrastructure improvement elevated Brazil's infrastructure investment ranking from 61st in 2007 to 41st in 2009. In addition, foreign direct investment (FDI) in Brazil more than doubled in five years, from $15.1 billion in 2005 to $48.5 billion in 2010.Footnote (Opens Overlay)
The factors influencing a massive investment in infrastructure are multifaceted:
- A period of political and fiscal stability dating back to the Plano Real in 1994 creating a positive environment for investment and development in many business sectors.
- The influx of foreign direct investment dollars for construction of factories, roads, rail lines and other infrastructure improvements to support business expansion.
- A general strengthening of the economy making funds available for investment and business growth.
- Burgeoning cities and industries requiring increasing amounts of energy.
- A growing middle class with disposable income to spend on consumer goods, leisure and recreation and housing, plus an expectation that they will have access to excellent transportation and plentiful energy.
- Increasing natural resources and agricultural production, making improved roads, railways, airports and seaports necessary to expedite the export of goods.
- Preparations for hosting both the 2014 World Cup and 2016 Summer Olympic Games, spurring extensive building of sports venues and upgrades to roads, rails, airports and metro subway facilities.
Opportunities abound for U.S. companies to feed the Brazilian economy's growing need for consumer goods, equipment and technology to assist in infrastructure improvement, programs to enhance the education of the workforce and the overall efforts to upgrade and fortify Brazil's economic backbone.
Read the full report (PDF) to understand the opportunities and challenges businesses may face when entering the Brazilian marketplace.
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