Businesses Charge towards Brazil Despite Inflation Fears
Global Financial Consultants Forecast an Increase in Transaction Activity in Brazil in the Coming Year
Almost 85 percent of U.S. business executives expect the level of inflation in Brazil to increase in the coming year, according to a new survey of over 500 global financial consultants conducted online by Merrill DataSite®, the leading provider of virtual data room (VDR) solutions for business communication and information management. Nonetheless, nearly 75 percent add that they expect their company to boost its level of activity in Brazil over the next 12 months. Currently, the inflation rate in Brazil is 6.5 percent*, up from 5.91 percent in 2010.
“While companies across the globe are eager to conduct business in Brazil, it is clear that they will have to overcome the hurdle of rising inflation rates in this emerging market,” commented Richard A. Martin Jr., Senior Director of Merrill DataSite. “Despite genuine fears about inflation and the country’s ability to accurately evaluate opportunity, businesses are still setting their sights on Brazil and its assets.”
The survey also revealed that almost half of respondents think that the greatest risk in doing business in Brazil is their inability to conduct proper due diligence there. Another 15 percent of the respondents say currency fluctuations are a bigger concern.
”Tax and regulatory constraints are the biggest hurdles facing investors doing deals in Brazil,” according to the webinar participant Daniel Calhman De Miranda, Partner at Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados. “These issues can be mitigated by having a management team on the ground in Brazil that understands the local business environment.”
Over half (53.3 percent) of the same respondents believe that over the next 12 months activity in Brazil will be slightly, or greatly weighted towards greater importing, with almost one third (32.5 and 32.8 percent, respectively) of respondents expecting the highest levels of growth in Brazil to be in construction and infrastructure or in the natural resources, energy and agriculture industries.
“There has been a significant increase in the amount of inbound foreign investment in Brazil,” commented another webinar participant Maurice Blanco, Partner Davis Polk & Wardwell LLP. “Natural resources are dominating the deal-making market in Brazil, with the oil and gas sector proving especially strong.”
“Brazil has successfully endured the financial crisis; the economic strength of this country is no longer a question” commented the third webinar speaker Jankiel Santos, Chief Economist, BES Investimento do Brasil. “The country’s high level of both imports and exports will curb inflation in the coming months as well as create a competitive marketplace in which Brazil will have a lasting presence.”
Responses were drawn from survey questions posed during a worldwide webinar on May 19th, 2011 called, “Brazil: A Case Study of Exponential Economic Growth Domestically and Internationally.” Click here to access the recorded session.
*Source: Bloomberg News
