Brazil: economy in a corner?

This was the topic for a conference organised by the MEB and JCEM at the Automobile Club, in partnership with Monaco Asset Management: an opportunity for 70 entrepreneurs to better understand their prospects in Latin America’s largest economy.

Invited for the third year running to the Principality, Ludovic Subran, Chief Economist and Director of Economic Research at the Euler-Hermès Group, painted a rather gloomy picture of the situation in Brazil, while intimating that a brighter future lies ahead in the mid-term and even opportunities in the short-term.

Faced with its worst economic crisis in ten years, Brazil is struggling: lower commodity prices and slowing economies in key partner countries have hit exports, and its currency continues to depreciate. The labour market is deteriorating and demand has fallen. Businesses are suffering, banks have tightened up on lending and capital inflows are becoming scarce.

According to Ludovic Subran, poor allocation of the country’s resources, the high cost of living for companies and a “flawed” business environment, particularly the level of protectionism, are key concerns. However, there are some sound fundamentals holding it up including a better mix of macro-economic policies, a big reduction in poverty and improving social indicators. With 17 months of foreign reserve funds, Brazil’s financial position remains quite robust. And lastly, global companies are setting up shop to diversify their sources of finance.

To succeed the country must now develop its diverse infrastructural needs, maximise the potential of its oil and metal reserves, exploit its knowhow in agriculture and the food industry, and take advantage of an expanded middle class from the last ten years, by focusing on services that Brazil can also export, particularly to Latin American countries. For the attentive audience, there are clearly some interesting openings to be found in this country.

Ludovic Subran’s talk was given an enthusiastic reception by all those present whose questions took the event over the time limit. Delegates were mainly from the insurance, banking/finance, real estate and international trade sectors. In other words it was a very successful evening, with MEB Chairman Michel Dotta and JCEM President David Sirour already agreeing to invite Mr Subran to speak on another topic next year to shed more light on the country before the MEB’s next outing.

Indeed the Monaco Economic Board’s trade mission to Sao Paulo is scheduled for 2 to 5 April 2016. For MEB Chairman Michel Dotta: “This destination, that our members have requested for a long time now, promises to be particularly rewarding. The situation is difficult but that probably offers some good opportunities for our companies, some of whom are already established there.” SBM Offshore, a fine example of a Monegasque success story in the oil sector, has a significant share of its business in Brazil with a Regional Centre in Rio de Janeiro, three bases, six FPSO (Floating Production Storage and Offloading) vessels in operation and two FPSOs under construction in the Rio shipyard. For its part, the conference’s partner Monaco Asset Management is associated with Brasilinvest via its joint subsidiary Brasilinvest Monaco SAM.