Angles on the Americas

South America’s thriving superpower

June 9, 2006

While Brazil may be better known for its famous beaches and world-class soccer, it is now emerging as an economic force in the world—buoyed by an economy poised for impressive growth.

“Brazil is evolving from an economy of production to an economy of consumption,” says Guillermo Rishchynski, Canada’s Ambassador to Brazil. As a result, Brazil has been identified as one of Canada’s three priority emerging markets, says Rishchynski.

Big market to tap

Some 45 million consumers and a highly developed industrial economy has resulted in strong export and import growth and a record goods trade surplus of some $50 billion, with goods and services accounting for some $41 billion of that surplus. Recently, Brazil has become energy self-sufficient in oil.

Potential is what makes this marketplace so special, says Rishchynski. “There have been many positive changes to Brazil’s economy in recent years,” he says, noting that the marked economic improvements are primarily due to the macro-economic policies of its government. “A solid and stable democracy has led to a functioning market economy. In fact, progress in economic reforms has been evident in bankruptcy legislation, anti-trust reinforcement, and in the public-private partnerships law designed to improve the country’s infrastructure.”

The numbers support Rishchynski’s optimism. Inflation is under control at 6.9%, the debt-to-GDP ratio has shrunk, foreign reserves have been built up and credit conditions are improving. Despite some domestic political concerns, Brazil’s “country risk” has been decreasing and is well on its way to attaining investment grade level. In 2005, Brazil ranked tenth as a destination for foreign direct investment—attracting over $17 billion—after France, the U.K., the U.S., Mexico, China, Hong Kong, Malaysia, Singapore and Russia.

Canada aims to double its exports to Brazil by 2010. Rishchynski says that a global commercial strategy is in the process of being finalized, one that identifies eight priority sectors: oil and gas, mining, information and communication technology (ICT), cultural industries, environment, forestry, agriculture and power. The strategy will focus on developing the full potential of Canadian small and medium-size enterprises in Brazil’s marketplace.

Taking the world stage

But when it comes to seeing potential in the Brazilian market, Canada is not alone. “The world has responded enthusiastically to the positive changes in Brazil,” says the ambassador. Mercosur—the Southern Common Market made up of Brazil, Argentina, Paraguay, and Uruguay—has made bilateral trade agreement overtures that have been warmly welcomed by other large markets and is actively negotiating agreements with the EU, India and South Africa.

Brazil, the world’s eleventh-largest economy, has also become a strategic player in international forums in addition to being the economic engine of South America and Mercosur. As a member of Mercosur, Brazil is part of the fifth-largest trade area in the world after the EU, NAFTA, EFTA and ASEAN. Brazil is also the G-20 lead for trade negotiations in the WTO.

With Brazil’s economy riding high, Ambassador Rishchynski stresses that there are a multitude of opportunities available to Canadian exporters who want to take their business to this dynamic market. “Now is the time for Canadian exporters to make their move.”