5 May 2009
Brazil has untapped opportunity for UK
A new report commissioned by the City of London Corporation
finds that Brazil offers substantial opportunities for UK financial
services firms. ‘The Challenges and Opportunities for Financial
Services in Brazil’ assesses Brazil’s economic prospects, focusing
on developments and threats in six key areas: banking and capital
markets; consumer finance; insurance and reinsurance; energy
infrastructure and project finance; agribusiness and biofuels.
The research, conducted by Trusted Sources, is published to
coincide with a visit to Brazil and Argentina by a delegation led
by the Lord Mayor of the City of London. It finds that whilst some
short term risks exist as export flows and commodities remain
vulnerable in the current crisis, Brazil is in an excellent
position to emerge from the global recession earlier and stronger
than many other countries. The report finds that despite its
prominence on the global stage Brazil has not received the
attention it deserves from UK companies. There is also evidence
that Brazilian economic players consider that reinforcing London’s
historical ties with Latin America, and with Brazil specifically,
would bring substantial mutual benefits.
Lord Mayor of the City of London, Ian Luder said:
- "This is the first report we have ever commissioned
specifically into Brazil's economy as seen globally. It finds that
the UK and Brazil have many areas of common interest where further
collaboration could bring real benefits from commercial links, and
we are well placed to develop these. Brazil is a global powerhouse
that has seen and will see a rapid pace of development, so for the
canny practitioner the opportunities are boundless.”
Brazil’s fiscal problems during the nineties generated a
response by the Central Bank that laid the foundations for a
banking sector which remains largely unaffected by the global
financial crisis. Its banks have strong capitalisation and avoided
heavy exposure to the toxic assets that have affected many banks
globally.
The outlook for capital markets and consumer finance looks
particularly promising due to the burgeoning middle class and
demographic profile. The Brazilian middle class now accounts for a
small majority of the population, up from around a third fifteen
years ago, which has boosted sales of consumer goods and the rapid
expansion of consumer credit. In addition, the proportion of the
population under the age of 14 (27%) is high in comparison with the
UK (17%) and should underpin the country’s economic growth, by
keeping labour costs relatively low and encouraging innovation. But
more importantly it will also fuel the ongoing development of
Brazil’s consumer credit markets as 34 million people enter the
workforce over the next decade. Retail banking expansion will be
rapid, sustained by mortgage and consumer-durable financing and
growing penetration of credit and debit cards.
Brazilian energy and infrastructure as well as new oil and gas
discoveries require major new investments from global energy and
financial firms in order to sustain continued economic growth. The
experience of British firms with public private partnerships could
prove invaluable in structuring these infrastructure projects and
Brazilian banks, which have a limited presence today in the City of
London, will be positioning themselves to facilitate the
involvement of UK investors in projects coming to market over the
next decade.
The Brazilian insurance industry has expanded rapidly over the
past decade and looks set to continue. The domestic industry is
well capitalised and able to support growth in traditional product
segments but development of large scale energy and infrastructure
projects in the medium term will drive rapid growth in new
insurance coverage. They will require the sophisticated insurance
and reinsurance solutions that UK firms are competitively
well-positioned to offer.
With Brazil strengthening its lead as one of the world’s
agricultural powerhouses agricultural producers have a growing
interest in trade financing and M&A advisory services. It also
has the largest, most successful ethanol industry in the world and
hopes to become the Saudi Arabia of ethanol in the next decade, but
producers are looking for capital injections and there is
opportunity to acquire valuable assets at distressed prices. The
development of liquid ethanol futures is another important
innovation that sooner or later will have to happen.
Lord Mayor of the City of London, Ian Luder said:
- "City of London institutions need to listen to what their
potential Brazilian partners have to contribute. They are justly
proud of their country’s economic and political achievements in the
past decade and want their voice to be heard, both at home and
increasingly on the global scene.”
Ends
Notes to editors
- Press enquiries
Kristina Blissett at the City of London Corporation
Tel 020 7332 345 / Mob 07795 290040
Email:
kristina.blissett@cityoflondon.gov.uk
- Copies of ‘The Challenges and Opportunities for Financial
Services in Brazil’ can be downloaded at
www.cityoflondon.gov.uk/researchpublications
- About the City of London Corporation
The City of London Corporation provides local government services
for the Square Mile, the financial and commercial heart of Britain.
The Corporation works nationally and internationally to maintain
and enhance the City as a world-leading international financial and
business centre. It also serves London and the UK with special
responsibilities such as the Barbican Arts Centre, the Central
Criminal Court at the Old Bailey, 10,000 acres of open space
including Hampstead Heath and Epping Forest, three wholesale food
markets, three inner-London City Academies, the City Bridge Trust,
economic regeneration programmes in neighbouring boroughs and
acting as London’s Port Health Authority.
- About Trusted Sources
Trusted Sources is an independent research firm that specialises in
the analysis of the political economies of Brazil, Russia, India
and China, as well as other frontier markets. The ultimate goal of
our analysis is to provide sound and timely expert judgement on
developments and issues that are impacting not only emerging
markets but also the global economy. Tapped into an extensive
network of experts with first-hand experience in areas such as
business, finance, industry and government, we spot evolving trends
early and pinpoint themes and topics somewhat removed from the
mainstream, providing clients with a unique understanding of the
opportunities and risks in emerging markets.
www.trustedsources.co.uk