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.”
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.”
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