BRAZIL
THE HEMISPHERE RISES
THE OPPORTUNITIES AND CHALLENGES FOR
PRESIDENT DILMA
ROUSSEFF
Brazilians face a
new generation
of challenges,
from regulatory
reform to
education.
Confronting
them requires
political will
from our private
sector and our
leaders.
Roberto Setubal
Gradually and firmly over the past 15 years, Brazil has consolidated a stable de- mocracy, broken free from
macroeconomic instability, and
taken remarkable steps toward alleviating poverty and reducing a
historically high level of income inequality. The country that welcomed
Dilma Rousseff as its new president
on January 1 is also the country that
will host the 2014 World Cup and the
2016 Summer Olympics.
Ms. Rousseff has a chance to push
Brazil further along the road to development. To get there, she must
maintain the achievements of the
past and persevere in making the
changes that Brazil needs. The opportunities are big—so are the challenges.
Brazil’s political, economic and
social advances have paved the way
for the development of a large consumer market. This puts the country in a position to benefit from
today’s global marketplace. Consumer spending in advanced economies is flattening out. At the same
time, with their large potential consumer markets, emerging markets
are becoming “consumers of last resort,” attracting an increasing share
of global resources.
Brazil is one of them.
A new, larger middle class is now
emerging. From 2003 to 2009,
about 35. 7 million people joined Brazil’s middle-class income bracket. By
2014, Brazilian economists and business leaders estimate that another
30 million will have made that move.
This development will have far-reaching implications for businesses,
but also for society as a whole.
Investment is very likely to rise
in the years ahead. New projects
now follow the expected consumer
patterns of this new middle class.
Investment is spurred by macroeconomic stability and other developments that have increased
confidence and enabled a slow but
steady decline in real interest rates.
This has lowered the cost of capital and stimulated credit and capital
markets.
Investments will also increase for
more specific reasons. First, the new
deepwater oil fields will require vast
financial resources and new technology, allowing Brazil’s oil production
to double by 2020. Second, pent-up
demand for housing will be a catalyst
for investment, since a significant
number of Brazilians still live in substandard homes. Third, the World
Cup and Olympics will require investments on a considerable scale.
