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Brazilian asset management in focus, part 1 - The Brazilian economy: what has fueled the gains? - EY - United States

Brazilian asset management in focus, part 1

The Brazilian economy: what has fueled the gains?

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Reduced inequality and increased earnings have led millions of Brazilians out of poverty and into the consumer class.

Sound macroeconomic and social policies consistently implemented during the past 16 years have delivered an extended period of stability, growth and social gain.

For example, the Growth Acceleration Plan (PAC) launched in 2007 to provide tax incentives while also allocating significant funds to the power grid, transportation, logistics programs as well as social and urban projects. The PAC delivered a 5.1% growth rate in 2008 and, many argue, helped Brazil recover from the 2008 economic downtown more quickly than other Latin American economies.

Government efforts to boost economy

At the same time, the Brazilian government aggressively continued efforts to lower inflation, which delivered results. Today, inflation remains within the government's target range, although a rise in commodity prices has led some inflation expectations to climb.

The most notable result of these reforms has been the marked rise in economic opportunity for Brazil's poorest citizens. Reduced inequality and increased earnings have led millions of Brazilians out of poverty and into the consumer class.

Now, many Brazilians are purchasing their first cars, homes and electronics. They are also acquiring credits cards at a brisk pace.

An infusion of tremendous optimism

To gain a foothold in this remarkable consumer spending spree, global companies are pouring investment dollars into Brazil. The country's government – led by President Dilma Rousseff since January 2011 – is preparing to launch a second PAC program to fund transpiration, energy and facilities upgrades required for Brazil's hosting of the 2014 World Cup and 2016 Summer Olympics.

The Brazilian Ministry of Finance projects that economic growth will be sustained at or near five percent annually through 2014.

In this report, we explore these trends, and their affect on the asset management sector, across the following topics:



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