Mr Reuther, is the Brazilian economy enjoying an upswing?

Question:
Mr Reuther, is the Brazilian economy enjoying an upswing?

Yes, Brazil is on a good course. So say our colleagues from São Paulo, where for good reason we have been represented for sixty years and have had our own subsidiary for the last one. As we know from our many discussions with our German and Brazilian customers, the mood in companies has brightened visibly in the last twelve months. The numbers also confirm this: GDP grew by 1 percent in the first quarter of 2017, as compared to the once proceeding it — the first increase in two years and the strongest in almost four. After a further slight increase in the second quarter, we expect an even more significant increase of around 2 percent in 2018.

Inflation has also been developing satisfactorily, having come in even below the central bank’s target corridor of 3 to 6 percent by registering at just under 2.5 percent in August 2017. This means that the rate of inflation has halved compared to early 2017. Since October 2016, the central bank has been lowering the high key interest rate from an initial 14.25 percent to 8.25 percent at the beginning of September 2017 — the lowest level in over four years. Given the enormous potential involved, this too is boosting the business cycle in Latin America’s largest economy. So Brazil is once again becoming more attractive for exporters and investors.

Whether the positive forecasts ultimately prove reliable depends largely on the presidential election in 2018, as any turbulence in politics and populace could quickly cause a downturn in the positive tendencies cited above.

LADW Mitglied Michael Reuther - Commerzbank

Michael Reuther

Member of Commerzbank’s Board of Managing Directors

Sunday Brief N°6

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