ECONOMIC SCENERY – IT IS TIME TO INVEST IN BRAZIL

The Brazilian economy is going through a period of intense prosperity. Brazil has been nominated by reputed institutions as a reliable country to invest in and the São Paulo Stock Exchange (BOVESPA) has surpassed historical barriers. The Real is becoming stronger each day against the American dollar. Even thought are some world crises going on, this is the ideal moment for investment in the country.

Brazil obtained in April an investment grading by the rating agency, Standard & Poors. Also the Canadian agency of risk classification DBRS, announced in May that upgraded
Brazil's investment grading from BB+ to BBB-. This changes the perspective of the Brazilian economy from stable to positive. Also in May, the Fitch converted the country evaluation from BB+ to BBB-, following the trend of other agencies, aforementioned, and of the Japanese’s JCR and R&I. The country stepped into the group of nations considered to have a small possibility of insolvency and low risk for foreigner’s financial applications. A series of factors led these institutions to modify the country’s rate, among them, the stability of macro economical politics, well-conduced monetary and cambial politics, stronger public administration, availability of bank credit, improvement of the dimension and structure of public debt, increase of the market liquidity and recent discoveries of oil fields by Petrobrás.

As a consequence of the economical stability and in the days after the announcement of Standard and Poors assessment, the Ibovespa, main rate of the Brazilian stock market, surpassed the historical barrier of 70.000 points. Stocks of Brazilian companies, for example Petrobrás, had its papers validated which helped to push the rises of the stock exchange of São Paulo.

On the other hand, the dollar is losing ground around the world when compared to other currencies due to the cut of interest rate made by the Federal Reserve between September of the last year and April this year. The interest rate fell as part of the Fed’s action to stimulate the credit and to promote the American economy. Since the beginning of the government of Lula da Silva, the dollar lost 52% of its value against the Real. This year, it accumulated 5.12% of depreciation. In 2007, the fall in the value of the American currency was in 16.85%.

The consequence of this scenery is record investment and growth of the economy. The Brazilian PIB grew 5.8% in the first trimester of this year in comparison with the same period of last year. The expansion in twelve months is the greatest since 1996. Investment grew 15.2% from January to March, when compared to the same period of last year.

When Brazil's rating was enhanced to investment grade, the expectation of economists was that more foreigners would invest in Brazilian assets. This perspective proved to be correct and is expected to continue for some time yet.

Contributed by Daniela Lima who Is a lawyer and partner of EMDOC MRS, a 20-year old firm, specializing in providing services in the immigration market, transferring employees to Brazil and from Brazil to other countries.