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| Edition 58
Agenda for the resumption
Executives of large companies and market players in general share their perspectives on the economic and business environment for Brazil in 2018; expectation is for growth in the medium term and expansion of investments
October-December | 2017
October-December | 2017
The last few years in Brazil offered a true test of endurance for companies that worked in the Country. However, after all this period of tension and uncertainty, the economic scenario is getting brighter. Falling interest rates, controlled inflation and a slight recovery of the activity create some optimism for 2018. On the other hand, unemployment still at a high, the still unpredictable electoral scenario and the unfolding corruption investigations suggest caution. How to see in the midst of so much fog?
In order to broaden the debate and establish the expectations of the market next year, Mundo Corporativo has invited some of Brazil’s most important executives to share their perspectives on the economy as a whole and also regarding their own sector of activity. Respondents are unanimous on two points: 2018 is a year to prepare the strongest growth for the future, and doubts about the Country cannot halt all investments that can generate more wealth.
Leaders of associations and executives of large national and multinational companies with operations in Brazil believe that the next year will primarily depend on the private sector for 2019 to start with the foot on the gas. Transform the Brazilian economy’s potential into reality will require planning capacity from entrepreneurs and sensitivity to detect trends and synergies in a country still hard to read.
More transparency
“To a greater or lesser degree, regulatory changes such as the State Companies Law, the Anti-corruption Law regulation and the review of special governance segments of the Stock Exchange serve society's aspiration for healthy and benign ways of doing business. Given that in the era of digital transformation, due to increasing social aspirations, transparency is unavoidable, companies need to get out of the reactive mode to intelligently use this wave of luck and differentiate themselves positively, reinforcing the bond of trust and loyalty with customers and users and all relevant stakeholders.”
Resources and opportunities
“2018 will compulsorily be a better year than the last three. We're in a big country, with huge consumption and many resources. To the private equity world, there are many opportunities in consumption, services, education and health. Abroad they already see good opportunities here.”
Employability in focus
“The general framework is improved. When we look at the GDP components, the potential balance is already on the rise and household consumption can improve. Purchasing power tends to improve before jobs do. Do we have 13 million people unemployed? Yes. But we have 87 million employees who have an appetite for consumption. Employability is supported by people development. Education comes along with health as something that cannot be scratched.”
Job growth
“We are in a moment of imminent improvement in all matters. The external scenario weighs enough; We have a lot of liquidity in the world. On interest rates, already see the drop, consequently improving financing and sales. We hope more people with the confidence to invest in construction. The growth in employment starts slow and then advances a little more. A year in this horizon is very short, but it will begin.”
Sustainable optimism
“Although the Country has not completed all the reforms planned, it is undeniable that there were advances, such as the establishment of public expenditure ceiling, the approval of the labor reform and the balance of the foreign exchange and interest rates, in addition to the prospect of a social security reform . All this gives us a certain sustainable optimism for years to come. Except for an shocking election accident in 2018, which could propose the reversal of these achievements, I see excellent long-term perspectives for our economy.”
Recovery in consumption
“It is possible be a little more optimistic. I think there's room to grow without relying on government reforms. It is possible to realize that part of the economy idleness is already slowing and that changes in labor legislation could reduce business costs already in the next year. So, we can expect some progress. Petrochemical and flexible plastics industries are a bellwether for the economy as a whole. There is already some recovery in consumption that tends to extend to next year. We can anticipate that 2018 will be a better year than the last few years, but still far from what we had five, six years ago.”
A scenario of bigger trust
“We are confident about the Brazilian economic scenario for 20198.We believe that there will be a growth in the economy of 2% to 3% due to increased consumer confidence, the cheaper credit cost and other incentives, such as the withdrawal of inactive FGTS. The online delivery market continues growing every year, and the expectation for 2018 is that the market continues positive.”
Recovery signals
“If we consider the main economic indicators such as inflation, unemployment and the Selic rate, we see some signs of recovery for the Brazilian economy. We believe that the market will slightly increase this year and the next, but it is still difficult to predict when we will again have the same performance we had in 2013, for example. We remain optimistic about the future prosperity of this great country. Brazil has one of the largest economies in the world, an abundance of natural resources, an important internal consumption market and a strong auto industry. For 2018, our studies are taking us to forecast a market of 2.4 million units sold, which would provide an increase of 9% compared to 2017.”
Detachment of politics and economy
“Expectations today are more positive. It is possible to start thinking in the medium term, although there is still a lot of uncertainties. I think there was already a detachment of politics and the economy; let's see if that still takes place next year. We hope that, in 2018 and thence forward, more modern investments become palatable, and that, from now on, we can diversify more and better.”
More demanding consumers
“You can't mix politics and economics anymore. In 2018, detach these two agendas is even more important because of the elections. It's going to be a year of resumption. I think that the international market will be more positive for us and this should have an effect on our economy. A certain exchange rate stability also helps us quite a bit. We are working with a 17% growth forecast in the next year's revenue; I think a lot of people understands again language learning as a chance to reposition themselves on the market. The industry needs to prepare for the increase in demand because the recovery is already happening now and consumers will be more demanding in this resumption.”
Macro and sectoral reforms
“The recovery of the economy depends on measures such as reducing the fiscal deficit, which passes through the macro-reforms approval, in particular, social security and sectoral reforms, such as the General Telecommunications Law. We are not yet realizing a steady exit from the crisis, but our expectation is that the lower inflation and falling interest rates will gradually boost the consumption. The redirection of these resources will generate the expansion of direct and indirect jobs and has a strong impact on GDP growth, while reducing regional inequalities and promoting more digital inclusion and improving the citizens’ quality of life.”
Potential for growth
“The expectation for the Information Technology (IT) and telecommunications areas is positive, with the recovery of the investment levels. Brazil should follow the global technology market movement, in which estimates are of US$ 3.7 trillion in 2018, with an increase of 4.3% compared to 2017. I believe that now is the time for companies to resume their projects. Surveys indicate an increase in IT and telecommunications investments above the GDP rates in 2018 and the use of new fronts, such as digital transformation, digitalization, cloud (infrastructure as a service, integrated platform as a service and communication as a service), Internet of Things, mobile applications and financial solutions, such as payment via smartphones and analytics, among others.”
More investments in technology
“We are optimistic about the economic scenario foreseen for 2018. All these indicators are positive and should raise greater investments in technology. Despite the recession of the last two years, we have managed to significantly grow with customers seeking solutions that reduce costs, since revenue was not growing. In 2017, we already feel a greater demand for innovation, with some companies showing growth especially in the second half. I believe that there must be a demand even greater for software-as-a-service solutions and solutions that improve the companies’ operational efficiency.”
Opportunities to fill
“We believe in the Brazilian economy's recovery and we can already witness the major indexes’ movement. Brazil has an uncanny ability to turn things around and always retrieve the path for growth. The analysis of large numbers in recent months may show a low growth scenario, but we realize that there is a gradual upturn, in addition to the strengthening of consumer confidence – a very important factor in this process. Some sectors already show improvement in performance and end up pulling related areas. Despite feeling the effects of the economic downturn, the Brazilian insurance market followed showing continuous growth over the years. Despite good numbers, we still have a long way to go and many opportunities to fill. It is a scenario of numerous opportunities for the sector that, as in all segments of the economy, is being impacted by the digital revolution.”
Exports on the rise
“For 2018, there is much to happen that will be crucial to the economy, especially the high degree of uncertainty surrounding the 2018 presidential elections. However, in short, the prospects are positive for an economic recovery. Recently, the Government announced investments of R$ 130 billion in infrastructure, housing and energy projects, which extends the growth prospects for the sector in the coming years. Moreover, the Brazilian trade balance recorded a surplus of US$ 58,477 billion in the accumulated from January to October, representing an increase of 51.8% over the same period last year. This means that Brazilian exports were higher than imports, which directly impacts UPS's growth potential, since the company's strategic focus in Brazil is international, with exports.”
Diversification
“We have achieved positive results in Brazilian operations, even with the challenging economic scenario. Penske's main sectors of activity in Brazil are automotive and electronics, but, from this year, the company is diversifying its activity area. There is reason to invest, to grow both at retail as in consumption. The company seeks to invest up to R$ 12 million in new Information Technology systems. By the end of 2018, various enhancements and new software implementations will already be executed.”
Transition period
“The Brazilian economy can signal improvement in 2018 if it continues to be detached as much as possible from the political scenario. When the economic team has managed certain autonomy, the GDP grew back and the interest rates were more stable, as well as inflation and the dollar. The approval of the labor reform, in this regard, also contributed to an improvement in business confidence and, consequently, of the market. I believe next year will be a period of transition, and, in the best of all worlds, the growth will be maintained. With the crisis started in 2013, many carriers have ceased to renew and expand the fleet because of the economic stagnation. If, from 2018, we continue on the path for growth, we will have a probable recovery, with the drop in unemployment, the improvement in consumer and business confidence and, consequently, the increase of the retail business, leading fleet owners to invest in new trucks, which is very healthy for the transport business in the country.”
Reinvention
“We are optimistic about the country's economic resumption. We know that it will be in the long term, but we have seen signs of improvement. Perhaps the greatest barrier to the resumption of economic growth in Brazil is the time it will take, but we're hoping that in the next few years, the signs of improvement are increasingly notorious. In our case, we're reinventing ourselves over the years, and the solutions in which we invest must render even more fruits starting 2018.”
