LatAm Brazil Consumers
Brazil is in a period of transition. With a CAGR of 2.5% over the past four years, the country had a great 6.9% growth in 2010, but has clearly been in deceleration since, having just a 0.9% growth rate in 2012. In 2013, the US dollar hit the highest rate for the last 4 four years, reaching R$2.14. To control this high, the Central Bank sold at least US$ 876 million in the futures market. Investors became increasingly suspicious and there was a downturn of foreign investments, due partly to government state and economic interventions, and also to high inflation.
Seeking better public policies, Brazilians took to the streets to demand more from the government in terms of services (such as transportation, health and education), as well as a stronger stance on the punishment of crimes of corruption. Focusing on short-term policies, with frequent rule changes and low investment in infrastructure, the fiscal incentives promoted had little effect on the country’s productivity.
Other factors contributing to the reduction in growth include the decline in market value of companies dependent on exports (as a result of commodity drops around the world), and the decrease of banking spreads (as a reaction to the interest rate reduction imposed by the government on private banks). This second factor increases access to personal loans, boosting consumption and leveraging the value of brands in the retail sector, but notably reduces the value of brands in the banking sector. Personal loan costs dropped from 9% to around 6% per month, but even at this figure remains very high.
In contrast, companies like Ambev (America’s Beverage Company) and Natura have seen their values strengthened, and companies such as BR Foods, Pão de Açúcar Group and ItaúUnibanco have started to benefit from mergers and consolidations that occurred between 2010 and 2012.