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BMI Report: Q3 Market Overview for Brazil

Jun 27, 2014

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Sporting Events Promise Uptick For Freight Transport, Concerns For Exports Remain

Business Monitor International forecasts that growth in Brazil's freight transport volumes will outpace the Latin American giant's real GDP growth in 2014 and over our medium-term forecast period (2014-2018), across all freight modes. Continued growth in the BRIC nation's mining and agribusiness sectors will ensure that the road, rail and ports sectors will continue to experience healthy expansion, while air freight will benefit from the growing demands of the country's expanding middle class. We caution, however, that the country has considerable problems to overcome; corruption is reported to be endemic and labour disputes frequently bring port and road operations to a stand still.

The Brazilian freight transport sector is in large part driven by raw materials exports. Our outlook for the sector is informed by BMI's views on the Brazilian agribusiness sector, where we envisage nominal growth in the sector's market value to average 3.2% over our forecast period, contributing around 9% of GDP.

Import demand for consumer goods is also looking positive, as the power of the Brazilian consumer has grown hugely in recent years. We forecast average growth of 2.9% over our medium-term forecast period from 2014-2018. Debt constraints might hamper this expansion to some degree, though the coming FIFA World Cup in 2014, followed by the Rio de Janeiro Olympic Games in 2016, offer upside risk to our outlook as these major sporting competitions should boost demand for freight transport in host countries.

BMI notes that although the uptick in freight volumes surrounding sporting events, such as the Olympics and the FIFA World Cup, will most likely place pressure on Brazil's logistics sector, but the events should have a positive impact on the country's freight transport sector. This applies both in the short term, with an increase in cargo volumes, and over the medium term, as companies enter or expand their operations in the country in the run up to the sporting event. Businesses thereby gain expertise and exposure in Brazil's market, which they can build on following the event, thereby retaining a role in the host country's freight transport sector.

On the export side, however, BMI notes Brazilian exports have been hit hard by delays at major commodity exporting port Santos, as well as weakening iron ore prices. While we believe that strong soy, coffee and corn harvests will feed through to a pick-up in export growth over the coming months, we see no major upside for Brazil's mining exports this year, as prices remain under pressure from weakening Chinese demand.

Investment and Development Outlook

According to our Key Infrastructure Projects Database, there are USD 246.69bn-worth of transport projects in the pipeline for Brazil.  BMI welcomes these investments as they will help alleviate the infrastructure deficit the country is facing in the run up to the 2014 FIFA World Cup and the 2016 Olympic Games.  Nevertheless, investors will have to face considerable bureaucracy and corruption issues if they are to get plans off the ground.

© 2013 Business Monitor International Ltd.

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