Brazil – Its own worst enemy and why supply chain practitioners should care

When last Ti published South America Logistics and Transport in 2011, Brazil was experiencing a booming economy as a top global exporter of automobiles, agricultural and mining commodities and electronics. At the same time, Brazil also featured high on the Agility Emerging Markets Logistics Index, produced by Ti in partnership with Agility Logistics. Furthermore, it was set to take its place on the global economic stage as it prepared to host the 2014 World Cup and the 2016 Summer Olympic Games.

However the global economic recovery proved to be a much slower process than expected and thus wreaked havoc on commodity prices. In the years since 2011 the market for raw materials, agricultural goods and oil, which propelled Brazil onto the global economic stage, have resulted in the country’s stumble.

As noted in Ti’s 2011 South America Logistics and Transport report, then, as now, the need for economic diversification for the region’s largest economy is great. After all the opportunities are immense despite what is seen by many as a country that is burdened with restrictive government regulations, corruption, rising taxes and poor infrastructure.

As such, strikes are common in Brazil. In fact, there is a truck strike currently underway. Truck drivers are protesting against higher diesel prices, taxes and tolls and as a result, exports are threatened, in particular agricultural ones such as soy beans.

So why bother with this country? Maybe, for bulk shipping opportunities, because it continues to be a leading exporter of several commodities. In terms of value of exports, Brazil exports the most raw sugar in the world, it is the second largest global exporter of iron ore and in terms of tonnage, Brazil is also the largest global exporter of soybeans. In terms of other exports, Brazil was the seventh largest exporter of automobiles in 2013.

But it’s not all about exports. Brazil’s GDP per capita is over 60% higher than that of China’s and the majority of the country’s population is part of a middle class. This middle class expects access to consumer goods and credit and it is increasingly calling for government reforms and infrastructure improvements but no more tax increases. But, government regulations are such that many multinational companies looking to sell to Brazilian consumers have had to establish manufacturing facilities within the country. As a result, supply chains are a bit different in Brazil.

Classified as an emerging market, Brazil is struggling to grow out of this category. Consistently ranked in the top ten emerging countries in the Agility Emerging Markets Index, it continues to be its own worst enemy, often blocking the reforms, debt reduction and FDI that it requires in order for the country to return to a consistent booming economic growth pattern.

To find out more about Brazil and the rest of the region you can register your interest in Ti’s upcoming Latin America Logistics and Transport report due to be published later this month. In addition to South America, this report will cover Mexico, Central America and the Caribbean.

To coincide with the publication of the report, Ti is pleased to announce that its CEO, John Manners-Bell will be speaking at the Brazilian Supply Chain & Logistics Summit 2015 Conference in Sao Paulo in March 2015.

For more information and to register your interest in Ti’s latest report please contact Michael Clover.