As Vieira Rezende approaches our 30-year anniversary, we have seen another change in government defined by a more centralised approach to politics, in what was a highly polarised election.
This polarisation of politics has been witnessed the world over, underpinned by a period of global instability. Firstly with the spread of Covid-19 and subsequent lockdowns, followed by a global energy crisis which has led governments to focus the spotlight on geo-politics, energy production, and greater energy sufficiency.
Brazil, with a landmass bigger than Europe, is the fifth largest country in the world. As Kjetil Solbraekke, CEO of Maha Energy says in this issue’s roundtable interview, this is just one of the factors putting Brazil in a fantastic position to be a market maker in energy. We have under-exploited oil and gas fields to meet Brazil and the world’s energy needs while we transition to more sustainable sources. And with a long history of wind and solar generation, Brazil is well positioned for further developments in sustainable energy, including green hydrogen.
The country’s infrastructure requires substantial investment, particularly in urban areas and in terms of energy capacity and accessibility. Funding is committed and starting to come through, but there is still a shortfall, which presents an opportunity for investors.
According to the Brazilian Association of Infrastructure and Key Industries (ABDIB), the need for substantial resources is estimated at R$462.3billion annually. To date, R$213 billion is to be injected, primarily for energy projects. The new federal government’s PAC (Growth Acceleration Program) promises to invest around R$1.7 trillion in infrastructure by 2030, with R$1.4trillion anticipated by 2026, some of which is expected to come from private sector investment.
To attract these investments, Brazil provides legal security, risk mitigation, and socio-environmental sustainability. This is in stark contrast with neighbouring countries that are experiencing greater political instability, authoritarianism, and high inflation. Additionally, recent approval of the infrastructure debenture law should provide new tax incentives for the sector, paving the way for significant growth and development.
Brazil is already among the top 10 recipients of foreign direct investment (FDI) globally, leading in Latin America. In the first quarter of 2024, FDI reached US$ 9.6 billion. With significant investment opportunities in infrastructure, and the transition to a low-carbon economy, investment looks set to continue. We explore infrastructure bonds, and other options for environmental, social and governance (ESG) investing.
As well as mining and renewable energy, Brazil boasts diversity in climate, soil, and vegetation that benefits a wide mix of agriculture. This sector is vital to the national economy, with Brazil being one of the largest producers and exporters of agricultural goods, as well as providing scope for further employment to rural areas.
The Brazilian economy, one of the world's top 10, is characterised by a diverse sectoral distribution typical of mature economies: the services sector contributes 67.4% to GDP, industry 25.5%, and agriculture 7.1%. This diversity is reflected in a robust domestic market, prominent in industries such as vehicles, cosmetics, textiles, electronics, construction materials, mining, agricultural equipment, and aerospace.
At last year’s International Bar Association (IBA) Conference, it was apparent that legal colleagues from across the world were interested to discuss geopolitics. We all recognise that with political uncertainty and change comes challenge and opportunity for clients, as well as increasing legal complexity.
For Brazil, politically, the country is under the third term of Luiz Inácio Lula da Silva. President Lula governed in 2002 and 2006 and elected his successor Dilma Rousseff in 2010 and 2014. Lula won a tight race against Jair Bolsonaro, president in 2018, by expanding his alliance from the left to the centre and appointing former adversary Geraldo Alckmin as vice president.
Lula is known for his pragmatism and ability to dialogue with various political groups. He formed a coalition with centrist parties and ceded important ministries, managing to pass a long-awaited tax reform, which complements labour, pension, and fiscal reforms from previous governments.
Against this backdrop, Brazil has emerged as a country of political stability, and with it a growing economy. Since the 1988 Constitution, the country has developed a track record of strong institutions, a reliable political and electoral system, and an independent judiciary.
The outlook for the coming years is optimistic, with new legal frameworks approved for public concessions, attracting investments, and economic modernisation.
Population in Brazil currently stands at 220.6 million, with an unemployment rate of 7.5%. Inflation for this year is projected at 3.8%, below the target ceiling, and GDP growth is estimated at 2.8%.
The country is attractive to investors and Brazil's international credibility has been reinforced by hosting global events such as the 2014 World Cup and the 2016 Olympic Games. We will gain further prominence on the world stage with the upcoming G20 summit, and COP30 in 2025. The future looks bright for Brazil.
This issue of the magazine is timed for publication during IBA 2024. We hope to see you there or hear from you soon.
Best wishes,
Pedro Hermeto – Managing Partner and CEO
