An ACE briefing focused on impressive growth for a country determined to stand out from its South American neighbours. Katie Puckett reports back
Massive government investment and a fast-maturing insurance industry mean great opportunities for foreign companies in Brazil, according to speakers at an ACE Group client briefing at Lloyd’s this month.
Over the next 20 years, investment of $1.04 trillion ($786bn) is planned for the country’s infrastructure, including the government’s $280bn PAC programme, $600bn for the Pre-Salt oil extraction project, and $135bn in preparation for staging the 2014 World Cup and the 2016 Olympic Games.
ACE’s vice-president for multinational accounts in Latin America, Flavio Bauer, said: “The message is simple. Right now, Brazil is doing very well, and I see opportunities for everybody in this room. The government’s investment, combined with the fact that we’re taking millions of people out of poverty each year, also gives the insurance industry fantastic conditions for growth.”
Brazil is the world’s 10th largest economy, with a GDP of $1.57 trillion in 2009, but its insurance market still ranks only 15th. This is growing fast, though. Bauer said: “Before 1984, insurance was never more than 1% of our GDP. Now it is more than 3%, and we expect by 2015 it will be 5%-6%.”
The Brazilian insurance industry almost quadrupled in value over the last 10 years to reach $49.65m in 2009. The strongest growth has been in the life and pension sector, which increased by a staggering 490% to reach a premium income of $26.23m.
Audience members asked about the potential for greater state intervention in business following the election of the country’s first female president, former Marxist guerrilla Dilma Rousseff, who takes office on 1 January.
Rear Admiral Chris Parry, a strategic forecasting specialist, said: “The Brazilian government knows it’s got to show a level of fiscal responsibility and political predictability, or it will be lumped in with the other South American countries and they won’t be able to differentiate themselves.
“In Brazil, you won’t see nationalisation, but you may see the odd demonstration of state power to show they can do something if the electorate wants them to. We will also see a certain amount of favour given to nationally sponsored enterprises, and to poverty reduction, education and health – that’s what people will have to work around.”