Brazil: A bright future overcomes inflation fears

Welcome to my first of many dispatches as director of economic risk analysis at Competitive Futures, Inc. I look forward to sharing with you some the insights we provide clients on current economic trends from around the world. Jumping right in: Is Brazil’s economy too hot?

These days, the orthodox view is that economic growth is GOOD, inflation is BAD. Most countries around the world have too little of the former and risk far too much from the latter, mostly from profligate spending and “quantitative easing.” Which is why it’s easy to see Brazil as a bright spot in the global economy. Brazil’s GDP growth is at a scorching 9%- which would normally be so hot as to cause worry of inflation. But wait – Brazil’s inflation won’t cause the same problems that the world will see in all the other countries at risk of inflation due to monster deficits. The land of futbol, caipirinhas and Copacabana is more dynamic and innovative than ever before, and will overcome inflation through investment.

Inflation in hot economies is often caused by a lack of sufficient infrastructure to meet growing demand. In Brazil, this won’t be a problem going forward, to listen to the country’s forward-looking economic policy makers. The country’s economic future appears to be poised to grow past any inflation concerns. The consumer market has grown exponentially for the past 15 years; massive investment opportunities such as the 2014 World Cup across Brazil and the 2016 Rio Olympics will see inflows from across the globe; and mass infrastructure projects in energy, transportation, and extraction (Franco fields and Tupí finds) are increasing. In a world where North America and Europe look backward to find their Golden Age, Brazil is looking at the next decades.

Imagine businesses looking for growing seeing Sao Paolo as a better bet for stability than the ailing eurozone or deficit prone North America. Brazil won’t be “one of the BRIC countries” it might be “where we have our headquarters.”