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Rio de Janeiro : Office - Q1 2017

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Rio de Janeiro : Office - Q1 2017

The Brazilian economy shows signs of rebounding. Although still flimsy, the evidence of recovery comes down to four key areas to allow an organized growth. First we have declining interest rates (which can go down to 8.75% per year by late 2017), followed by lower and stable inflation rates (4.57% in the accumulated 12 months for March 2017) which clearly indicates the Central Bank new targeting on the short-run; improved figures on the job data and government incentives, when it comes to structural reforms and consumption increase tends to increase consumer confidence levels.

Concomitantly, there are still exogenous risks that are inherent to the resumption process. The “Lava Jato” operation still shows strength and relevance, hitting the heart of the government's allied base, a fact that may overcast the tax reforms concerning Congress approval. Nonetheless, the risk of an eventual fall of the current government is low, which supports the economic growth projections in the short and medium terms.

Concerning foreign exchange, particularly on the domestic scenario, the street talking uncertainties associated with the approval of tax reforms keep ruling the market depreciating the Brazilian Real against the American Dollar. In the external scenario, the hurdle between the Federal Government and the FED, related to the delay on interest rate increase, continues to affect the future exchange rate. Pursuant to that, a hike is expected this year and our projections suggest a rate ranging between R$/US$ 3.20 and R$/US$ 3.30 until the end of 2017.

Source : Cushman & Wakefield

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