Economic Analysis


Population 206,1 million
GDP per capita 8,727 US$
Country risk assessment
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major macro economic indicators

Key economic indicators 2015 2016 2017(f) 2018(f)
GDP growth (%) -3.8 -3.6 0.7 2.3
Inflation (yearly average, %) 9.0 8.7 3.7 4.0
Budget balance (% GDP) -10.2 -9.0 -9.2 -7.6
Current account balance (% GDP) -3.3 -1.3 -0.6 -1.6
Public debt (% GDP) 65.5 69.9 74.4 74.8


(f): forecast




  • Varied and rich mineral resources and agricultural harvests
  • Well diversified industry
  • Improving institutional transparency following recent corruption scandals
  • Strong internal reserves position (import coverage of roughly 30 months)


  • Very sensitive fiscal position
  • Bottlenecks in infrastructure
  • Low investment level
  • High cost of production (wages, energy, logistics, credit)
  • Shortages of qualified labour; inadequate education system

Risk assessment

Activity is gradually recovering

After two years of sharp recession, the economy rebounded in 2017, with GDP growing by 0.6% year-on-year during the first three quarters of the year. On the supply side, agriculture climbed by 14.5% year-on-year, driven by the favourable weather conditions that contributed to a record harvest. Industrial and services activities improved as well: industry rose by 0.4% year-on-year in the third quarter of 2017, while services grew by 1%. On the demand side, the rebound has been mainly driven by household consumption. The improvement is explained by more benign macro fundamentals, such as declining unemployment, low inflation level, and a strong easing monetary cycle since October 2016. On the other hand, investments have weakened as a result of political turmoil: gross fixed investments shrunk by 3.6% in the first nine months of 2017 year-on-year.

Activity is set to gain strength this year, driven by a stronger recovery of household consumption and by exports. A repressed consumption, a stronger job market and a faster pass-through from lower policy rate to the final interest rates will contribute to this movement. In addition, foreign trade should continue to benefit from a still solid global activity (particularly the recovery in Argentina). Despite the generally more positive perspective, investments are likely to remain undermined by upcoming presidential elections (October 2018).


Comfortable trade surplus diverges from a bleeding fiscal account

Brazil’s current account has improved significantly in recent years. This shift has been mainly led by a record trade surplus. Weakened local demand versus the relatively higher global growth played a decisive role. The current account deficit is expected to marginally widen in 2018 as economic rebound gains traction. Nevertheless, the current account deficit will remain easily covered by direct investments received by the country (coverage of approximately eight times).

The fiscal aspect remains the Achilles’s heel of the Brazilian economy. Gross public debt has increased significantly over recent years, leading the country to successive downgrades by rating agencies. The economic team of President Michel Temer took office in May 2016 and has since pursued a tightened fiscal policy. Improvements were achieved, such as the approval in Congress of a spending cap that limits the growth of government expenses by the previous year’s inflation. A social security reform, which is a key to containing fiscal bleeding, was also sent to the Lower House in December 2016. However, the proposal – which requires 60% support in two rounds of voting in the Lower House and in the Senate – was delayed by new political scandals that came into light and threatened President Temer’s government, who managed to weather two complaints imposed by the Attorney General, but not without consequences. The now-weakened government, with less political support in Congress, is running out of time to pass a softer version of the social security reform, which nonetheless might be unsuccessful due to the proximity of the legislative elections in October 2018.


Presidential elections of October 2018 will be closely watched

Former Vice President Michel Temer (centre-right PMDB party) became President in August 2016, after President Dilma Rousseff (leftist Labour Party) was impeached by the Congress. The case was triggered by the accusation that her government was hiding the size of the public deficit (breaking the Fiscal Responsibility Law). Her dismissal, however, gradually became more likely with the “Operation Car Wash” investigation approaching the heart of her party. This investigation, initiated in March 2014 and carried out by the Federal Police of Brazil, has revealed widespread corruption scandals within several of the country’s political parties, and impacted President Temer in May 2017. The new turmoil was triggered by the content of the plea bargain of the chairman of Brazil’s largest meat processing group. President Temer was able to survive two charges brought against him by the Attorney General, thanks to a mobilization that included the ostensive use of the state apparatus.

The presidential and legislative elections in October 2018 will be held in a challenging political environment. The population is both tired of the current government (only 5% considers the PMDB government good or very good) and angered by the widespread corruption. This scenario might create an opportunity for outsiders, but because the presidential candidates are not yet concretely confirmed, it is too early to try and predict the winner. However, former president Luiz Inácio Lula da Silva (Labour Party) and the extreme-right populist Jair Bolsonaro were doing well in the polls in late 2017. “Lula” is currently the frontrunner, but might not be able to run after being found guilty on corruption and money-laundering charges in July 2017. If his sentence is maintained on appeal, he will be prevented of running for elections.


Last update: January 2018



Bills of exchange (letra de câmbio) and, to a lesser extent, promissory notes (nota promissória) are the most common form of payment used in local commercial transactions. The validity of either instrument requires a certain degree of formalism in their issuance.


The use of cheques is relatively commonplace – often post-dated in practice and thus transformed into credit payment instruments – and their issuance requires comparable formalism.


Although the use of the above credit payment instruments for international settlements is not advisable, they nonetheless represent, an effective means of pressure in case of default, constituting an extra-legal enforcement title that provides creditors with privileged access to enforcement proceedings.


Theduplicata mercantil, a specific payment instrument, is a copy of the original invoice presented by the supplier to the customer within 30 days for acceptance and signature. It can then circulate as an enforceable credit instrument.


Bank transfers, sometimes guaranteed by a standby letter of credit, are also commonly used for payments in domestic and foreign transactions. They offer relatively flexible settlement processing, particularly via the SWIFT electronic network, to which most major Brazilian banks are connected.


For transfers of large sums, various highly automated interbank transfer systems are available, e.g. since April 2002, the STR real time Interbank Fund Transfer System (Sistema de Transferência de Reservas) managed by Banco Central do Brasil or the RSFN / National Financial System Network (Rede do Sistema Financeiro Nacional) linking various financial operators in Brazil in real time.


Debt collection

Amicable Phase

Creditors begin this phase by attempting to contact their debtors via telephone and email. If unsuccessful, creditors must then make a final demand by a registered letter with recorded delivery, requesting that the debtor pay the outstanding principal increased by past-due interest as stipulated in the transaction agreement. In the absence of an interest-rate clause, the civil code stipulates use of the penalty interest rate imposed on tax payments, which is 1% per month past due.


When creditors are unable to reach their debtors by phone and/or email, a search of the company’s contacts, partner businesses, and owners is conducted, in order to establish contact and enter into a settlement negotiation. If there is still no contact, this leads to an investigation of assets, an on-site visit, and an analysis of the debtor’s financial situation so as to ascertain the feasibility of taking legal action. Considering the slow pace and the cost of legal proceedings, it is always advisable to negotiate directly with defaulting debtors where possible, and attempt to settle on an amicable basis, taking into consideration that a repayment plan may last for up to two years. If amicable settlement negotiation is unsuccessful, creditors may attempt to reclaim the money owed via the Brazilian judicial system.


Legal proceedings

The legal system comprises two types of jurisdiction. The first of these is at the state level. Each Brazilian state (26 states, plus the Distrito Federal of Brasilia), notably including a Court of Justice (Tribunal de Justiça) whose judgments can be appealed at the state level. Legal costs vary from state to state.


The second type of jurisdiction involves the Federal Courts. There are five regional Federal Courts (Tribunais Regionais Federais,TRF), each with its own geographic competence encompassing several States.


For recourse on non-constitutional questions, TRF judgments can be appealed to the highest court of law, the Superior Tribunal de Justiça (STJ) located in Brasilia.


Brazilian law provides a wide range of legal measures to be used in defence of the rights of creditor against debtor, and provides also a large number of appeals to debtor.


Monitory Action

The ação monitóriais a special procedure that can be filed by any creditor who holds either a non-enforceable written proof, or any proof that is considered as an extrajudicial instrument recognized by the law as enforceable (even if it does not comply with all the legal requirements).


If the debtor’s obligation is deemed certain, liquid and eligible, the Municipal Courts usually render payment orders within fifteen days. If the debtor fails to comply within three days, the order becomes enforceable. In cases of appeal, the creditor has to commence formal ordinary legal action. The difference between this procedure and the Enforcement Proceeding is in the legal requirements and in the possibility of questioning the merit of the obligational relationship by the debtor over the course of the suit.


The ação monitória is slower than a regular Enforcement Proceeding: if the debtor presents an objection in the court, the merits of the commercial relation will be thoroughly discussed in the same fashion as a Standard Lawsuit. The estimated period of this lawsuit is on average two years.


Ordinary proceedings

are presided over by an interrogating judge (inquisitorial procedure), and require a scrupulous examination of evidence submitted by each party in conjunction with study of any expert testimony. The creditor must serve the debtor with a registered Writ of Summons, which the debtor must answer within fifteen days of receipt. The initial proceedings encompass an investigation phase and an examination phase. The final step of the process is the main hearing, during which the respective parties are heard. After this, a judgement is made by the court. The tribunal may render a default judgment if a duly served writ is left unanswered. It takes two to three years to obtain an enforceable judgment in first instance. 

Enforcement Proceeding

Of a Court decision

A final judgment is normally automatically enforced by Brazilian Courts. Since the reforms in 2005 and 2006, attachment of the debtor’s assets is possible if the latter fails to obey a final order within three days. In practice, execution can prove difficult, as there are very few methods for tracing assets in Brazil.


Foreign awards can be enforced if they meet certain conditions:

  • The homologation has to be concluded by the Superior Court to be enforced in Brazil
  • The parties have be notified
  • The award has to comply with all the requirements for enforcement (such as being translated from Portuguese by a public sworn translator).
Of an extra judicial instrument

The enforcement of extrajudicial instruments is a legal type of enforcement granted to the creditor in order to allow him to claim his rights against the debtor. This is the most direct and effective court vehicle to recover credits in Brazil. This lawsuit does not require prior guarantees from foreign creditors (as the bond in the monitory suit for example).


Moreover, Brazilian legislation renders some documents enforceable. These are separated in two main categories:

  • Legal enforcement titles, including judgments made by a local Court recognizing the existence of a contractual obligation, and court-approved conciliations and arbitral awards
  • Extralegal enforcement titles, such as bills of exchange, invoices, promissory notes, duplicata mercantil, cheques, official documents signed by the debtor, private agreements signed by debtor, creditor and two witnesses (obligatory) – as an acknowledgement of debt, secured agreements, and so on
    • It is obligatory to submit the original versions of these documents – copies are not accepted by the court

On average and within the main states, it takes a year for a judgement to be made following the initiation of legal proceedings.


Insolvency proceedings

Out of Court restructuring

Debtor can negotiate a restructuring plan informally with their creditors. The plan must represent a minimum of 60% of the total debt amount. This plan must be approved by the court.


Judicial Restructuring Procedure

The objective of this procedure is to help companies overcome financial difficulties and to preserve the company, its employees and creditors’ interests, with the goal of leaving it able to continue business once the procedure is completed.


The principal  stages of this lawsuit are as follows:

  • Debtors make a restructure to the request to the court, or request the conversion of a liquidation request to the court from their creditor(s)
  • If the plan is accepted by the court, debtors typically have typically 60 days (though this period is not  necessarily mandatory) to present a list with all debts from creditors, and a payment plan
  • A judge schedules two creditors’ meetings, with the second only occurring if the first one does not take place. During these meetings, the proposed plan must be accepted by a majority of creditors
  • Payments start as decided in the approved plan.

The estimated period of this lawsuit is between 5 and 20 years



The objective of the liquidation process is to collect all of the incomes of debtors who are declared bankrupt. The principal stages of liquidation are as follows:

  • Liquidation can be requested by either debtors (auto-falência), or any of their creditors if the debt totals more than 40 times the minimum wage
  • The initiating party must prove the existence of a net obligation, overdue and defaulted by presenting protested enforceable title (special protest – personal notice of debtor);
  • Upon analysis of a debtor’s financial situation, the judge can decide that the company must be liquidated
  • All of the company´s assets have to be sold and the obtained amount is shared equally between creditors, respecting eventual privileges.

The estimated period of this lawsuit is between 7 and 20 years

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