Brazil is a notoriously difficult country for foreigners to do business. Its famous bureaucracy and ambiguous attitude to foreign trade places it second only to Venezuela for difficulty of doing business among South American countries. Add to that the volatile economy of recent years, caused in part by corrupt government practices, and it is easy to understand why 2016 made for one of the worst fiscal years the country has seen in decades.
But things are changing. The Workers’ Party’s reign has come to an end with the impeachment of President Dilma Rousseff last year, and sitting President Michel Temer has a different attitude toward trade. In a recent G-20 meeting, Brazilian Finance Minister Henrique Meirelles warned other nations of the downside of adopting an isolationist economic stance. His words were aimed at the United States, whose President Donald Trump has vocally championed the idea of ending some of America’s trade agreements. President Trump has also suggested raising taxes on imports as part of his “America First” vision of pumping up the U.S. economy.
Many economists believe that Brazil’s cataclysmic financial downturn was a result of the country’s failure to embrace international trade. Finance Minister Meirelles told a Wall Street Journal reporter that “we had adopted during the last years some protectionist measures for some sectors of the economy, and the net result was not positive. At the end of the day, the products became more expensive and Brazil…became less competitive. In Brazil, we are moving toward a more open trade policy.”
President Temer has also expressed his welcoming attitude toward foreign investors. He hopes that by slashing some of Brazil’s red tape, he can entice investors to put their money in Brazil. This attitude contrasts heavily to the U.S.’s current rhetoric. But world leaders are pushing back. At the G-20 meeting, finance ministers from around the world rescinded an agreement to “resist all forms of protectionism” and modified the language to “strive to reduce excessive global imbalances.”
Temer’s new economic policies have been met with enthusiasm by foreign investors who were already gearing up to snap up Brazilian bonds and assets if the impeachment rumors became a reality. His open arms policy toward foreign investment is intended to help the economy stabilize and transition out of the protectionist mode that, together with rampant corruption, drove Brazil into recession.
