Pandemic performance Like the rest of the world, Brazil was severely impacted by Covid-19. A questionable governmental response to the pandemic resulted in the country recording some of the world’s highest death tolls, while the economy experienced a severe contraction in gross domestic product due to the combination of falling external and internal demand and a precipitous drop in commodity prices. Along with its global peers, the Brazilian government moved to mitigate the consequences of Covid with fiscal and monetary policy. “The Brazilian government spent US$120bn, more than 80% of its GDP, to face the social and economic impact of the pandemic,” said Otavio Ladeira de Medeiros, undersecretary at the National Treasury, with responsibility for Brazil’s public debt. Taking those measures when the economy was moving into recession resulted in the country’s debt-to-GDP ratio “increasing from 75% to almost 89%, the highest annual rise in our country’s history”, according to de Medeiros. That trend had reversed by 2021, with government expenditure and borrowing returning to pre-pandemic levels. “Last year we delivered the first surplus since 2014, and our debt to GDP fell to almost 80%,” said de Medeiros. “We will probably deliver a positive result again this year, reducing debt to GDP to maybe 75%.” Inflation, on the other hand, began to escalate as the country emerged from the first wave of the pandemic. The cost of living, which had been increasing by less than 4% per year between 2017 to 2020, began to pick up sharply from 2021, reaching more than 12% in April this year and forcing the central bank into one of the world’s most aggressive rate-hiking exercises. In September, the Banco Central do Brasil signalled an end its aggressive interest rate stance, keeping the Selic rate – the country’s primary instrument of monetary policy – steady at 13.75%. Brazil’s inflation rate eased below 8.75% in August, the first time it had fallen to single figures for a year. “We are reaping the benefits [of our interest rate policy] and it looks like inflation is moving back towards 6.5% in 2022 – according to market expectation – and 5% in 2023,” said de Medeiros. “Our target is 3% for 2024.” With international reserves of around US$360bn, de Medeiros said the country’s external position was “very comfortable”, which is how he also described the levels of foreign direct investment. “For the last decade FDI has been sufficient to finance our deficit,” he said. “In 2022, for example, FDI is projected at US$60bn while the deficit is expected at US$20bn.” He expects similarly strong flows of FDI in future. There was also a notable rebound in the strength of the economy. From a pandemic-induced 4% contraction during 2020, GDP grew by 4.6% in 2021, moving back to pre-pandemic levels of expansion. The economy is forecast to grow at 2%–2.5% in 2022.Corporate focus Throughout the pandemic-related volatility in domestic and international markets, large Brazilian corporates continued to target growth. They continue to do so, according to Paulo Bernardo, CEO and country head of Scotiabank, Brazil, but the central bank’s aggressive monetary stance has left them more cautious when allocating capital. Despite the challenges, some sectors of the economy continue to post good results and remain well placed to take advantage of any rebound. “Even during the pandemic and the international crisis, the cement industry actually increased sales,” said Bianca Nasser, CFO and head of IR at Votorantim Cimentos. Increased sales contributed to Votorantim’s cash position and the company’s conservative balance sheet management helped it through a period of uncertain economic and financial conditions. Votorantim favoured liquidity. “Now we are facing a
