The Brazil Risk Checklist: Questions Nobody Wants to Answer

economyLet’s get straight to brass tacks. Everyone loves investing in Brazil’s economy, everyone loves Brazilian Samba, everyone  has World Cup Fever. How can it go wrong?

What if World Cup infrastructure progress remains behind schedule?

How will Brazil’s infrastructure buildup generally compare to South Africa ’10 or Greece ’04? Oh, those comparisons aren’t fair? Then how ’bout Germany ’06?

Will any more cabinet ministers resign due to corruption allegations or is 6 the final tally? Either way, should we take these resignations as evidence that corruption in Brazil is improving or that its standing as a country more difficult to do business in than Russia, Pakistan or Egypt is indeed deserved and accurate?

Will Brazil achieve a standing in the top half of the world’s countries ranked by infant mortality before or after it lands in the top half of the world’s countries ranked by doing business?

Is 3.5% real economic growth in 2012 enough for Brazil to remain on a path toward realizing its potential? If 2012 growth comes in below expectations again, or if inflation goes above the stated 4.5% target, what will this do for unemployment? And for those who don’t like unemployment as a viable indicator, then what about gini coefficient? And for those who don’t like gini coefficient as a viable indicator, what about incomes per capita, regardless of whether we calculate it with the Atlas method or purchasing power parity?

If 2012 economic growth comes in better than expected, will the famously underfunded mid-market private equity sector finally receive its due? And if economic growth underperforms, then what?

If Dilma has to choose between sacrificing tax reform, pension reform or labor reform, which should she sacrifice? And which will she sacrifice?

If so much is already known about the Brazil-Africa narcotics corridor, when will Brazil bring home a massive snowstorm payday bust like this one? Or this one?

What if China’s growth continues slowing and demand for Brazilian exports continues sliding while U.S. and the Eurozone demand remain sluggish?

Was capping auto imports from Mexico really necessary and what difference will it really make in the long run?

Will returns from green energy investing be realized soon enough to offset oil market volatility?

At what point can we deem Brazil a true success? What does it mean to be a true success?

Given wide expectations that Brazil’s central bank will put a 9.0 percent floor on the SELIC rate (encouraged by the central bank president himself) and given equally wide expectations that the central bank will defend the real at 1.80 against the dollar, which line in the sand will the central bank sacrifice first?

Did I miss anything?

One response to “The Brazil Risk Checklist: Questions Nobody Wants to Answer

  1. Good list. I think the biggest one missing is oil and gas, and the how long it will take to fully exploit the pre-salt offshore fields. Another is rising consumer credit card debt.