Brazil drops to 10th position in CEO investment preference ranking

Brazil has plummeted in importance on the agenda of large companies in the last ten years.

If in 2013 the country ranked third among the biggest strategic markets for global CEOs, it has now dropped to tenth position this year, with only 5% of respondents placing it as one of their markets with the greatest potential.

Last year, Brazil ranked eighth, but was overtaken by Canada and Australia in 2022.

This is what PwC consultancy points out in its annual survey of presidents of large companies around the world. In the first positions of the survey are the United States (cited by 41%) of respondents, China (27%) and Germany (18%).

According to the president of PwC, Marco Castro, although Brazil is cheap given the appreciation of the dollar against the real, which could stimulate investments here, it is also poorer and without growth prospects due to the numerous crises which passes, such as political, fiscal and environmental.

“Brazil has lost relevance in every way: growth is not great and representation for companies has become even smaller in dollar terms. The country continues to be a consumer bet, but it is no longer a priority for investments”, says Castro.

In fact, the numbers for those looking for returns are not very encouraging. According to the latest Focus Bulletin, a report by the Central Bank that brings together the estimates of the main analysts in the country, Brazil should grow only 0.29% this year.

Despite the 0.1 percentage point increase in the edition published on Monday (17), the number has been falling week after week.

The growth perspective is much lower than expected for several developed economies, that is, less risk for more return.

Far from the analysis, the real economy shows that some foreigners are leaving Brazil. In January last year, the automaker Ford announced its departure from the country, despite being one of the market leaders.

In addition to it, the largest cement manufacturer in the world, the French-Swiss group LafargeHolcim, also decided to abandon the local market and closed an agreement with the Brazilian CSN to sell its operation.

For Sérgio Vale, chief economist at MB Associados, Brazil has not had a period of tranquility for years and faces a succession of crises, something that the government of President Jair Bolsonaro has also not helped to reduce.

“Despite some positive measures taken by the government, such as the bankruptcy law, the sanitation framework and the independence of the Central Bank, the Bolsonaro government brought additional crises, such as the issue of environmental risk,” says Vale.

However, there are those who look for opportunities here, especially the Brazilians themselves. And even there is a lot of optimism among this public, according to the PwC survey, above the global average.

About 63% of Brazilian executives interviewed by the consultancy said they are very confident that their companies’ revenues will increase – only 5% said they are not confident. In the world, the proportion is 56% for the completely optimists and 4% for the pessimists.

Fusions and acquisitions

One of the sectors that are most confident about a strong recovery is private equity.

No wonder: mergers and acquisitions hit a record in 2021 in the world, with US$ 5.63 trillion in business volumes, according to data from consultancy Dealogic, up 63%.

In Brazil, according to a survey carried out by the consultancy Duff & Phelps, there was a growth of 52% between January and November.

It is not by chance that manager Neo has plans to double the size of its fund for acquisitions of holdings in companies.

If, today, the manager has R$ 500 million for the private equity arm, Marcelo Cabral, president of Neo, believes that it can reach R$ 1 billion raised by the end of the year in the face of market opportunities.

But he admits that he has felt the foreigner very afraid of the country. “Investments in the area did well, but given the currency devaluation, the returns were not as attractive in relation to risk when you compare opportunities elsewhere in the world,” says Cabral.

“But in our experience, it is cyclical.”

This is a similar opinion to that of Marco Stefanini, president and founder of the Stefanini Group, one of the largest in the field of technology in the country. According to the businessman, it is a fact that there has been a depreciation of Brazil in recent years in the view of the foreign executive, but which he believes to be exaggerated.

“I think of it this way: Brazil wasn’t as good as they said in the early 2010s and it’s not as bad as they say today,” he says. “We need to be careful to relativize these analyses, as they have an intensity above reality, both up and down.”

ESG

Stefanini, however, also defends that the country does a more careful work on the environmental issue. In fact, ESG (Environmental, Social and Governance) causes are already guiding investments around the world.

And, according to PwC’s survey of CEOs, nearly 75% of executives say business metrics are more closely integrated with companies’ long-term strategies.

However, the story has two sides. While many professionals are aware of the importance, only 27% of companies in the country have made a commitment to zero carbon emissions or have joined net zero programs.

To see the glass as half full, it is a value 5 percentage points above the global average.

“So it’s good news and bad news at the same time. The bad thing is that there was an expectation that the number would be higher, but the positive part is that there is a growing number of companies adhering to these causes”, says Castro, from PwC.

One of them was the retailer Amaro. In August last year, the company decided to neutralize all its CO2 emissions, estimated at 15,000 tons per year, still in 2021.

More than that, the company has also created a kind of guide for other companies to know the size of their carbon footprint and measures to reduce or compensate for the impact.

“We are experiencing two major movements in the company that have driven us on the subject: our team, formed mostly by the Y and Z generations and our consumers, who are activists and attentive to environmental causes”, says Dominique Oliver, president of Amaro.

According to a survey carried out by the company itself, 64% of its customers said they would like to buy in a more sustainable way.