Beyond Carnaval: Pessimism Is An Ugly Addiction
Concise reflections, digests, and highlights of the week's significant news within Brazil's investment and innovation landscape.
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IN TODAY'S BEYOND CARNAVAL:
Being bearish about Brazil is being complacent: you're not doing anyone any good
Reasons why Brazil can grow into a developed society
Pessimism is an addiction
We have been contacting thinkers who want to express their opinions in Open Zeitgeist, our - now monthly - edition for guests to write about non-obvious theses to decipher Brazilian potential for global investment. The next one is out Jul 6th, by the way.
We're happy with the adherence and proud of the amazing thinkers we're bringing into I'm No Economist. However, during these conversations, we face the challenge of recovering pessimistic addicts of Brazil’s economic landscape and getting them back on track to inspire positive change.
Brazil is rich with opportunities for investors and entrepreneurs, characterized by a blend of innovation, and growth in key sectors: like fintech, biotech, and climate tech, and a vast, untapped consumer market.
So for this edition, we thought of exploring the key factors that make Brazil an attractive investment destination, drawing on insights from trusted sources to highlight the nation's potential.
We're not blind idiots
We're a team of No Economists - but we're not blinded by wishful thinking. We know it's tough to sell the idea of investing in an unorthodox thesis when there is a double-digit interest rate scenario. We're not that naive.
But we also see an untapped potential and unique opportunities that lie beneath the surface. That's why we spend so much time meticulously analyzing data and leveraging our curiosity so we can uncover the hidden gems within Brazil's economic landscape.
We don't provide investment advice, ever. But what we do is inspire with grounded insights to help you navigate this complex environment confidently. So before diving into today's edition, open your mind.
But there are deeper problems, that despite having seen investment in the past years, that will have to catchup with new tech developments, such as AI.
Brazil, such as the rest of the world, has been expanding its renewable energy sources, particularly hydroelectric, wind, and solar power. The country’s vast river systems provide an excellent foundation for hydroelectric power, which already accounts for a significant portion of its energy mix - 40%+ of its main energy source is clean.
Brazil is the last frontier against emerging pairs
Climate tech leader
Brazil is at the forefront of climate tech innovation, with significant advancements in renewable energy and sustainable technologies.
The country’s commitment to combating climate change is evident through government incentives and pioneering projects in green tech. Brazil's initiatives in this sector not only contribute to environmental sustainability but also present lucrative opportunities for investors.
Regulators such as ANEEL (National Electric Energy Agency) and ANP (National Petroleum Agency) stipulate that energy companies must invest part of their revenue in R&D. This has been boosting investments in energy tech in the past 2-3 years.
I've seen it up close while working in innovation consulting for energy companies. But don't take everything we say at face value:
"Investment in renewable energy skyrocketed in Brazil in 2022, attracting $25 billion – compared with a cumulative $41 billion over the five preceding years. Brazil attracted the third-highest investment in renewables globally, behind only mainland China and the US." - Source BloomberNEF 2023.
When it comes to solar energy generation alone, Brazil comes 4th, only behind countries with way larger populations:
The real challenge, however, is making sure we're pressuring authorities to create clear policies that will incentivize investments to benefit those who depend on their goodwill and quasi-competence.
Untapped consumer market
Brazil's large, young, and tech-savvy population is a key driver of its growing consumer market. With a growing middle class and increasing purchasing power, sectors such as e-commerce, retail, and consumer goods are thriving. The rise in digital adoption and economic stability offers a fertile ground for investment.
Alex Ball brought up a few editions back of Open Zeitgeist that Brazilians are fed up with "caudillo" policies and won't stand poor policy-making and poor economic policies. They're better informed and feel the impact of bad politics in their pockets:
As Alex put it:
"The Brazil of 2002 is not the same Brazil, sure, there are still bottlenecks, bureaucracy, and some similar problems, but things have changed. The middle class is growing, labour laws have become more flexible, and personal consumption is growing. State interventionism and economic protectionism will never work, and I personally feel that the Brazil of 2024 and beyond does not want this [...]
[...] Brazilians are demanding educational opportunities; they will continue to demand better, and relevant preparedness for the 21st century economy. Entrepreneurism is alive and kicking in Brazil, even with high interest rates locally, and abroad."
– Open Zeitgeist: Brazil Macro & Fiscal: Should you be worried? - May 18th, 2024. Read more below:
There's so much room for improvement in quality of life that will bring more people into the middle class. The improvement will likely come from the obvious deflationary effects of technology. Take Nubank as an example for the finance sector: once a shy fast-growing fintech, now the biggest bank in Brazil due to its asset-light business model.
This is one of many examples we can mention. And we will keep saying them. They're worth our time and effort. Otherwise, if it's all about accepting our fate, why do we still do what we do?
Suzano, a Brazilian pulp and paper giant, has invested R$ 1.3 billion to enter the textile sector. This strategic move aims to diversify its portfolio and leverage sustainable practices in the textile industry, aligning with global trends towards eco-friendly materials and expanding its market reach.
The Federal Reserve kept interest rates unchanged in the U.S. and projected only one rate cut for this year. This decision reflects ongoing concerns about inflation and economic growth, indicating a cautious approach to monetary policy amid uncertain economic conditions.
Apple surpassed Microsoft to become the world's most valuable company, driven by advancements in artificial intelligence (AI). This milestone highlights the growing importance of AI in boosting market value and underscores Apple's leadership in technological innovation.
🇧🇷 Brazil
Jun 11th
Annual Inflation Rate: Actual 3.93% | Previous 3.69%
Jun 19th
Interest Rate: Previous 10.5% | Expectation 10.5%
🇺🇸 US
Jun 12th
Interest Rate Decision: Actual 5.5% | Previous 5.5%
Annual Inflation CPI: Actual 3.3% | Previous 3.6%
Source: https://pt.tradingeconomics.com/
📩 Partner with I'm No Economist
Deciphering Brazilian potential. Generating expert intelligence and strategic insights for the Brazilian investment market.
Every Thursday 06:09 am (BR time), the Beyond Carnaval newsletter offers concise reflections, digests, and highlights of the week's significant news within Brazil's investment and innovation landscape.
Delivered on the first Saturday of the month at 06:09 am (BR time), the Open Zeitgeist newsletter provides a space for both Brazilian and "gringo" guests to share their perspectives on Brazilian investment opportunities.
Investors are closely looking for opportunities in our country. It is our job to decipher Brazilian potential.
When a Brazilian friend of mine who lives abroad said, "Tell me when you find out the Brazilian potential," I realized he clearly didn't know our country well and had adopted an underdog mindset.
This text explains why we have this perspective and why we will continue to reveal Brazil's potential for investments.