Olympics give Brazil bounce

In July, Brazil will play host to the 31st Olympic Games and the eyes of the world will be focused on Rio de Janeiro, writes Sheldon Slabbert.

Behind the scenes, Brazil is a country in financial and political turmoil.

Just 39 days out from the global spectacular Rio’s acting governor, Francisco Dornelles warned the Olympic Games could be a ‘big failure’ because of budget shortfalls equating to $2.9 billion Brazilian real (US$1.3 billion) threatening to compromise security and mobility.

Until recently, Brazil was an emerging market superstar which formed part of the economic group known as the BRICS along with Russia, India, China and South Africa. These countries formed a powerful unit of about 42 per cent of the world’s population and the next wave of growth.

Over the last few years however, Brazil has experienced a spectacular reversal of fortunes.

When one considers that Brazil has a population of more than 200 million people and vast natural resources, it has all the ingredients to recover and be prosperous again.

Domestically, many in our dairy sector have been keeping a close eye on their Brazilian counterparts. As the dairy sector in Brazil plays catchup, many view Brazil as a sleeping giant with the potential to become a serious contender in the global dairy market.

Brazil already produces 50 per cent more milk than New Zealand and has vast land. It is no surprise Brazil has enjoyed investment from dairy giant Fonterra and smaller farm syndicates alike. Fonterra already has thousands of workers in Brazil and operates various joint ventures in the region. Through BRICS, Brazil is better positioned to access markets in China, Russia and India, than certain countries outside of the group.

Investors with higher risk appetite are able to invest in the performance of countries like Brazil through instruments such as Exchange Traded Funds (ETFs) or Brazilian companies that have a dual listing in other markets such as the New York Stock Exchange (NYSE).

In part, there is an optimism that despite their recent debt issues Rio will be one of the Olympic success stories. This may be partly due to less infrastructure spending required after hosting the soccer world cup in 2014.

Come August, the local economy can look forward to a shot in the arm as visitors pour in from around the world and with the Brazilian Real trading at historically low levels across many currencies, tourists may be spending a little more while Brazil is on sale.