Brazil 2016: investments, economy and recession

The current scenario of political and economic instability became a major concern among the Brazilian people. Several sectors are suffering from the economic slowdown, which is affecting everything from household monthly budget to the investment market. However, this is the right time to detect new opportunities. Even though we are witnessing productivity falls, there is plenty of room for transformation concerning the market logic and consumer behavior.


Regarding the financial market, the savings account is one of the sectors that showed worst results in 2016. According to the Banco Central do Brasil, savings has been showing its worst activity in the last two decades. Distrust in the economy is expressively increasing the number of withdrawals. An example is that in the months from January to March, withdrawals corresponded to the removal of about 24 billion reais, exceeding the volume of deposits.


The decrease of people who is interested in savings is explained mainly due to inflation. High inflation hurts this investment’s profitability, doing so that Brazilians chose to withdraw the money invested and search for new solutions and opportunities.


A type of investment that stood out in this period was the Tesouro Direto, which consists of trading government bonds and debt securities. It emerged from a partnership between the main Stock Exchange in Brazil, BM&F Bovespa, and the Brazilian Treasury.


The Tesouro Direto recently hit a record of new investors. The advantage of this investment is that it offers more attractive financial return than savings, with reduced risks, and it can be used as margin collateral for other investments, such as trading stocks.


Brazilian investors are seeking to educate themselves about the finance market. They are becoming more demanding and careful, while become specialists in the subject. And with that, the number of  investors in the stock market is having a significant increase in Brazil.


Investments with a better profitabilty, such as the Tesouro Direto, are also attracting more and more supporters. Seeking better return on their money, when people compare the benefits and possible gains, they prefer to withdraw money from savings and invest it anywhere else.


In May, the BM&F Bovespa shared some data that confirms the significant increase of individual participation in their business.The number of registered people rose from 85 thousand to 560 thousand through the years of 2002 to 2016.


Rio’s Olympic Games: great legacy or future burden?


Despite this significant increase in the stocks exchange sphere, brazilian government is still looking for news ways to strengthen not only the financial market, but the whole economy. The Rio 2016 Olympic Games can be seen as an attempt to relief the economic scenario, even momentarily.


The large influx of tourists in the country creates the expectation that some markets will get stronger, and will be able to recover a little bit from the recession. One example is that during the Olympic Games, Airbnb expects to move about $ 75 million only in Rio de Janeiro. This value is almost half of the total spent in the city through their website in the whole year of 2015.


Before the games, more than 60,000 bookings were made using Airbnb in Rio. One of the reasons for this sudden rise is the very Brazilian people who, due to the economic scenario of the country, are looking for more inexpensive ways of traveling to see the Olimpic Games. Since the World Cup, the number of Brazilians using Airbnb rose from 6% to 55%.

Even thought the country will benefit from the Olympics, the event will not substantially change the economic scenario in Brazil. According to Moody´s, an analysis and financial risk management company, the main legacy of the Olympics will be in the infrastructure sector of Rio de Janeiro.


For instance, Rio’s fourth subway line, which was built to connect the south side of the city to the main Olympic park, in Barra da Tijuca. This route is known for its heavy traffic, so the prospect is that the subway line will relief the number of cars in the streets, quickly connecting the areas.


However, the expectation is a sudden increase in taxes, to cover the huge expenses made during this period. Rio  saw major investments in construction and renovation, improvements in the transport system and revitalization of many areas of the city. But all of this money used was at the expense of the population. Although the benefits will stay in the city, people will have to pay a high price, especially considering the economic timing.


Moody´s also reported in a note released in August, that the country will again suffer the harsh consequences of the economic recession as soon as the games end. The gains in infraestructure will indeed last and improve urban mobility in Rio de Janeiro. But will it be enough to worth the high cost of the event?