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Bermuda Plays Key Role In Brazil Growth

August 2009

The financial crisis has not left Brazil unscathed, but the general consensus is that an economic recovery is under way here and should gain momentum into 2010. Although the global outlook remains uncertain, the Central Bank of Brazil (Banco Central do Brasil – www.bcb.gov.br) believes that investors in Brazil have a long-term perspective, based on the fundamentals of Brazil’s economy. Brazil is now reaping the benefits of its policies of the last 15 years, as successive governments have gradually steered Brazil towards macroeconomic stability. Likewise, outward FDI is expected to follow the general upward trend of the past few years, as large Brazilian corporations continue to expand outside Brazil.

2008 was a high-water mark for Brazil, when its sovereign debt was granted investment grade status. Market confidence in Brazil continues into 2009, as shown by the recent US$525 million issuance of government bonds in July, at a lower rate than the US$750 million issuance in May, which itself was at a lower rate than the US$1 billion January issuance.

One thread of this story of Brazil’s economic growth is the role played by offshore financial centres, like Bermuda. BCB statistics show that, historically, over 20% of FDI inflows to Brazilare through such OFCs. This type of OFC use is common throughout the world, and respected academic studies show that use of OFCs facilitates more rapid economic growth. Bermuda has consolidated its position as provider of a globally accepted standard for cross-border investment vehicles.

 

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