The Promise of Brazil – Overview of Economic Situation in Brazil by Silicon Valley Bank’s Andy Tsao
Make way for the BRIC countries! With the western economies mired in recession over the past few years, the engine of global growth has been without question Brazil, India, China and Russia. At their fourth annual summit in March, the BRIC countries discussed collaboration and policies that would give these powerhouses a greater voice in the global markets and reduce their reliance on the developed economies. Now that the BRIC countries account for 40 percent of the world’s population and a fifth of its economy (WSJ – 4/1/12), we can all agree that the world has indeed shifted.
Expanding From Asia
China has the largest economy of the BRIC countries and much has been made of its astounding growth in the past decade, having risen to the number two global economy behind the U.S. Bay Area venture capital firms began to take notice of the tremendous opportunities in Asia in the early part of the last decade. Many of the Silicon Valley’s most visionary venture capitalists were quick to open up offices in Shanghai and Beijing, and at around the same time moved into South Asia to the cities of Bangalore, and Mumbai.
However, with the abundant liquidity available in the China market for venture capital and private equity investors, competition for deals from both local and global funds have driven up valuations. Many institutional investors have begun to question whether China has become too hot. India continues to show promise, but there have not been significant exits to return capital to investors. The discussion in the hallways of the various private equity conferences around the globe have shifted from being centered on Asia, to other developing growth markets.
Perhaps the hottest region of opportunity right now is in South America and in particular its largest economy — Brazil. In many ways the rise of Brazil has been stealthy, at least from a venture capital and innovation perspective. The B of the BRIC nations has quietly grown to the number six economy in the world, having recently surpassed the United Kingdom. Its economy is coming on like a freight train, driven by its abundance of natural resources, in particular oil, gas, minerals and agriculture. I suspect it won’t be long before Brazil overtakes France as it continues to move up the league table of world economies.
Brazil is a big country, larger in land mass than the continental United States. Its population of nearly 200 million people makes it the most populous country in South America. The booming economy has pulled 30 million people out of poverty into the growing middle class and consumer consumption is on the rise.
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SVB also has a related Webinar and Presentation: CURRENCY WAR! AN UPDATE ON BRAZIL AND THE REAL
Andy Tsao Managing Director, SVB Global Gateway, and SVB Global Private Equity Services
Silicon Valley Bank