UK exporters urged to wake up and smell the coffee in Brazil
With little relief in sight for the Eurozone economies, UK businesses will need to reach out to countries like Brazil to boost their exports. That is the message from Coface, the experts in analysing country and business risk who urge businesses to focus on opportunities in emerging markets as credit risk across Europe shows no signs of improving.
Coface’s latest Panorama focuses on the findings of the company’s annual Country Risk Conference in Paris. It highlights a world divided in two with the advanced economies, particularly the Eurozone, continuing to experience difficulties because of the weakness of domestic demand. In contrast, the outlook in emerging economies such as Brazil is far more positive, but while UK exports to BRIC economies have grown significantly since the economic crisis in 2008, UK trade with the EU still represented over 50% of exports in 2012.
Coface’s Chief Economist, Yves Zlotowski explained: “In the context of the Eurozone crisis and given the rate of company bankruptcies, the credit risk is likely to increase in France, Spain and Italy. American and Japanese companies however have a more favourable profile but confidence remains a problem. Emerging nations have proved more resilient to external crises, partly because of prudent economic policies but also because domestic demand has been fuelled by the uninterrupted expansion of their middle classes.”
Brazilian economist Zeina Latif, a partner at Gibraltar Consulting, said: “Over the past ten years, 25million people have moved above the poverty line in Brazil and 35million have entered the new middle class (defined as families with a monthly income between US$150 and US$500) and now represent more than half the total population. The middle class are consumers of goods and services and are increasingly demanding better quality products and services.”
Grant Williams, Risk Underwriting Director at Coface in the UK & Ireland commented: “Brazil is just one of the emerging countries which offer good opportunities for UK businesses, provided they take sensible precautions. Coface considers the average risk of default in Brazil is A3 (satisfactory) and assigns a business climate assessment of A4 (acceptable but can be difficult). We forecast economic growth of 3.4% in 2013, largely driven by household consumption which should be fuelled by a 9% increase in the minimum wage in January 2013. Brazil is also one of the places to attract investment in the construction sector thanks to its social housing programmes and the development of facilities ahead of the World Cup in 2014 and the Olympics in 2016.”
“In the current climate, the most successful UK businesses are likely to be those who are prepared to look beyond European borders and Coface is able to support companies with a more ambitious export strategy. For example, we can help them research the risks and opportunities in Brazil where our local presence means we have access to the latest, reliable local company information. And we can offer credit insurance cover for exports to Brazil to reduce trading risk, including overdue debt collection.”
Coface’s country risk profile for Brazil is available free of charge on the country risk section of the company’s website at www.cofaceuk.com. Also available are insolvency trends, an index of payment incidents (late payment and bad debt) and information about the means of payment and debt collection. Country risk information is available for 158 countries in total.