Country risk in Brazil is moderate to high, which is reflected in the OECD rating of 5, indicating a moderate to high chance it will be unable or unwilling to meet its external debt obligations in a systemic sense. Brazil’s political and economic performance has impacted its credit rating. Shortages of qualified labour, infrastructure shortcomings, widespread corruption, and high costs of production will remain a risk for investors into Brazil.
Brazil is ranked of 109 out of a possible 190 countries on the World Bank’s ease of doing business scorecard, which is above the Latin America/Caribbean average of 112. Brazil outperforms the regional average when it comes to the ease of enforcing contracts, protecting minority investors and accessing electricity. But paying taxes, dealing with construction permits and trading across borders is harder in Brazil. Brazil has a low to moderate risk of expropriation, as no major expropriation actions have taken place against foreign investors in recent years. However, weak and backlogged institutions would make legal challenges against the state difficult and lengthy.
Brazil’s governance scores are generally consistent with the Latin American average, except for control of corruption and political stability/absence of violence, which are both well below the regional average. Brazil has 19 out of the 50 most dangerous cities in the world, including Natal, which has 70 annual homicides per 100,000 residents.
The free and fair election of President Jair Bolsonaro in 2018 restored some confidence in Brazil’s political institutions. The new President is focused on deregulation and fiscal austerity, —which includes a smaller government.