Country risk

Country risk in Brazil is moderate to high. The OECD rating is 5, indicating a moderate to high probability the country will be unable or unwilling to meet its external debt obligations. Over the past five years, Brazil’s political tensions, tepid economic performance and growing risks to fiscal sustainability have resulted in sovereign credit rating downgrades into sub-investment grade territory.

Brazil ranked 124th out of a possible 190 countries on the World Bank’s latest ease of doing business scorecard, underperforming the Latin America and Caribbean average of 116. Brazil outperforms the regional average in enforcing contracts, protecting minority investors and resolving insolvency. But paying taxes and dealing with construction permits is somewhat harder. Progress on the government’s economic reform agenda, including fiscal consolidation, administrative reform, deregulation, tax reform, trade liberalisation, privatisation and infrastructure investment remains important to enhance Brazil’s business climate in coming years.

Brazil has a low to moderate risk of expropriation, as no major expropriation actions have taken place against foreign investors in recent years.

Brazil’s governance indicators are largely in line with the Latin American average. The notable exceptions are lower scores on political stability/absence of violence and government effectiveness.

The free and fair election of President Jair Bolsonaro in 2018 restored some confidence in Brazil’s political institutions. The new government has made progress on its fiscal and economic reform agenda, including significant pension reform that is necessary to ensure compliance with the government spending ceiling and put public debt on a downward trajectory.