Brazil Agribusiness Outlook Positive on Political Shakeup
The outlook for Brazilian agribusiness in 2019 is positive following the election of Jair Bolsonaro, according to a new Rabobank report.
“In 2019, Rabobank expects local demand to rise on the back of improving economic growth, although freight and trade issues pose risks. Brazilian politics experienced a profound shake-up following the election of Jair Bolsonaro, who took over as president on Jan. 1. This development is viewed with optimism by Brazilian business, which is rooted in the fact that the new president’s economics team has sent the right signals about fiscal reforms. The markets appear to have given the new government the benefit of the doubt, but they will want to see real progress in reforms in the first six to 12 months of the new presidency. This represents the pivotal challenge for the new government in 2019,” the report states.
“The gradual recovery of Brazil’s economy in 2019 is expected to boost local demand across a range of key agribusiness sectors, including corn, cotton, beef, poultry, and dairy,” according to Andy Duff, Head of RaboResearch F&A – South America. ”Meanwhile, for soybeans, sugar, and poultry, among others, trade-related issues will be decisive for the local sector’s performance.”
Although the decline in international oil prices at the end of 2018 has helped to bring local fuel prices down, the former government’s hasty compromise with the trucking sector following last year’s strikes has yet to turn into a clear long-term agreement, with consensus on all sides and a solid legal basis. “The uncertainty regarding road freight rates contributes to an ongoing general risk for Brazilian agribusiness in 2019,” continues Mr. Duff. “Given this continuing uncertainty, the threat of another round of freight disruption in 2019 cannot be ruled out.”