Economic growth has been disappointing in Brazil since 2011, and we are expecting GDP to contract by 0.5% (with the balance of risks tilted more to the downside) in 2015, before picking up to above 1% in 2016. The president, Dilma Rousseff, was re-elected in October for a second four-year term. After a marked deterioration in the public finances, Ms Rousseff is overseeing fiscal adjustments, which should help to safeguard Brazil's "investment grade" rating, but micro-economic policies will not be much more market-oriented than in her first term, where interventionist measures hammered investor confidence. Forecast GDP growth rates of just over 2% from 2017 are still well below those achieved in 2004-10, when the economy grew by an average of over 4% annually. The current soft growth dynamic is also the result of a tight labour market and competitiveness shortcomings, including poor infrastructure, red tape and a heavy tax burden.
The financial services sector will outpace the overall rate of growth, but will lose some dynamism as credit growth slows. Credit as a proportion of GDP has more than doubled in the past decade, to 58.9% in December 2014. The role of the state in credit markets has grown since 2008, with public banks now accounting for 54% of total loans to the private sector (up from 35%). Directed lending as a share of the total has also risen and accounts for 47-8%.
With an estimated population of 203m and GDP of US$2.2trn in 2014, Brazil has the largest financial services market in Latin America. However, income and wealth remain highly concentrated. A continued trend towards formalisation of businesses and the labour force will support financial deepening. Rising incomes will lift demand for financial services, but Brazil's labour-market dynamics will be less favourable than in the previous decade.

Financial services report 2

Banks 3

Insurers 6

Asset managers 8

Financial markets and instruments 9

Financial regulation 13

Monetary and currency policy 14

Brazil at a glance 16

Fundamental indicators 17

Key contacts 18

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