Economic Analysis


Population 210.1 million
GDP per capita 8,751 US$
Country risk assessment
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major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 1.3 1.1 -4.5 3.0
Inflation (yearly average, %) 3.7 3.7 2.9 3.3
Budget balance (% GDP) -7.1 -5.9 -16.2 -7.1
Current account balance (% GDP) -2.2 -2.8 0.0 0.0
Public debt (% GDP) 76.5 75.8 94.9 95.2

(e): Estimate (f): Forecast


  • Varied mineral resources and agricultural harvests
  • Large population (estimated at 211.9 million)
  • Well-diversified industry
  • Strong foreign exchange reserves
  • Net creditor in foreign currency


  • Sensitive fiscal position
  • Infrastructure bottlenecks
  • Low level of investment (roughly 18% of GDP)
  • Relatively closed to foreign trade (exports + imports represent only 28% of GDP)
  • High costs of production (wages, energy, logistics, credit) that harm competitiveness
  • Shortage of qualified labour, inadequate education system

Risk assessment

Economic rebound will be insufficient to return to pre-crisis level

In Brazil, the first COVID-19 case was reported on 26 February 2020 and it did not take long for the virus to spread, transforming the country into an epicentre on a global level. This was underpinned by the poor coordination of the authorities regarding the health emergency, as the federal government refused to impose stronger mobility restrictions, which led the state governors to assume this role. The pandemic reached a peak in mid-August and has steadily receded since (albeit still at a high level and with daily new cases signalling a rise in mid-November). Despite this, the economy observed one of the smoothest dives in Latin America. This outcome can be mostly attributed to the implementation of large fiscal and monetary stimuli. In 2021, economic activity is expected to resume. The recovery in household consumption is likely to lose some momentum in early 2021, as a side effect of lower income aid and the recent increase in food prices. However, the index will still be supported by the gradual improvement on the job market and the maintenance of the policy rate at a historical minimum at least during a large part of the year. Moreover, foreign sales will be bolstered by a global economic rebound, improving depressed manufacturing exports, as primary exports (agriculture and iron ore) will remain at robust levels. Conversely, gross fixed investments will remain lacklustre because of the weak fiscal situation, which limits public investment and creates fear for private investors. Downside risks are related to the COVID-19 pandemic’s evolution and the weak political environment.


Strong external position vs. worrying fiscal account

The current account deficit shifted into balance in 2020, bolstered by a stronger trade balance (as imports contracted much faster than exports) and the narrowing of the deficits in the services (driven by lower tourism expenditure) and income (due to the drop in foreign companies’ profits) accounts. Regarding the financing, net foreign direct investment (FDI) registered a strong decline, but remained positive. Conversely, a strong outflow in portfolio investments was recorded (notably in H1 2020). As of September 2020, foreign exchange reserves remained as a strong buffer to external headwinds (totalling USD 357 billion and covering 27 months of imports). In 2021, the current account should remain broadly stable, as the lacklustre domestic economic recovery, and the recent strong exchange rate depreciation, will prevent a relevant deterioration. On the financial side, FDI is likely to improve somewhat, in line with a relatively lower global risk aversion. Finally, total gross external debt stood at 25% of GDP in September 2020 (considering intercompany loans and local bonds held by foreigners), with its public share at 6% of GDP (thus net creditor in foreign currency). On the fiscal front, the challenges imposed by COVID-19 have further aggravated the already ailing fiscal accounts, with the impact estimated at 8.6% of GDP in 2020. Drawdown of government deposits from the central bank was a major source of financing. This was, in counterpart, sterilized trough reverse repos in order to keep the monetary policy stance stable. Overall, while it reduced the cost of borrowing on the one hand, it also shortened the maturity of new bonds on the other. In 2021, uncertainty regarding compliance with the spending cap (which prevents public expenditure to increase in real terms, suspended in 2020) should remain until March, when the budget for the year must finally be approved.


Government popularity may be tested

The political temperature soared in April 2020, when the then Justice Minister Sergio Moro resigned and accused President Bolsonaro of attempting to interfere in the federal police’s investigations. Nevertheless, the political environment has improved somewhat since then, as J. Bolsonaro has worked on improving his allied base at the congress. Therefore, the presidential mandate’s interruption risk is currently low. This is also underpinned by the aid to informal workers, which has shadowed positively on the government´s approval rating. Consequently, the President has been pushing the Ministry of the Economy to design a new welfare program in order to replace the current Bolsa Família. The aim is to increase the aid despite the lack of fiscal space. Conversely, the failure in reaching a broader program, combined with the dismantling of the aid to informal workers, could take a negative toll on the ruling government’s popularity. Moreover, in order to ensure governability, the government has built a coalition in Congress with a block of ideologically vacant parties, which normally provide their support in exchange of the control over ministries and departments with sizeable budgets. This reduces the autonomy to conduct economic policies. Therefore, aggravated by the health emergency and the halt for the municipal elections, the reform agenda has been delayed. This includes the much needed tax and administrative reforms (only affecting new servants) that are still in Congress for vote.


Last updated: February 2021



Bills of exchange (letra de câmbio) and, to a lesser extent, promissory notes (nota promissória) are the most common form of credit note used in local commercial transactions. The validity of either instrument requires a certain degree of formalism in their issuance. The most commonly payment method used in Brasil is “Boleto bancário” which is an official Brazilian payment method regulated by the Central Bank of Brazil. It is a push payment system, which was launched in 1993 and today generates 3.7 billion transactions per year.  The payment process for “Boleto bancário” transactions is similar to that of wire transfer or cash payment methods. Customers are provided with a prefilled boleto bancário payment slip. At this point, the customer has the option of printing the form and paying it physically at any bank branch or at authorized processors such as drugstores, supermarkets, lottery agencies and post offices. Additionally, it can also be paid electronically at any of the more than 48,000 ATMs in Brazil, as well as through internet banking or mobile banking apps, which are widely used in the country. Although the use of the above credit payment instruments for international settlements is not advisable, they nonetheless represent, an effective means of pressure in case of default, constituting an extra-legal enforcement title that provides creditors with privileged access to enforcement proceedings.

The duplicata mercantil, a specific payment instrument, is a copy of the original invoice presented by the supplier to the customer within 30 days for acceptance and signature. It can then circulate as an enforceable credit instrument.

Bank transfers, sometimes guaranteed by a standby letter of credit, are also commonly used for payments in domestic and foreign transactions. They offer relatively flexible settlement processing, particularly via the SWIFT electronic network, to which most major Brazilian banks are connected. For transfers of large sums, various highly automated interbank transfer systems are available, e.g. the STR real time Interbank Fund Transfer System (sistema de transferência de reservas) or the National Financial System Network (rede do sistema financeiro nacional, RSFN).

Debt collection

Amicable Phase

Creditors begin this phase by attempting to contact their debtors via telephone and email. If unsuccessful, creditors must then make a final demand by a registered letter with recorded delivery, requesting that the debtor pay the outstanding principal increased by past-due interest as stipulated in the transaction agreement. In the absence of an interest-rate clause, the civil code stipulates use of the penalty interest rate imposed on tax payments, which is 1% per month past due. When creditors are unable to reach their debtors by phone and/or email, a search of the company’s contacts, partner businesses, and owners is conducted. If there is still no contact, this leads to an investigation of assets, an on-site visit, and an analysis of the debtor’s financial situation so as to ascertain the feasibility of taking legal action. Considering the slow pace and the cost of legal proceedings, it is always advisable to negotiate directly with defaulting debtors where possible, and attempt to settle on an amicable basis, taking into consideration that a repayment plan may last for up to two years.


Legal proceedings

The legal system comprises two types of jurisdiction. The first of these is at the state level. Each Brazilian state (26 states, plus the Distrito Federal of Brasilia), notably including a Court of Justice (Tribunal de Justiça) whose judgments can be appealed at the state level. Legal costs vary from state to state. The second type of jurisdiction involves the Federal Courts. There are five regional Federal Courts (Tribunais Regionais Federais, TRF), each with its own geographic competence encompassing several states. For recourse on non-constitutional questions, TRF judgments can be appealed to the highest court of law, the Superior Tribunal de Justiça (STJ) located in Brasilia.


Monitory Action

The ação monitória is a special procedure that can be filed by any creditor who holds either a non-enforceable written proof, or any proof that is considered as an extrajudicial instrument recognized by the law as enforceable (even if it does not comply with all the legal requirements). If the debtor’s obligation is deemed certain, liquid and eligible, the Municipal Courts usually render payment orders within fifteen days. If the debtor fails to comply within three days, the order becomes enforceable. In cases of appeal, the creditor has to commence formal ordinary legal action. The difference between this procedure and the Enforcement Proceeding lies in the legal requirements and in the possibility of questioning the merit of the obligational relationship by the debtor over the course of the suit. The ação monitória is slower than a regular Enforcement Proceeding: if the debtor presents an objection in the court, the merits of the commercial relation will be thoroughly discussed in the same fashion as a Standard Lawsuit. The estimated period of this lawsuit is on average two years.


Ordinary proceedings

Ordinary proceedings are presided over by an interrogating judge (inquisitorial procedure), and require examination of evidence submitted by each party in conjunction with study of any expert testimony. The creditor must serve the debtor with a registered Writ of Summons, which the debtor must answer within 15 days of receipt. The initial proceedings encompass an investigation phase and an examination phase. The final step of the process is the main hearing, during which the respective parties are heard. After this, a judgement is made by the court. The tribunal may render a default judgment if a duly served writ is left unanswered. It takes two to three years to obtain an enforceable judgment in first instance.

Enforcement Proceeding

On average and within the main states, it takes a year for a judgement to be made following the initiation of legal proceedings.


Court Decision

A final judgment is normally automatically enforced by Brazilian Courts. Since the reforms in 2005 and 2006, attachment of the debtor’s assets is possible if the latter fails to obey a final order within three days. In practice, execution can prove difficult, as there are very few methods for tracing assets in Brazil.

Foreign awards can be enforced if they meet certain conditions: the homologation has to be concluded by the Superior Court to be enforced in Brazil, the parties have be notified, and the award has to comply with all the requirements for enforcement (such as being translated from Portuguese by a public sworn translator).


Extrajudicial Instruments

The enforcement of extrajudicial instruments is a legal type of enforcement granted to the creditor in order to allow him to claim his rights against the debtor. This is the most direct and effective court vehicle to recover credits in Brazil. This lawsuit does not require prior guarantees from foreign creditors (as the bond in the monitory suit for example). Moreover, Brazilian legislation renders some documents enforceable. These are separated in two main categories: Legal enforcement titles (including judgments made by a local Court recognizing the existence of a contractual obligation, and court-approved conciliations and arbitral awards) and extra-legal enforcement titles, which includes bills of exchange, invoices, promissory notes, duplicata mercantil, cheques, official documents signed by the debtor, private agreements signed by debtor, creditor and two witnesses (obligatory)  as an acknowledgement of debt, secured agreements, and so on. It is obligatory to submit the original versions of these documents – copies are not accepted by the court. 

Insolvency proceedings

Out of Court restructuring

Debtors can negotiate a restructuring plan informally with their creditors. The plan must represent a minimum of 60% of the total debt amount. This plan must be approved by the court.


Judicial Restructuring

Debtors make a restructure to the request to the court, or request the conversion of a liquidation request to the court from their creditor(s). If the plan is accepted by the court, debtors typically have 60 days to present a list with all debts from creditors, and a payment plan. A judge then schedules two creditors’ meetings, with the second only occurring if the first one does not take place. During these meetings, the proposed plan must be accepted by a majority of creditors. Once accepted, payments start as decided in the approved plan. The estimated period of this lawsuit is between 5 and 20 years.



The principal stages of liquidation are as follows:

  • liquidation can be requested by either debtors (auto-falência), or any of their creditors if the debt totals more than 40 times the minimum wage;
  • the initiating party must prove the existence of a net obligation, overdue and defaulted by presenting protested enforceable title (special protest – personal notice of debtor);
  • upon analysis of a debtor’s financial situation, the judge can decide that the company must be liquidated.

All of the company’s assets have to be sold and the obtained amount is shared equally between creditors, respecting eventual privileges. The estimated period of this lawsuit is between 7 and 20 years.

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