Brazil: April 2014, In Numbers

With more than $175 billion in investments expected this year, Brazil is positioned to become the world’s fourth-largest Information and communications technology (ICT) market, according to a report by global market analysis firm IDC. Brazil is currently ranked as the world’s sixth-largest Internet market in terms of users (86 million in 2012). The report predicts $569 million in Brazilian investments in public Cloud services by 2017. Brazilians are also expected to purchase more than 58 million smartphones and tablets this year, outpacing sales of desktops and notebooks.

Petrobras, Brazil’s state-controlled oil company, slashed its refining investment program through 2018 by $26 billion, to $38.7 billion, as it tackles debt and pricing challenges. Petrobras has sold fuel at subsidized rates since 2011, as part of the government’s plan to curb inflation, expected to reach 5.9% this year. Last November, Petrobras’ board approved its first price hike in nine months. The company’s refineries have posted $37 billion losses since 2011. Analysts worry that, with $114.3 billion in debt, Petrobras will be unable to fund the reduced investment budget, for which it expects to borrow more than $12 billion annually through 2018. Petrobras is counting on development of pre-salt oil finds to boost revenues and position Brazil as a major crude exporter. The company announced in March that it found two new pre-salt wells at fields off the coast of Rio de Janeiro state.

The government plans to cut nearly $19 billion in discretionary spending this year in a bid to restore investor confidence and avoid a ratings downgrade. Finance minister Guido Mantega announced a new 2014 primary surplus target of 1.9%. Brazil missed its 2.3% target last year, despite a downward revision from 3.1%. The target may be missed again, as authorities are unlikely to aggressively curb spending in an election year, particularly as president Dilma Rousseff seeks reelection. The government’s 2.5% GDP growth forecast is also unrealistic, as private estimates put it closer to 1.3%. Standard & Poor’s revised its rating outlook to negative last June, prompting concerns of a possible downgrade and spooking investors. S&P rates Brazil at BBB, two notches into investment-grade territory.