The president of the Swiss bank UBS in Brazil, Sylvia Coutinho, believes that the country has all the conditions to assume a global leadership role in the issue of “green finance”.
At a time when international demands and those from economic agents themselves are increasing for sustainable environmental policies, she says that Brazil “has the largest environmental assets on the planet” and may be able to attract foreign investment if it knows how to take advantage of this opportunity.
What is your assessment of Brazil's economic scenario?
Brazil is experiencing a somewhat classic cycle of economic recovery. This year, in principle, would be the fourth year of a ten-year period of growth. Because we have a vision that foresees ten years of sustained growth.
And we hope that 2020 will be the first year, in these first four years of this recovery, in which we see slightly more robust growth.
Despite the impacts caused by the coronavirus, which should reduce growth a little, we estimated that this year's GDP would be around 2.5%. And we are revising it to something around 2.1%.
How important are reforms for this recovery?
One thing I think is positive when we look at Brazil is that it is one of the few markets that is facing the necessary reforms head on. Although obviously, the pension reform was an important milestone.
So, you look there and there are a number of markets, including developed ones, that are having to go through the same difficult reforms and are not succeeding. Brazil is there, not only doing its homework, but there are signs that it will continue to do so.
Despite our vision of a positive cycle for the next ten years, it also assumes, of course, that these reforms will continue to happen. In fact, Brazil continues in that famous Doing Business ranking (the best countries to do business) with a very poor score.
And we hope that this, over this period, will contribute to significantly improving the country's position in the ranking.
The government is trying to reduce the state's participation and thus attract the private sector to invest. How do you see this?
The closing of last year's GDP, which will be announced in March, is estimated at around 1.0%, 1.1%. When we look at the resulting number, it is not as robust as we would expect.
But when you deconstruct this 1.0%, you had the State retreating by around 0.6% and the private sector growing by 2.0%, which resulted in the 1.1% that we will see in March. The result may have been lower than what the market wanted.
But qualitatively, it is quite healthy. And more sustainable than previous growths, which were often artificially inflated by government actions and short-term consumption.
What has caught your attention the most?
Other actions that really excite me are what is happening in the infrastructure sector, in agribusiness, which, in addition to being led by people who really understand the business, are being reformulated to become increasingly competitive globally.
The Central Bank also has a strong agenda to increase competition. I would say that all of this is converging towards greater structural growth of the economy.
Should the coronavirus epidemic hinder growth?
The external scenario started the year in a rather benign manner. Apart from the coronavirus and the situation in the Middle East, I would say that the cooling of the trade war between China and the United States calmed the markets, and we gradually noticed a renewed appetite for emerging markets. Especially when you consider that there are developed markets abroad with very low and often even negative interest rates.
Do low interest rates make things easier for Brazil?
When we think about everyday domestic issues, in the short, medium and long term, the average interest rate in Brazil over the last 20 years was 13.1%. We expect it to be around 5.5% over the next ten years. This has several implications.
We have never seen low interest rates or low inflation in the market for a longer period of time. And the Brazilian economy is traditionally low leverage. We have followed the tradition of very high interest rates for so many years.
Let's take the real estate credit market in Brazil as an example. This is a market with enormous leverage potential, but it is still in its infancy, especially given the instruments available to do so. I don't think we have yet seen the effects of a low interest rate for a prolonged period on the Brazilian economy. This is also a very interesting point.
These scenarios I mentioned assume that the reforms will continue to move forward in the country. We believe that there will be, in some way, this constructive dialogue and that they will be able to approve some of these important reforms. In addition to the microeconomic proposals, which are also moving forward.
Has the pace of privatizations been slower than expected?
This is not an easy agenda. I think all the agents involved are moving towards advancing this agenda in a very constructive way. But that was expected. I find it difficult to judge whether it could be moving at a much faster pace given the context in which they find themselves.
At the World Economic Forum in Davos, Brazil was asked to adopt better environmental practices. And it became clear that a poor environmental policy could drive away investors. What is your assessment?
In short, Brazil, in my opinion, has the potential to become the world leader in green finance. We have the largest environmental assets on the planet. Our entire infrastructure agenda is green. In fact, this is the type of capital we are able to attract. So, this agenda is very important. There is currently a tremendous global demand for this entire ESG agenda, for sustainable investment.