Nothing goes well for Brazil: failed growth, rising inflation, scandals, Moody’s degradation of Petrobras, the country’s most important company. Such is the situation endured by the star of the BRICS - concept coined by Goldman Sachs ten years ago to characterize the new locomotives of the world economy: B as Brazil, R as Russia, I as India, C, of ​​course, as China and S as South Africa, subsequently added to take into account the African continent. The concept did not survive the crisis. China is the only one to keep up its development, albeit at a slower pace. Retrospectively, it is not surprising, as the profile of these countries was different. But in terms of marketing and in order to sell new financial products backed by emerging countries, it was a brilliant idea.

The main disappointment comes from Brazil. The country remarkably achieved its democratic transition despite a hashed history marked by coups and hyperinflation. Lula's election in 2002 consolidated the regime by showing that change in power was now the norm. And, from 2004, the Brazilian economy has accelerated, which has brought Brazil into the club of countries selected by the US bank. Growth even shot up, to the point that thanks to the increase in production and the revaluation of its currency, the Real, Brazil became in 2011 the sixth world economy, surpassing the United Kingdom, weakened by financial crisis, and was right on France’s heels.

Back then, everything worked for Brazil. It was awarded the organization of the 2014 FIFA World Cup and the 2016 summer Olympics. No doubt that these two events would be the opportunity for Brazil to display its development to the entire world. At the same time, a giant deep-water oil deposit was discovered in the South, off the coast. Petrobras announced colossal production prospects and a huge investment program of approximately $ 300 billion over six years. Brazil also benefited from higher iron ore prices and agricultural commodities, due to the acceleration in Chinese demand. Raw materials would represent up to 60% of the exports.

Eike Batista, who became the richest man of the country in less than ten years, symbolized that time.  Supported by the authorities that issued permits and by the banks that financed his projects, he built a firm that manages oil and gas exploration, logistics and engineering operation as well as luxury hotels and the organization of sports events. At its peak, the network of companies he owned – which all have an “X” in their acronym and have been IPOs - weighed more than $ 10 billion. The group collapsed in 2013 when it appears that OGX, in charge of oil exploration did not keep its promises.

The Brazilian dream ended with the slowdown in Chinese demand that caused the drop in commodity prices, preceding the drop in oil and gas prices. When the global economy recovered, under US leadership, the Brazilian economy stalled: growth was close to zero in 2013 and 2014 and most economists are predicting a recession of 0.6% in 2015. Meanwhile, the Real lost its attractiveness and was devalued by 16% against the euro and 30% against the dollar, ending up at the lowest exchange rate for ten years against the US currency. This is not without consequences for inflation, which exceeds 8%, leading the central bank to raise interest rates up to 12.75%.

The fall in oil prices does not help: the famous deposits discovered by Petrobras required investments whose profitability became problematic. On top of this, the country is facing a record drought while nearly two-thirds of production is provided by dams, and is under the threat of power shortages, with consecutive cuts in the major industrial and urban centres of the South. All this is difficult to take for a country that was promised to a bright economic future. This reveals one of its weaknesses: its inability to achieve its ambitious targets and the mistake made by the observers who were wrong to acknowledge them.

On top of this difficult economic climate, there is the scandal of corruption and misappropriation of funds aimed at Petrobras, and affecting the political class including the President, Dilma Rousseff. Indeed, she ran the company at the time facts allegedly happened. Thereupon, the new Finance Minister, Joaquim Levy, facing fiscal slippages, prepared an austerity plan that is constested by its own majority, just like in France ! Economic recession, dysfunctional public services and weakening of political power. Yet, so many untapped assets!

Despite its luxuriant nature, raw materials in abundance, an exceptionally rich culture due to its diversity, its architects, designers, writers and a music that the entire planet covets, Brazil is struggling to impose itself on the global stage. The country wrongly bet on protectionism, which has crippled its industrial development. Moreover its political class has failed to develop and offer its people a vision adapted to nowadays open world.

Despite a few exceptions, notably Embraer in aeronautics and Odebrecht in construction, no large Brazilian group has established itself in the global markets, except for production and export of raw materials. The creativity is there, for example in furniture or clothing: just walk the streets of Rio and Sao Paulo, to be sure, but no Brazilian brand is known outside its borders. As for tourism, which could and should be a growth factor, with a huge and almost virgin territory, it does not take off.  It is a shame but the tourism balance is even in deficit: There are more Brazilians who spend their holidays abroad than there are tourists in their country, due to the lack of infrastructure and appropriate services.

So the country is going through dark times. French companies investing in Brazil need to be aware of this situation and to be careful. In this respect, it is unlikely that the scandal Petrobras remains limited to a few individuals or to local businesses. But Brazil will bounce back, sooner or later. Thus, in order to be there at the right time, we should monitor the situation closely and show our confidence in this great nation that has all the qualities to be ranked in the global economic elite, once it would have officially returned to sound business practices and made the necessary changes in economic priorities.