UK exporters urged to wake up and smell the coffee in Brazil

With little relief in sight for the Eurozone economies, UK businesses will need to reach out to countries like Brazil to boost their exports, according to Coface.

Coface’s latest Panorama focuses on the findings of the company’s annual Country Risk Conference in Paris. It highlights a world divided in two with the advanced economies, particularly the Eurozone, continuing to experience difficulties because of the weakness of domestic demand. In contrast, the outlook in emerging economies such as Brazil is far more positive, but while UK exports to BRIC economies have grown significantly since the economic crisis in 2008, UK trade with the EU still represented over 50 percent of exports in 2012.

Coface’s Chief Economist, Yves Zlotowski explains that in the context of the Eurozone crisis and given the rate of company bankruptcies, the credit risk is likely to increase in France, Spain and Italy: “American and Japanese companies however have a more favourable profile but confidence remains a problem. Emerging nations have proved more resilient to external crises, partly because of prudent economic policies but also because domestic demand has been fuelled by the uninterrupted expansion of their middle classes.”

Grant Williams, Risk Underwriting Director at Coface in the UK and Ireland adds that Brazil is just one of the emerging countries that offers good opportunities for UK businesses, provided they take sensible precautions: “Coface considers the average risk of default in Brazil is A3 (satisfactory) and assigns a business climate assessment of A4 (acceptable but can be difficult). We forecast economic growth of 3.4 percent in 2013, largely driven by household consumption which should be fuelled by a nine percent increase in the minimum wage in January 2013. Brazil is also one of the places to attract investment in the construction sector thanks to its social housing programmes and the development of facilities ahead of the World Cup in 2014 and the Olympics in 2016.”