New payment technologies accelerate banking and credit markets growth in Brazil

Structural reforms and stronger institutions powering Brazil forward

Santander Brazil’s economists analyse some of the key fundamentals of growth for South America’s largest country.

Brazil economic reforms over the last seven years have generated significant productivity gains. They have improved flexibility in the labour market, addressed the challenges of an aging population, deepened capital markets and modernized the regulatory framework around infrastructure – with a special emphasis on water and sanitation.

The operational autonomy that the country established for its central bank has strengthened the monetary authority’s credibility. There has also been a tax reform, which significantly modifies the taxation of goods and services, and changes to the legal system designed to dramatically reduce the volume of litigation. Combined, these measures have been credited with improving Brazil's credit rating.

Macroeconomic policy is based on inflation targets, a flexible exchange rate, and a fiscal framework that seeks to control the growth in public spending. The country has 95% of its public debt denominated in reais, which is held predominantly by residents, and in foreign assets exceeding their liabilities.

In addition to external solidity and broad capital mobility, Brazil has a healthy and well-regulated financial industry. The central bank is one of the world’s most proactive in adopting new payment technologies which has contributed to accelerated growth in banking and credit markets.

Brazil has comparative advantages in producing commodities the world needs – including food, metals, critical minerals and energy. It will be one of the world's top five oil producers by the end of the decade, while 85% of its energy comes from renewable sources.

There are millions of hectares of fertile land and a tropical climate that offers potential for expanding food production with advanced agricultural technologies that will improve productivity in the field. It is already the world's largest producer of soybeans, the third largest in corn and the biggest animal protein exporter.

Brazil will also be an important player in the drive towards net zero as the country’s cost per metric tons of carbon is one third of the average decarbonization cost in industrialized economies. Its top source of decarbonization lies in reducing deforestation and restoring degraded areas of the rain forest.