Brazil's ability to move forward hindered by political crisis - Marsh

Friday, March 10, 2017

Every year, insurance and risk management specialist Marsh and macroeconomic and financial analysis firm BMI Research release the Political Risk Map, which analyzes the political scenario in more than 200 countries around the world. This year, Brazil's score came in at 56.70, while the top country in South America, Chile, had a score of 70.40.

BNamericas spoke to Kiyoshi Watari, Marsh's senior vice president of credit and surety, and political risk practice leader, about the 2017 map and what put Brazil so far behind Chile.

BNamericas: Several factors were listed in Marsh's 2017 Political Risk Map that could affect Brazil's political risk, like corruption, the poor quality of public services and inequality. Which of these factors affects the country the most?
Watari: All of these factors are co-related and none have an isolated influence on Brazil's score, but when put together they all represent [the country's] current political-economic scenario. The perception and the consequent reality of corruption is certainly more latent in the news and in the population, in addition to having more weight in international agency and investor evaluations.
In the insurance market, economists at insurers certainly point to a set of structural weaknesses, including the above points, and stress that key reforms – such as policy, fiscal and pension – will only affect the next generation. These are profound changes that take time to be absorbed by society and by managers.
BNamericas: What other factors affected Brazil's political risk score?
Watari: While investigations have revealed part of the corruption and some politicians and businessmen are already serving sentences, there is still a sense of lethargy and a lack of concrete actions for prevention and enforcement going forward. The approval of the anti-corruption law, with reservations, and a lack of long-term investment planning, still inhibits the investment potential of foreign capital.
BNamericas: Is Brazil's score expected to improve in the coming years?
Watari: Everything will depend on the political and economic developments in the next 18-24 months, including next year's elections.
BNamericas: The map mentions President Michel Temer's efforts to stabilize the country. Could the country's political risk score change because of the 2018 elections?
Watari: By all means. And everything will depend on the direction society takes in the elections.
BNamericas: Brazil's score puts it in third place in South America on the Political Risk Map, but it's still far behind the first place country, Chile. What can Brazil do to reach the same level as Chile?
Watari: This distance has increased in the last 10 years. While Chile continues to bet on attracting foreign capital and investing in infrastructure, education and an open economy, Brazil does not see any investments and continues to impose protectionist barriers as a means of preserving the lowest competitiveness of the national industry.

About the company

Created in 1871, Marsh is part of the Marsh & McLennan Companies and it has some 30,000 employees in more than 130 countries.