Why cement sales are lagging behind Brazil's economic growth

Although Brazil’s economy is likely to perform better this year than originally projected, the outlook for the cement industry is not so positive.

"Sales of cement will likely see a contraction of 2% this year, among other factors, because of the effects of the increase in Brazil's benchmark rate and also due to the holding of the World Cup, which reduces the level of economic activity," the president of cement producers association SNIC, Paulo Camillo Penna, told BNamericas.

In the first nine months, domestic cement sales dropped 3% year-over-year to 47.7Mt, according to SNIC. 

"In the first months of the COVID-19 pandemic, the cement sector was supported by small works done by people who wanted to improve their homes to spend more time in them, but this effect has now disappeared," added Penna. 

Earlier this week, the IMF increased its projection for 2022 GDP growth in Latin America and the Caribbean due, among other factors, to higher expectations in Brazil. The IMF now sees Brazil's GDP growing 2.8% this year compared with a previous projection of 1.7%.

However, the construction sector has lost traction in recent months, due to the sharp increase in interest rates, impacting cement sales.

The Selic base rate is currently at 13.75% compared with 2% at the start of 2021.