Brazil's Economic Challenges Rooted in Internal Issues, Says Bradesco CEO

Brazil is currently navigating a complex economic landscape marked by both challenges and opportunities. Recent insights from Ernesto Torres Cantú, head of Citi’s international division, suggest that Brazil is in a favorable position on the global stage, with a GDP projected to grow by 3% in 2024, a significant improvement compared to less than 1% at the beginning of the year [e051b4c0].

However, Marcelo Noronha, CEO of Bradesco, emphasizes that Brazil's economic challenges are primarily internal rather than influenced by external factors such as U.S. President Donald Trump's policies. Noronha, who has been leading Bradesco since late 2023, will attend the World Economic Forum in Davos from January 20 to January 24, 2025, where he plans to discuss these internal challenges [32a65441].

Brazil is grappling with high interest rates and a rising debt-to-GDP ratio, which was around 76% last year and is expected to rise to 80% by 2025 [32a65441]. Cantú noted that Brazil's fiscal discipline is crucial to ensure sustainable growth and attract further investment, while Noronha pointed out that the Selic rate is expected to hover around 15% this year, impacting the economy and consumer behavior [e051b4c0][32a65441].

Despite these challenges, Cantú's comments provide a counterpoint to the prevailing narrative of economic instability, suggesting a potential for recovery. The federal primary deficit is projected to rise to 1.0% of GDP by 2025, putting additional pressure on the Lula administration to implement reforms to stabilize the economy [a98a8388].

Fitch Ratings has indicated that an upgrade to Brazil's credit rating remains unlikely unless there are sustained improvements in fiscal management [a98a8388]. However, Citi's profits in Brazil are expected to exceed a 50% growth target from 2022 to 2024, indicating strong performance in the banking sector despite broader economic challenges [e051b4c0]. Noronha does not foresee a significant increase in consumer default rates, although he acknowledges that the capital market is likely to remain closed to IPOs, with debt issuances expected to perform positively [32a65441].

As Brazil's government engages with major rating agencies to discuss economic policies, the insights from both Citi and Bradesco's leadership underscore the potential for recovery and growth, even amidst fiscal constraints and external pressures such as potential U.S. tariffs under a future Trump administration [e051b4c0].