Franklin Templeton fund manager Mark Mobius has warned that Brazil has entered a “rough patch of sluggish growth”.
Mobius says heightened economic challenges threatening its competitive position as one for the fast growing Bric bloc, which includes Brazil, Russia, India & China.
Growth has slowed thanks to the eurozone crisis and the stronger Brazilian Real, says Mobius, adding that a lack of human resources in high tech areas and “unwillingess to allow imports of strategic material” could hamper its competitive edge.
He adds: “In spite of the slowing growth, Brazil has been enjoying an export boom, aided by China’s demand of Brazilian commodities and expansionary monetary policies in the US and other developed nations.
“While the ideal combination of higher global prices and increased demand have helped drive exports of Brazilian commodities, exports of manufactured products have been impacted by a stronger Real and rising labor costs which make it more difficult to compete with other emerging market economies.”
However, Mobius says despite challenges facing the country, he continues to favour the long-term investment potential for Brazil.
He says: “It is by far the most populous country in South America, which means rising incomes and higher living standards of a young, working population have the potential to drive domestic consumption.
“In particular, we like the energy, financials and materials sectors. Should these trends continue, Brazil’s sluggish growth may turn into a growth spurt in the future.”