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The Brazilian economy is being impacted by internal and external factors, and forecast figures are being quickly revised downwards.
The Brazilian economy is being impacted by internal and external factors, and forecast figures are being quickly revised downwards. Market research released by Brazil’s Central Bank revised average analysts’ projections for economic growth in 2014 down to 0.70% from 0.90% four weeks earlier (1). In June 2014, the Hong Kong Trade Development Council (HKTDC) stated that the local economy was projected to grow by 1.8% in 2014. Projection figures keep slipping on a weekly basis (2).
The HKTDC research identifies moderation in local industrial production and a slower inflow of foreign capital as reasons for Brazil’s economic boom cooling off after recording growth levels of 7.5% in 2010. The research shows, however, that because there are signs of worldwide economic recovery and sustained commodity demand, the economy could see growth of approximately 2.1% in 2015, “as the world economy improves” (2).
After hosting the World Cup in 2014, the country’s presidential election in October 2014, and the planning of the Summer Olympics in 2016, the economic situation has become unstable, unpredictable, and uncomfortable for companies, consumers, and investors. These players all await political, social, and economical clarification to go forward with start-ups, investments, and acquisitions, including the pharmaceutical sector. Analysts believe the sector will continue its growth pattern, however, due to the country’s strong domestic demand and large foreign reserves as well as wide potential for growth as the Brazilian population ages and becomes wealthier.
Growth linked with wealthy and aging population
Specialist Rodrigo Leifert, intelligence analyst at São Paulo-based consulting company Tendências Consultoria Integrada, told Pharmaceutical Technology that the sector’s growth is directly linked with how much the population earns and how wealthier it becomes as it ages, needing and wanting more pharmaceutical products and services. Leifert expects pharmaceutical production to grow approximately 3.8% in 2014, and to maintain a similar growth pattern for the next five years, considering Brazil’s Statistics and Geography Institute (IBGE) projections for the sector.
“Brazil’s pharmaceutical sector might not grow as strongly as years before, but should continue growing at positive figures,” he told
Pharmaceutical Technology. According to Leifert, one of the reasons why the growth patterns for the sector slowed down is that during the World Cup, there were fewer working days. He said the scenario started to deteriorate in the beginning of 2014’s second quarter, as fewer working days meant less production of pharmaceuticals.
The analyst expects this year’s figures will reflect uncertainty amid the political scenario while 2015 might show a few adjustments to the political and economic scenario. In 2016, Brazil could see benefits from adjustments and definitions, Leifert said. “It will all depend on how Brazilian families adjust to the scenario and how they cope financially,” he said. Leifert explained that, when it comes to the pharmaceutical sector, how well families do financially directly impacts the growth of the sector. Leifert believes most pharmaceutical projects will be resumed after political definitions are unveiled following presidential elections in October.
Renato Tamarozzi, executive director of the Brazilian Association of Pharmaceutical Commerce (ABCFARMA), is also optimistic for the future of retail sales. Tamarozzi told Pharmaceutical Technology that he expects retails sales of pharmaceutical products to grow approximately 12% in 2014 and believes the two-digit pattern should continue for the next five years. Tamarozzi explains that there is a positive trend related with the sector’s growth, which is the access and globalization of health information for both patients and doctors.
“An informed patient will tend to take better care of his own heath, while a doctor who has more access to information (on health and drugs) will tend to write more prescriptions,” said Tamarozzi. That alone, added to an aging population, could increase sales by meeting “restrained demand,” he says.
Tamarozzi says Brazil’s growth potential in terms of retail sales could lie in the poorer areas of the country, as these needy areas tend to grow faster than the richer southeast where access to pharmaceutical drugs is easier and the competition is fierce.
“Larger retail groups are present in only 450 municipalities, from a total of 5.564 municipalities in Brazil … [therefore], we cannot say that larger retail groups have consolidated the local market,” said Tamarozzi. Difficulties regarding regulatory issues and bureaucracy, however, many times end up slowing retail growth in the country. “Structural, political, and bureaucracy issues directly affect retails sales,” he adds.
Brazil had total revenue of $25.4 billion in 2013, up 17% from the previous year, making Brazil the sixth largest pharmaceutical sales market globally, according to Emerging Markets Information Service. Brazil’s pharma market is expected to move up the ladder a bit more by 2016.
According to public information offered by Marketline from April 2014, population growth and economic stability produced a robust pharma market in recent years, helped also by import tariffs on pharma products, which aided the local industry (3). According to the research, the performance of the market is expected to accelerate during 2013-2018, driving the market to a projected value of $24.2 billion by the end of 2018.
Public figures from Visiongain’s Brazilian Pharmaceutical Market Report predicted that the country’s pharma market would reach $41.3 billion in 2017, with fast expansion, and by 2024 would contribute strongly to world medical revenues (4). The research stated that manufacturers of generic and biosimilar drugs would stand to profit. The study concludes that patients, healthcare providers, and pharma companies would benefit from progress in Brazil, citing population size as the biggest driver. The research indicates that the generic-drug segment would continue growing and projects that the southeastern region of the country, with approximately 40% of the national population, would contribute with over half of pharmaceutical market revenues.
1. Brazil Central Bank, Market Report (Aug. 25, 2014).
2. HKTDC, HKTDC Emerging Markets Research (June 11, 2014).
3. Marketline, Marketline Industry Profile (April 2014).
4. Visiongain, Brazilian Pharmaceutical Market Report (Nov. 21, 2013).
About the Author
Hellen Berger is a business correspondent based in São Paulo, Brazil.