Overview of Brazil's Economy

October 2014
Economic growth and social changes that come along with it have made Brazil the world's 6th economy.

beauty in bresil - 976X549 - 3
beauty in bresil - 976X549 - 3

Brazil's GDP in 2013 reached 2.19 billion dollars USD, making it the seventh largest economy in the world. The country's economy is expected to rank 6th by the end of 2030 and 4th in 2050 behind China, the USA and India(1).

Indeed Brazil enjoys an ideal population pyramid illustrating that a majority of Brazilians are of age to work. The country is also reaping the fruit of a number of years of social reform such as increased minimum wage, the development of redistribution programs, or facilitated access to credit for a large portion of the population. These measures have contributed towards creating a genuinely strong domestic market, one of the main propellers behind Brazil's recent economic expansion. Consequently, in 2012, household spending reached 1.40 billion dollars USD(2).

Brazilians are also well equipped: there are more mobile telephone subscriptions than inhabitants (125 subscriptions for 100 inhabitants(3)) and 54.3% of the population uses Internet. Online and mobile commerce therefore holds strong strategic appeal for companies. Brazilians nonetheless continue to rely strongly on direct sales and on traditional distribution channels - namely in shopping centres: there are over 500 such malls in Brazil, of which one third are in São Paulo.

Although Brazil has experienced recent decline in growth (2.3% in 2013) and there remains a number of challenges to address, such as a lack of infrastructure or high tax rates, the overall economic progress has had significant impact on Brazilian society.

Brazil's New Society

There have never been more millionaires in Brazil and over half the population has integrated the middle class - 113 million people - whereas poor classes represent 15.9% of the population(4).

The status of women has also evolved. As an integrated part of the work force, women bear fewer children and their revenues continue to increase: over 38% between 2001 and 2009 compared to 16% for men. Brazil's birth rate - an average of 1.8 children per woman - is also closer to rates in developed countries. Brazilian women alone then represent great potential for international businesses, and namely for L'Oréal.

Although there are fewer children, they study for longer: the average duration of study almost doubled between 1990 and 2012, shifting from 3.8 to 7.2 years. As government budgets for education increase and there are fewer students, education promises to lead to improved productivity and economic growth for the country.

With 36 million people expected to reach the middle class by 2020(5), Brazil represents a formidable growth market.

The Cosmetics Sector

The beauty market, sustained by a new middle class, is remarkably robust: between 1996 and 2012, it increased by 10% when the country's GDP for the same period increased by only 3%(6). Spending on beauty and care products represents 260 dollars per year per inhabitant - a rate that is comparable to the North American market(7).

Brazil's cosmetics sector ranks fourth globally, behind the USA, Japan and China(8). In 2012, cosmetics sales represented 42 billion dollars(9). Two segments experienced spectacular growth between 2006 and 2011: cosmetics (+281%) and sunscreens (+230%). The sector's global growth over the same period was of +142%.

(1) World in 2050, The Brics and beyond : prospects, challenges and opportunities, PwC, January 2013
(2) World Bank, 2012
(3) World Bank, 2012
(4)World Bank, 2012
(5) Ubifrance (São Paulo bureau), 2013
(6) Brazilian Association of the Cosmetic Toiletry and Fragrance Industry (Abihpec), 2013
(7) L’Oréal Brazil
(8) Euromonitor 2013
(9) Brazilian Association of the Cosmetic Toiletry and Fragrance Industry (Abihpec), 2012