New Market Report Now Available: Brazil Retail Report Q1 2014

Brazil's retail sector is set to see continued expansion in the future, as sales are boosted by an expanding population, rising incomes and growth in household spending. We believe an increasingly affluent urban population of aspirational status purchasers are driving growth, particularly in high-end big-name global luxury brands, and this is attracting these brands to the country. However, lower income households are also being targeted by budget store formats, particularly in the MGR sector, and we expect this trend to continue.

The 2014 FIFA World Cup and the 2016 Olympics are set to promote investment into sectors that traditionally benefit from major sporting events - including beer, soft drinks and retail - with these events representing an opportunity for Brazil to shine as both an investment and tourist destination. Tourism offers a huge opportunity for the retail sector over the next few years, one which the retail groups are keen to capitalise on, as evidenced by the swathe of new malls and retail complexes being developed across the country.

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However the persistent domestic unrest has had a negative impact on the economy. Widespread protests erupted across Brazil earlier in the year, aimed at issues including elevated public spending, high living costs, government transparency, and the sub-par quality of services such as education, healthcare and public transit. We believe this marks the rise of a more politically proactive electorate, such that we expect these issues to remain important parts of the mainstream political dialogue going forward. In part, this emphasis on education and healthcare has resulted from increased household spending in these sectors - a trend which we expect to continue, and one which is visible in our forecasts.

With a raft of disappointing data in recent months pointing to a still weak economic recovery, we now anticipate a more modest rebound in growth this year. Indeed, high inflation, faltering private consumption growth, and still moderate fixed investment inform our forecast for real GDP growth of just 2.6% this year. This is having a negative impact on our 2013 retail forecasts, however we expect these factors to resolve themselves in the coming months and are projecting household spending growth across all retail sectors from 2014 onwards.

Key BMI forecasts:

* We are forecasting the number of households to grow by an average of 0.9% y-o-y between 2013 and 2018.
* We are forecasting per capita income to increase from US$6,985 in 2013 to almost US$10,000 by 2018.
* We are forecasting the number of households in the US$10,000+ wage bracket to top 62% of total population by 2018.
* Food and drink purchases will continue to make up almost 25% of household spending.

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