From The Editor's Desk

What Brazil’s new presidency might mean for the country’s cosmetics industry

By Simon Pitman

- Last updated on GMT

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Getty Images
After years of economic uncertainty and fluctuating fortunes for the cosmetic and personal care industry in Brazil, we consider how new president Jair Bolsonaro might impact the future.

Bolsonaro won the second-round of the presidential election on 28th​ of October 2018 with 55% of the vote, and was sworn into power on January 1st​ 2019.

His campaign was fought on a pronounced right-wing ticket that has alarmed some, particularly social activists, but his pledges to fight corruption and lawlessness have been met with equal measures of enthusiasm.

Business world reacts positively to election

Indeed the business world reacted positively to the election of the country’s first right-wing president in 15 years, with the Bovespa stock index and the national currency both strengthening significantly the day after the election results.

With the new president now installed in office, we take a look at the country’s economic outlook and try to decipher some of the indicators for what is Latin America's largest and most important cosmetics and personal care market.

But despite some good early indications for the economy, environmentalists have been alarmed over proposals to loosen restrictions on the exploitation of the Amazon region, regulations that have presented challenges for ingredient players wanted to explore the areas biodiversity. More on this point later on.

Brazil’s 2019 financial outlook

Looking closer at the economic forecast for Brazil, FocusEconomics put together a panel of six economic experts to find out what they thought was in store for the country in the first year of the Bolsonaro government, with the outcome proving to be largely positive for the country’s 2019 financial outlook.

“We have made marginal changes in our forecasts for 2019 with the victory of Bolsonaro. His first signals suggest he is willing to appropriately address the fiscal problem and indebtedness ratio by leading Pension Reform, privatizing and shrinking the size of the Federal government’s structure,”​ said Helcio S Takeda, managing director and head of research at Pezco, which formed part of a panel.

“We remain optimistic about the prospective scenario for Brazil in 2019, with GDP growing 3%, BRL strengthening further against the USD, IPCA below target level and Selic rate unchanged at 6.5% p.a.”

Although Pezco’s predictions for economic growth were at the higher end of the panelists’ expectations, the five other financial institutions and consultancies questioned, including Banco Fator, BBVA, Datalynk and Banco MUFG Brasi, all predicted that GDP would jump from 1.5% in 2018 to a range of between 2.0% and 3.0% in 2019.

The prospects of a hike in the country’s economic outlook translating into higher consumer spend would rely on a wide number of indicators that are still uncertain, but this picture does certainly look like an improved one, particularly on the back of the slump that was seen in the economy during 2015 to 2017, when many beauty players struggled in the face of declining sales.

Exploiting the Amazon presents opportunities and dilemmas

But despite the economic picture looking rosier for the country’s cosmetics and personal care industry, plans to further exploit the amazon region could spell distinctly mixed blessings as the new government opens the door to potential development and tree-clearing in the Amazon rain forests.

The new government has already given the nod to the Agricultural Ministry to explore formerly protected lands for logging, farming and other projects.

For the cosmetics and personal care industry, particularly those players focused on Amazon-sourced ingredients and formulations, this might well present further opportunities, but it also comes with environmental dilemmas that might not sit well with activists and consumers alike.

Many environmental groups have aired their concerns about the direction the new Bolsonaro government wants to go in, including Greenpeace.

“This isn’t a choice between poverty or a wealthy future based on destroying the environment. It’s a choice between sustainable development and devastation. Bolsonaro could be one of the last Brazilian Presidents in a position to make that choice,”​ said Bunny Mcdiarmid, Greenpeace International Executive Director, at the time of the election victory.

“Brazil has the potential to be a leader on curbing climate change, but Jair Bolsonaro needs to commit to a Zero Deforestation policy instead of weakening environmental protections to make way for more industrial cattle grazing and farming."

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