Even if President Lula da Silva is wrong when he said God must be Brazilian, the country is still experiencing miracles in terms of its notable economic progress while a greater part of the world has lagged due to the economic recession.

The continued growth of its GDP has led to a booming middle class which now has the highest buying power in its history. Brazil contains nearly a fifth of the world's fresh water, allowing them to expand agricultural production and generate carbon-free electricity while recent discoveries of oil reserves has together painted an atmosphere of prosperity -- a mainframe for foreign investment attraction.

When there is turbulence in the international market, but to compensate, a country has a growing local market, then they can more easily overcome the crisis, the Consul General of Brazil in New York, Ambassador Osmar Chohfi, told IBTimes, speaking about the current state of Brazil's economy.

While the global economy declined, Brazil's GDP grew 5.1 percent in 2008, above the average of most dynamic economies, and the country stored over $200 billion in international reserves, according to the Brazilian Central Bank.

In the same year, foreign direct investment (FDI) in Brazil rose 30 percent over 2007, registering a record amount of $45 billion, while the world was facing a fall of 21 percent in FDI, according to data from United Nations Conference on Trade and Development.

Though faring better than most, Brazil hasn't been immune from the economic turmoil. It's GDP fell 0.84% in the first quarter of 2009 -- a lot better than expected (-3.0% to -0.9%, according to Agência Estado, Brazil largest news agency) but, quoting the Brazilian Finance Minister Guido Mantega in a conference in New York in late April, the country has everything to be one of the first out of the crisis.

According to the Brazilian Institute of Geography and Statistics (IBGE), industrial production increased in February by 1.8 percent from January 2009, ending a succession of three negative results. Energy consumption in March grew 2.1 percent compared to the same period last year.

In June, Brazil broke its monthly record of auto sales with 300,174 new vehicles sold, according to the National Federation of Distribution of Motor Vehicles. In the first quarter of 2009, 1.45 million of new vehicles were sold, following the fiscal measures and economic stimulus put in place by the government.

Although the country has prospered substantially, key challenges lie ahead for this Latin nation.

Firstly, Brazil needs to match its old bureaucratic system with today's modus operandi of the business world. The nation's fiscal system and the high taxation system must also be reviewed quickly and effectively.

According to Chohfi, the Brazilian government is aware of these problems and is determined to improve its business environment, but the complexity of these political issues will take some time to resolve.

Antonio Rego Gil, president of the Brazilian Association of Information Technology and Communication Companies (Brasscomm) said in a conference in New York that the country's labor law, which was issued in 1943, is currently under revision.

We hope to have our labor law revised while still under Lula's administration, said Gil in a conference hosted by the Brazilian-American Chamber of Commerce. Though revision is underway, there is a long way to go before it can be adapted.  

Current Investor Sentiment

Alcoa, the world's biggest Aluminum producer, has said they will continue with its investment program of $8 billion by 2010, in spite of the current economic crisis. After investing $900 million last year in Brazil, Telefonica SA, expects to increase it by 20 percent this year.

Wal-Mart is investing $730 million into opening new stores in Brazil. Brazil is not immune, but it will grow this year, said Hector Nunez, national president of the company.

Citigroup has emphasized interest in accelerating its operations in Brazil as the crisis challenges the world's financial system.

There's no question that with our focus on globalization and emerging markets that Brazil is a key, key part of that, Citigroup Inc. Chief Executive Officer Vikram Pandit in a conference in Sao Paulo couple of weeks ago. It's our goal to keep growing Brazilian operations just as the Brazilian consumers are growing, just as the Brazilian industry is becoming more multinational.

With crude prices hitting rock-bottom this year, Petroleo Brasileiro SA, is setting up the foundation to become one of the top 5 largest oil producers in the world. The state-owned oil company is raising investments to expand its business. The company recently signed a $10 billion loan agreement with China Development Bank.

The $10 billion is going to be used in our strategic plan that needs (the investment of) $174.4 billion from now until 2013, said the CEO of the company Jose Sergio Gabrielli de Azevedo.

Empowered by the recent oil discoveries, Brazil has grown substantially; it could potentially become an exporter of crude oil, according to analyst Jean Ergass, from Jean Ergass Consulting.

[Brazil] has the potential in the medium to long term to become an exporter of crude oil, with pressures on domestic demand moderated by the extensive use of alternative energy, said Ergass.

Its Central Bank has been effective in driving policies to control inflation. Meanwhile, the Brazilian Development Bank (BNDES) and Caixa Federal have played an important role on credit concession and promoting local initiative.

Its stock market index has grown extensively as we saw last month when Visa Inc.'s Brazilian affiliate raised $4.3 billion in the world's biggest initial public offering in more than a year. BM&F BOVESPA's equities and fixed-income markets traded $680 billion and registered an average daily financial volume of $2.74 billion in 2008, up 14.7 percent and 12.9 percent respectively over 2007, according to the Brazilian Central Bank.

The Brazilian strategy of strengthening its local market and not rely as much on the international market, allowed the economy to be successful during the economic slowdown. The social inclusion policies adopted by the government have rescued 4 million people from below the poverty line between 2003 to 2008, according to IBGE. Brazil has now over 100 million active consumers with income between $500 and $2.000 per month.

Lula's Growth Acceleration Program (PAC), a development plan that invests in the improvement and expansion of infrastructures, is one example of the government's commitment in reducing social inequalities. PAC has planned to invest over $290 billion from 2007, when it was launched, to 2010, according to the Brazilian Central Bank.

The Road Ahead

Brazil will continue to follow its own direction and will not seek to emulate the centralized model of China, nor the advanced capitalist model of the U.S.

Brazil will continue to be a market based economy, but the government will play an important role in promoting development. The government will provide investing incentives by creating policies and promoting public and private partnerships, said Chohfi.

Bilateral relations with China, Brazil's main trade partner, transcend commercial dealings. China and Brazil have developed an important scientific and technological partnership.

We [Brazil and China] have together created the China Brazil Earth Research Satellite (CBERS), which is a space program for monitoring natural resources.  CBERS has already launched three satellites, said Cohfi.

Brazilian market is complex but, once understood, it's very fruitful to do business, said Gil.

Correction: An article on Thursday, July 9, 2009 about Brazil's investment environment misstated the title of a Brazilian official. Osmar Chohfi is the Consul General of Brazil in New York, Ambassador.