Political risk dominates agenda at ABGR seminar

But participants in the 10th edition of the bi-annual International Seminar on Risk Management and Insurance organised by ABGR, Brazil's risk management association, were also told that the current troubles faced by the country should not be exaggerated. Companies still have reason to be optimistic in the long run, experts agreed. The analysis was delivered by Mailson da Nóbrega, a former finance minister and a leading economic consultant in Brazil, during the first day of the seminar, now the biggest risk management event organised in the Americas other than the RIMS annual conference in the US. ABGR expected to once again break the record of attendants at the seminar which was set in 2011. Then, more than 1,200 people attended the seminar. It was expected that attendance to the three-day seminar would breach the 1,300 threshold this week. Participants came from Brazil plus other Latin American countries, Europe, the US and African markets such as Portuguese-speaking Angola.hideBack in 2011, however, the general feeling about the Brazilian economy was much more upbeat than now. After a long cycle of solid economic growth fuelled by the global commodities boom and strong domestic demand, Brazil has disappointed investors in recent years with mediocre rates of GDP expansion. More recently, inflationary pressures coupled with a sharp devaluation of the local currency, the real, have affected the confidence of investors in the Brazilian economy. Mr Da Nóbrega, for instance, estimates that GDP will grow by a paltry 2.4% this year and 2.1% in 2014. Inflation, for its part, should hover around 5.8% in both years, well above the already generous 4.5% target established by the Central Bank. Mr Da Nóbrega noted that the reaction of the government of president Dilma Rousseff to the recent underperformance has further undermined the confidence of investors. Ms Rousseff has supported protectionist measures to try and benefit sectors such as local car producers and is accused of putting pressure on the Central Bank to reduce interest rates even though inflation has been on the rise. She was also criticised by Mr Da Nóbrega for adopting populist measures such as the decision to force energy companies to cut prices charged for electricity and lower tariffs for public transportation. The government was further vilified for not carrying forward reforms in areas such as Brazil's highly complex tax code and for failing to create conditions that could lead to more private investments in the country's flawed infrastructure. Finally, Mr Da Nóbrega criticised the interventionist instincts that Ms Rousseff has shown since she came to power in 2011. This, he said, has raised doubts among investors about legal certainty in Brazil. Risk managers that attended the event complained that one such sector is the corporate insurance industry, which, according to them, has been regulated with a heavy hand by Susep, the market supervisors. However, Mr Da Nóbrega said that it would be a mistake for investors to give up on Brazil. In his opinion, the largest country in Latin America is also one of the most stable. This is because it has a vibrant democracy, a free and vociferous media and an independent legal system, which are not necessarily found in other emerging markets. "There is not risk of a collapse of the Brazilian economy," Mr Da Nóbrega said. "Neither will Brazil become a new Argentina," he added. Mr Da Nóbrega conceded that Brazil is currently experiencing a period of slow economic growth. But he stressed that this is not an institutional crisis that could make the country an unfriendly destination for companies. He also said that the extent of the current troubles are sometimes exaggerated by the international media. In fact, he noted that social pressure and the reaction of markets have already forced the government to change tack. One recent example was the higher level of autonomy that the Central Bank has been granted in recent months, Mr Da Nóbrega said. The recent rise of a credible opponent to Ms Rousseff in next year's election could further pressurise the government to amend its policies, he concluded.

Political risk dominates agenda at ABGR seminar

Want to read this article?

Read Next

AXA P&C increases premiums by 7% as rates rise at AXA XL

Hong Kong and Shanghai to cooperate on captives and ILS

Swiss broker Kessler names head of special risks

Supply chain cyber risk concentrated in 15 top vendors with ‘below average’ cybersecurity

US insurers expected to increase casualty pricing as social inflation rises

AXA P&C increases premiums by 7% as rates rise at AXA XL

Hong Kong and Shanghai to cooperate on captives and ILS

Swiss broker Kessler names head of special risks

Supply chain cyber risk concentrated in 15 top vendors with ‘below average’ cybersecurity

US insurers expected to increase casualty pricing as social inflation rises

Want to read this article?

Read Next

AXA P&C increases premiums by 7% as rates rise at AXA XL

Hong Kong and Shanghai to cooperate on captives and ILS

Swiss broker Kessler names head of special risks

Supply chain cyber risk concentrated in 15 top vendors with ‘below average’ cybersecurity

US insurers expected to increase casualty pricing as social inflation rises

Related Articles