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Brazil – the largest economy in Latin America – has seen an economic decline since 2010 that has been reflected in the steady decrease of GDP, according to Cepal – Economic Commission for Latin America and the Caribbean. 

In 2014 the GDP closed with almost zero growth, a mere 0.1%. In addition to this low economic performance scenario, other important events marked the year such as the presidential elections, the world’s biggest sporting event – the World Cup FIFA – and the discovery of the corruption scheme involving the main oil company in the country, Petrobras.

The Brazilian economic slowdown in 2014 was mainly caused by the decrease in investments due to falling domestic production, lower capital goods importation of machinery and equipment and negative performance of civil construction. Overall, there was poor industry performance - a drop of 1.2%, and high inflation of 6.41%, which reduced consumer purchasing power. Furthermore, the slowdown in the Chinese economy affected some industries, as China is an important market for Brazil.

2014 was a year marked by one of the toughest electoral disputes in the country’s history. The elections occurred in the middle of public demonstrations where the Brazilians fought against issues such as corruption and lack of investments in health, safety and infrastructure. The final result was the re-election of President Dilma Rousseff (Workers’ Party - PT) with the tightest vote margin since the return of direct elections in 1989, with only 3 percentage points compared to the opponent Ae?cio Neves (Brazilian Social Democratic Party - PSDB).

In the pre-World Cup period, the government made strong efforts to convince everyone that the event would help boost the local economy, and bring new opportunities such as job creation through investment and the attracting of a large number of tourists to the country. However, after the event it was confirmed that the tournament’s overall effect on GDP was only negligible.

This environment of political and economic uncertainties was reflected in 2014 in the decline in confidence of the business sector and the constraint on public finances in Brazil. In the coming years the real economic growth is expected to remain low: World Bank is forecasting a 1.3% GDP growth in 2015 and 1.1% in 2016.

How are the brands dealing with this economic scenario? It depends on the category we are referring to.

Brands from the B2B segment like Petrobras (oil) and Vale (steel) – with less dependency on the role played by the brands in the purchasing decision process when compared to consumer goods brands – suffered with the slowing Chinese economy, which affected the commodities prices. In addition, Petrobras had problems related to corruption and corporate governance. Petrobras and Vale decreased 75% and 46% in brand value, respectively, and the segment as a whole dropped 71%.

The Retail macroeconomic segment in Brazil experienced its weakest performance in the last eleven years: the sales grew only 2.2% in 2014. As a consequence, the segment showed a decrease of 2% in comparison to the previous ranking.

Service was another category that observed a drop in brand value in 2015, decreasing 5%. The segment saw the number of brands dropping from 18 in the previous ranking to 14 in 2015. Moreover, the sub-segments Health Care, Communication Providers and Airlines also had a weak performance in the year.

The good news came from the Beer, Food & Personal Care and Financial Institutions categories.

Beer, Food & Personal Care showed a 19% growth in 2015, mainly driven by the AB Inbev’s beer brands Skol – the most valuable Brazilian brand, Brahma, Antarctica and Bohemia, which combined value grew 23%. On the other hand, Natura, the cosmetic company, saw its brand value drop 26%: the company has seen competitors increase their sales channels very quickly.

The recovery in the banking spreads and the consolidation of M&A benefited the brands from the Financial Institutions category, which grew 26% in terms of value in 2015. Bradesco and Itau?, which account for almost 80% of the segment, increased 25% and 28%, respectively.

These two categories – Beer and Finance – also observed a significant movement in 2014: some important brands sought ways to keep their growth and profitability, such as Skol and Bradesco, which have focused their brand strategy on attracting middle class consumers. This strategy seems to be paying-off: these two brands – the top two most valuable Brazilian brands – raised their brand values by 20% and 25%, respectively - impressive performances.