On the plus side, there’s been an obvious uplift in the last few weeks with Brazil’s staging of the football World Cup. This proved (some feared the worst) that it could indeed coordinate the complex construction and infrastructure requirements to produce a spectacularly successful event (notwithstanding the home team’s equally spectacular fall from grace) – and this bodes well for the Olympic Games in two years’ time.

On the more general economic front, other positives include the stated aim of Dilma Rousseff’s government to clear some of the obstacles to overseas investment and to make Brazil more attractive to foreign businesses. Brazil was already the recipient of the third-highest amount of foreign direct investment in the world in 2013, a level that is forecast to grow this year, but there is now an acknowledged need to lure more foreign firms to establish a physical presence. The auto sector is an example of firms setting up manufacturing bases, fuelled recently by the demand for luxury brands from the rapidly expanding middle classes.

However, these pluses are counter-balanced by an array of minuses. Despite being one of the biggest economies in the world and the "B" in BRICs that indicated such rich potential, Brazil’s economy has stalled since 2011 and predictions are for tepid growth in the near future. In March this year, S&P downgraded Brazil’s long-term sovereign debt rating to its lowest investment-grade rating, BBB-, which represents another setback for Rousseff’s campaign for re-election in October. Her popularity has also been hit by growing discontent among the millions of poor, who have not seen benefits in public services whilst consumption by the growing middle class has been encouraged. These frustrations were made very visible in street protests prior to the World Cup, and could well resurface in the build-up to the Presidential election.

Inflation is an ongoing problem, sticking stubbornly above target levels and in fact creeping back up, and growth prospects face constraints in the form of tight labour market conditions, weak investment and a burdensome regulatory environment − tax regulations, high tax rates and bureaucratic red tape have been persistent barriers to investment.   Most firms would put the condition known locally as Custo Brasil (Brazil Cost) at the top of the list of reasons for Brazil's constant underperformance − a combination of the added time and costs that come with working there.

The leasing industry has not been supported

The equipment leasing market, which should be on an upswing due to vast projects such as the preparations for the World Cup and Olympic Games, continues to decline, in direct contrast to the other important markets in Latin America. Behind this lies the provision of favourable loan rates from domestic banks, backed by the government’s development bank, BNDES.

Government policy has been to provide cheap finance via these banks for goods that are produced domestically, with the aim of getting foreign manufacturers to locate manufacturing bases in Brazil in order to benefit from this funding. However, this policy has created a system where such lending has become a major part of fiscal stimulus. In these circumstances, firms looking to acquire new equipment, or replace or upgrade old stock, have found less need to continue leasing when there is a more cost-effective funding option available in the form of the government-subsidized financing programme.

This has been the primary factor behind the decline in the leasing market in Brazil, a decline that started in 2009 and has continued unabated since then, with a massive project such as the World Cup seemingly failing to check the downward slide.

Complex tax regulations have worked against leasing as a means of financing, especially in the auto sector, although there are indications of progress for this market, including hopes that there could be growth in operating leasing – a form of finance that has so far been virtually unused.

But there are prospects for growth

Nonetheless, there are signs for a degree of optimism over the longer term. The Brazilian economy is still developing and maturing. For lessors, there is potential for increasing business with small and medium-sized enterprises (SMEs) and there is potential for niche operators to grow with innovative product and service offerings as investment growth returns.

There are sectors that will inevitably grow, one of which is telecommunications. Brazil is one of the largest IT markets within the emerging economies – in 2012, the US Department of Commerce forecast that IT end-user spending will grow to $134bn in 2014, and leasing of telecom equipment and computer hardware will surely benefit.

It may be that, after the October election, there will be the sort of confidence-boosting policy realignment that will lift growth expectations, and which would be even better received if it were accompanied by the introduction of major structural reforms to encourage domestic saving. The dominance of the BNDES in the loan markets may be reduced, and perhaps there will be greater opportunities for equipment lessors, possibly still for the Olympics but more hopefully for later, much-needed infrastructure projects.

The national leasing association, ABEL, would naturally put as positive a spin as possible on the outlook. Its president, Osmar Roncolato Pinho, has written of a return to growth for plant and machinery leasing: “There are numerous fronts to start a new cycle for the sector. We have great confidence that, despite the difficulties imposed on the national economy by the global crisis, the future of leasing in Brazil is considerable and with sustainable growth in prospect.”

That said, the message from most foreign companies operating in Brazil is that the country still has a long way to go.

These and many other issues are covered in White Clarke Group’s Brazil Asset and Auto Finance Country Survey, which is free to download here: http://www.whiteclarkegroup.com/knowledge-centre/category/country_reports