Brazil’s booming economy seems to be stuttering and that could mean bad news for the medical device makers placing large bets on the Federal Republic.
Brazil maintains the largest medical device market in the Latin American region and last year surpassed Great Britain to become the 6th largest economy in the world, but the Federal Republic has seen listless economic growth that has analysts less than impressed.
Economists this week cut their forecasts for Brazil’s 2012 economic expansion to just over 1.8% in the latest in a series of downgrades as the Eurozone debt crisis weighs heavily on the country, according to a Dow Jones report.
That’s less than the 2.5% growth Brazil posted last year and a harsh decline from the 4% economic growth that Goldman Sachs had predicted for Brazil for 2012. Moreover, it’s a slower growth rate than expected for the U.S., which analysts predict at around 2% for the year, Forbes reported.
That may be disappointing for medical device companies which launched aggressive strategies in Brazil following the impressive 7.5% growth in the country’s economy in 2010.
Smith & Nephew (NYSE:SNN) announced earlier this year that it was looking to increase business in Brazil 7-fold as part of its new emerging markets strategy.
"The potential of Brazil according to us is certainly over $150 million of potential revenue," Smith & Nephew CEO Olivier Bohuon told investors during a conference call in May. "We expect also to see in the years to come a strong development in Brazil."
Buhuon’s optimism may not be entirely misplaced, according to market research firm Espicom. The country’s healthcare market, which touts a private health insurance sector 2nd only to the U.S.’s in size, may be partially insulated from ongoing economic pressures.
"The expansion of the private health insurance sector in recent years has resulted in demand for better medical care and, in turn, further expenditure in medical equipment," according to an Espicom report. "The slow economic downturn has not affected hospital capital investments so severely. The public sector continues to be modernized and upgrade obsolete equipment, therefore there are sizable market opportunities if prices are competitive."
Brazil’s medical exports topped $555 million in 2011, which the report depicted as "small in comparison with total production."
