Brazil’s Long Game: Morgan Stanley’s Case for a 20–30 Year Industrial Strategy

Brazil, says Morgan Stanley’s Renato Grandmont, is underperforming its potential because it lacks one thing markets can’t supply: a 20–30-year industrial policy that survives elections.

In plain terms, companies won’t bet billions on factories, logistics, and skills if rules, taxes, and incentives reset every four years. With continuity, he argues, Brazil could push its growth closer to 6–8% a year instead of settling for middling gains.

The here-and-now backdrop is tough: the Selic policy rate sits at 15%, a deliberate brake to wrestle inflation lower. Morgan Stanley’s house view is that, if disinflation holds, rates could ease to about 11.5% by end-2026.

Market consensus is a shade less optimistic, near 12.25% for that horizon. Either way, cheaper money only unlocks investment if businesses believe the policy environment will be stable for decades.

The story behind the story is Brazil’s stop-go record. The country has tried bursts of targeted incentives and credit in the past; they often boosted activity but rarely left lasting productivity gains once the programs ended.

Grandmont’s pitch is not for another short-term push, but for a rules-based plan—clear sector priorities, export and innovation targets, and measurable milestones—that any administration agrees to carry forward.

Tourism is a case in point: world-class natural assets, but results held back by uneven infrastructure, safety, and training. With consistent execution, it could spread jobs beyond a few coastal hubs.

Why this matters outside Brazil: supply chains and investment decisions are shifting. A credible, long-horizon strategy in Latin America’s largest economy would steer capital toward advanced manufacturing, agritech, energy equipment, and services tied to tourism and logistics.

That means more reliable suppliers, deeper markets, and steadier growth in a G20 country that anchors South America. Bottom line: interest-rate relief will help, but staying power is the real catalyst.

If Brazil sets and keeps a 20–30-year playbook—focused on productivity, infrastructure, and skills—it can lower uncertainty, crowd in private investment, and turn potential into compounding gains.