A pivotal moment has arrived for corporate Brazil: the economy as a whole is healthier, just as some of the country’s biggest industries are enjoying a strong competitive position. With plenty of global liquidity and better economic fundamentals, large local companies are benefiting from the lower cost of capital and a greater degree of choice in financing their growth. Stable conditions are also helping multinational companies to establish export platforms in Brazil or to seek growth in its domestic market.

As confidence in the economy rises, investors, credit raters, analysts, and policy makers say that Brazil could reach investment-grade status by 2009 (Exhibit 1). That achievement would give local companies far better access to international capital markets. Brazil’s local-currency markets would become more comparable to developed financial ones in costs, terms, and maturities.

These developments have implications right across Brazil’s corporate landscape. Clearly, solid business opportunities exist, but the country’s volatile economic history suggests grounds for caution as well. Indeed, some of today’s economic optimism reflects strong commodities...