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COUNTRY ANALYSIS: FEDERATIVE REPUBLIC OF BRAZIL

Submitted To
Sir Nabeel Younas
Submitted By
Prince Ali Hassan (142000)
&
Manaf Mir (142026)

BBA 7th SEMESTER


Business Administration Department

AIR UNIVERSITY, MULTAN.

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Table of Contents
Executive Summary………………………………………………………………………..3
Introduction …………………………………………………………………………………..4
Ethnic Groups…………………………………………………………………………………4
Flag…………………………………………………………………………………………………5
Geography……………………………………………………………………………………..6
Political Infrastructure…………………………………………………………………….7
Law………………………………………………………………………………………………….8
Military……………………………………………………………………………………………10
International Relations……………………………………………………………………11
Economic Analysis…………………………………………………………………………..12
Economic Indicators………………………………………………………………………..12
Agriculture……………………………………………………………………………………….14
Industry……………………………………………………………………………………………15
Service……………………………………………………………………………………………..15
Media & Communication………………………………………………………………….16
Investment ………………………………………………………………………………………17
Economic Risk…………………………………………………………………………………..18
Major Natural Resources………………………………………………………………….18
Major Companies……………………………………………………………………………..20
Potential Business Opportunities……………………………………………………..20
Automotive & Transportation…………………………………………………………..21
Oil & Gas…………………………………………………………………………………………..23
Tourism…………………………………………………………………………………………….24
Health & Life Sciences……………………………………………………………………….26
Geopolitical importance & Challenges……………………………………………….27
Reasons to Invest in Brazil………………………………………………………………..30

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Executive Summary
This report is about the Brazil. Brazil is officially known as Federative Republic of
Brazil, is located in Eastern South America, bordering the Atlantic Ocean. Brazil has 26
states and 1 Federal District. Brasília is the capital and second largest city of Brazil after
São Paulo. The economy of Brazil is the world's ninth largest economy by nominal GDP
and eighth largest by purchasing power parity. The Brazilian economy is characterized by
a mixed economy that relies on import substitution to achieve economic growth. Brazil
has an estimated US$21.8 trillion worth of natural resources which includes vast amounts
of gold, uranium, iron, and timber. Agribusiness contributes to Brazil's trade balance, in
spite of trade barriers and subsidizing policies adopted by the developed countries.
Proven mineral resources are extensive. Large iron and manganese reserves are important
sources of industrial raw materials and export earnings. Deposits of nickel, tin, chromite,
uranium, bauxite, beryllium, copper, lead, tungsten, zinc, gold, and other minerals are
exploited.

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COUNTRY ANALYSIS: FEDERATIVE REPUBLIC OF BRAZIL

1. INTRODUCTION:

Brazil is officially known as Federative Republic of Brazil, is located in Eastern South America,
bordering the Atlantic Ocean. Brazil has 26 states and 1 Federal District. Brasília is the capital
and second largest city of brazil after São Paulo. Brazil celebrates its INDEPENDENCE DAY
on September 7, (1822). Current president of Brazil is Michel Tamer and Vice President Post is
vacant. The national currency of Brazil is Brazilian real while its official as well as major
language is PORTUGUESE. Its Total area is 8,515,770 km2 of which 157,630 km2

SEA/WATER and it is the 6th Largest country by total area in the world. Brazil is 5th largest
country in the world in terms of Population. Its current population is 207,353,391.

FOLLOWING ARE THE ETHNIC GROUPS AND RELIGIONS IN BRAZIL

ETHNIC GROUPS (est. 2010)

White 47.7%
Mulatto (Mixed white & Black) 43.1%
Black 7.6%
Asia 1.1%
Indigenous 0.4%

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RELIGIONS: (est. 2010)

Roman Catholic 64.6%


Other Catholic 0.4%
Protestant 22.2%
Other Christian 0.7%
Spiritist 2.2%
Other 1.4%
Unspecified 0.4%

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2. FLAG

flag was inspired by the banner of the former Empire of Brazil (1822-1889); on the imperial flag,
the green represented the House of Braganza of Pedro I, the first Emperor of Brazil, while the
yellow stood for the Habsburg Family of his wife; on the modern flag the green represents the
forests of the country and the yellow rhombus its mineral wealth (the diamond shape roughly
mirrors that of the country); the blue circle and stars, which replaced the coat of arms of the
original flag, depict the sky over Rio de Janeiro on the morning of 15 November 1889 - the day
the Republic of Brazil was declared; the number of stars has changed with the creation of new
states and has risen from an original 21 to the current 27.

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3. GEOGRAPHY:

Brazil is the largest country in South America and in the Southern Hemisphere; shares common
boundaries with every South American country except Chile and Ecuador; most of the Pantanal,
the world's largest tropical wetland, extends through the west central part of the country; shares
Iguazu Falls, the world's largest waterfalls system, with Argentina.

Location: Eastern South America, bordering the Atlantic Ocean


Area: total: 8,515,770 sq km (6th Largest)
land: 8,358,140 sq km
water: 157,630 sq km

Land Boundaries: total: 16,145 km

Border countries (10): Argentina 1,263 km, Bolivia 3,403 km, Colombia 1,790 km, French
Guiana 649 km, Guyana 1,308 km, Paraguay 1,371 km, Peru 2,659 km, Suriname 515 km,
Uruguay 1,050 km, Venezuela 2,137 km

Coast Line: 7,491 km


Climate: mostly tropical, but temperate in south
Land Use: agricultural land: 32.9%

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arable land 8.6%; permanent crops 0.8%; permanent pasture 23.5%
forest: 61.9%
other: 5.2% (2011 est.)
Environment –
Current Issues: Deforestation in Amazon Basin destroys the habitat and endangers a multitude
of Plants and animal species indigenous to the area; there is a lucrative illegal
wildlife trade; air and water pollution in Rio de Janeiro, Sao Paulo, and several
other large cities; land degradation and water pollution caused by improper
mining activities; wetland degradation; severe oil spills

4. POLITICAL INFORMATION:

The politics of Brazil take place in a framework of a federal presidential representative


democratic republic, whereby the President is both head of state and head of government, and of
a multi-party system. The political and administrative organization of Brazil comprises the
federal government, the 26 states and a federal district, and the municipalities.
4.1 POLITICAL STRUCTURE:

EXECUTIVE BRANCH:
CHIEF OF THE STATE: PRESIDENT
HEAD OF THE GOVT.: PRESIDENT & VICE PRESIDENT
CABINET: APPOINTED BY PRESIDENT

LEGISLATIVE BRANCH:
description: Bicameral National Congress of Federal Senate (81 seats) and the Chamber of
Deputies (513 seats)

4.2 POLITICAL RISK:

Considering Brazil’s uncertainty-ridden political system, companies need to bear in mind the risk
that the Government can choose to change laws or rules with potentially harmful effects on
expected future returns.
The recent impeachment process of Dilma Rousseff for budgetary violations and corruption has
led to a rapid increase in uncertainty that was partially settled by the interim president Michel
Temer. However the allegations of corruption and illegal donations that Temer is facing
undermine, again, the stability brought by his appointment.
Corruption in Brazil is a very relevant problem – as the scandal involving the state-controlled oil
company Petrobras has shown – and it is the primary cause of the excessive bureaucracy of the
country, with increasing costs, called ‘custo Brasil’.
New laws could be enacted, regarding, for example, data protection or the environment, whose
primary goal is to reduce corruption – but they can increase companies’ liabilities. This kind of

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risk is very hard to hedge. In fact, the standard tools utilised to protect future income, such as
contracts, insurance or financial instruments, can only marginally protect multinational
companies in this case.
The only way to hedge this risk is to change the set of strategies implemented. International
managers need to manage risk by themselves. One possible method that can be used to hedge
political risk is to find political pressure points as policy decisions can be influenced by the
relationships that exist within Brazilian society.
That is why having and maintaining good relationships with the most influent politicians can
help to avoid adverse policy decisions. For the same reason, it would be better to invest in Brazil
establishing a subsidiary rather than exporting, to better manage the corruption issue. At the
same time, it can be tough to enter with significant influence into the political world of Brazil as
well as penetrate with a new subsidiary in such corrupted market

5. LAW

Supreme Court of Brazil


Brazilian law is based on the civil law legal system and civil law concepts prevail over common
law practice. Most of Brazilian law is codified, although non-codified statutes also represent a
substantial part, playing a complementary role. Court decisions set out interpretive guidelines;
however, they are seldom binding on other specific cases. Doctrinal works and the works of
academic jurists have strong influence in law creation and in law cases.

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Supreme Federal Court of Brazil serves primarily as the Constitutional Court of the country

The legal system is based on the Federal Constitution, which was promulgated on 5 October
1988, and is the fundamental law of Brazil. All other legislation and court decisions must
conform to its rules. As of April 2007, there have been 53 amendments. States have their own
constitutions, which must not contradict the Federal Constitution. Municipalities and the Federal
District have "organic laws" (leis orgânicas), which act in a similar way to constitutions.
Legislative entities are the main source of statutes, although in certain matters judiciary and
executive bodies may enact legal norms. Jurisdiction is administered by the judiciary entities,
although in rare situations the Federal Constitution allows the Federal Senate to pass on legal
judgments. There are also specialized military, labor, and electoral courts. The highest court is
the Supreme Federal Court.

This system has been criticized over the last few decades for the slow pace of decision-making.
Lawsuits on appeal may take several years to resolve, and in some cases more than a decade
elapses before definitive rulings. Nevertheless, the Supreme Federal Tribunal was the first court
in the world to transmit its sessions on television, and also via YouTube. More recently, in
December 2009, the Supreme Court adopted Twitter to display items on the day planner of the
ministers, to inform the daily actions of the Court and the most important decisions made by
them.

6. MILITARY

Aircraft participate in the CRUZEX exercise on 11 November 2010, at Natal Air Force
Base. Brazil.
The armed forces of Brazil are the second largest in Latin America by active personnel and the
largest in terms of military equipment. It consists of the Brazilian Army (including the Army

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Aviation Command), the Brazilian Navy (including the Marine Corps and Naval Aviation), and
the Brazilian Air Force. Brazil's conscription policy gives it one of the world's largest military
forces, estimated at more than 1.6 million annually.
Numbering close to 236,000 active personnel the Brazilian Army has the largest number of
armored vehicles in South America, including armored transports and tanks. It is also unique in
Latin America for its large, elite forces specializing in unconventional missions, the Brazilian
Special Operations Command, and the versatile Strategic Rapid Action Force, made up of highly
mobilized and prepared Special Operations Brigade, Infantry Brigade Parachutist, 1st Jungle
Infantry Battalion (Airmobile) and 12th Brigade Light Infantry (Airmobile) able to act anywhere
in the country, on short notice, to counter external aggression. The states' Military Police and the
Military Firefighters Corps are described as an ancillary force of the Army by the constitution,
but are under the control of each state's governor.
The Navy once operated some of the most powerful warships in the world with the two Minas
Geraes-class dreadnoughts, which sparked a South American dreadnought race between
Argentina, Brazil, and Chile. Today, it is a green water force and has a group of specialized elite
in retaking ships and naval facilities, GRUMEC, unit specially trained to protect Brazilian oil
platforms along its coast. It's the only navy in Latin America that operates an aircraft carrier.
The Air Force is the largest in Latin America and has about 700 manned aircraft in service and
effective about 67,000 personnel.
Brazil has not been invaded since 1865 during the Paraguayan War. Additionally, Brazil has no
contested territorial disputes with any of its neighbors and neither does it have rivalries, like
Chile and Bolivia have with each other. The Brazilian military has also three times intervened
militarily to overthrow the Brazilian government. It has built a tradition of participating in UN
peacekeeping missions such as in Haiti and East Timor.

7. LAW ENFORCEMENT AND CRIME

In Brazil, the Constitution establishes five different police agencies for law enforcement: Federal
Police Department, Federal Highway Police, Federal Railroad Police, Military Police and Civil
Police. Of these, the first three are affiliated with federal authorities and the last two are
subordinate to state governments. All police forces are the responsibility of the executive branch
of any of the federal or state powers. The National Public Security Force also can act in public
disorder situations arising anywhere in the country.
The country still has above-average levels of violent crime and particularly high levels of gun
violence and homicide. In 2012, the World Health Organization (WHO) estimated the number of
32 deaths per 100,000 inhabitants, one of the highest rates of intentional homicide of the world.
The number considered tolerable by the WHO is about 10 homicides per 100,000 inhabitants.
However, there are differences between the crime rates in the Brazilian states. While in São

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Paulo the homicide rate registered in 2013 was 10.8 deaths per 100,000 inhabitants, in Alagoas it
was 64.7 homicides per 100,000 inhabitants.
Brazil also has high levels of incarceration and the third largest prison population in the world
(behind only China and the United States), with an estimated total of approximately 700,000
prisoners around the country (June 2014), an increase of about 300% compared to the index
registered in 1992. The high number of prisoners eventually overloaded the Brazilian prison
system, leading to a shortfall of about two hundred thousand accommodations.

INTERNATIONAL RELATIONS:

DIPLOMATIC RELATIONS OF BRAZIL:


Currently, Brazil maintains 139 embassies abroad as well as 197 consulates and 2 other
representations.
The Brazilian capital Brasilia hosts 133 embassies, and in addition there are 564 consulates and 2
other representations in Brazil.
ASSOCIATION WITH MAJOR INTERNATIONAL ORGANIZATION:
BRICS, G-15, G-20, G-5, International Chamber of Commerce (national committees),
International Criminal Court, International Monetary Funds, Interpol, International Olympic
Committee, International Organization for Migration, OECD (Enhanced Engagement, UN,
WHO, WTO.

8. ECONOMIC ANLAYSIS:

The economy of Brazil is the world's ninth largest economy by nominal GDP and eighth largest
by purchasing power parity. The Brazilian economy is characterized by a mixed economy that
relies on import substitution to achieve economic growth. Brazil has an estimated US$21.8
trillion worth of natural resources which includes vast amounts of gold, uranium, iron, and
timber.

As of late 2010, Brazil's economy is the largest of Latin America and the second largest in the
Americas.[citation needed] From 2000 to 2012, Brazil was one of the fastest-growing major
economies in the world, with an average annual GDP growth rate of over 5%, with its economy
in 2012 surpassing that of the United Kingdom, temporarily making Brazil the world's sixth
largest economy. However, Brazil's economy growth decelerated in 2011 and the country entered
a recession in 2014. In 2017, however, the economy started to recover, with a 1% GDP growth in
the first quarter. In the second quarter, the economy growth 0.3% compared to the same period
of the previous year, officially exiting the recession.

According to the World Economic Forum, Brazil was the top country in upward evolution of
competitiveness in 2009, gaining eight positions among other countries, overcoming Russia for

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the first time, and partially closing the competitiveness gap with India and China among the
BRIC economies. Important steps taken since the 1990s toward fiscal sustainability, as well as
measures taken to liberalize and open the economy, have significantly boosted the country's
competitiveness fundamentals, providing a better environment for private-sector development.
In 2012 Forbes ranked Brazil as having the 5th largest number of billionaires in the world, a
number much larger than what is found in other Latin American countries, and even ahead of
United Kingdom and Japan. Brazil is a member of diverse economic organizations, such as
Mercosur, Unasul, G8+5, G20, WTO, and the Cairns Group.

5.1 MACROECONOMIC PERFORMANCE INDICATORS:

Real GDP: (2016 est.) US$ 3.141 Trillion

Real GDP Growth Rate: (2016 est.) -3.6%

Real GDP Per Capita: (2016 est.) US$ 15, 200

Rate of Unemployment: (2016 est.) 11.3%

Rate of Inflation: (2016 est.) 8.7%

Foreign Exchange Reserve: (Dec 2016 est.) US$ 365 billion

Public Debt: (est. 2016) 69.9% of GDP

Debt External: (Dec 2016 est.) US$ 551.3 billion

Population below Poverty Line: (2016 est.) 3.7%


5.2 TRADE PERFORMANCE:

Brazil is the 26th largest export and 30th largest import economy in the world. In 2016, Brazil
exports are $184.5 Billion and imports are $139.4 Billion, resulting in a positive trade balance.
The top exports of Brazil are transport equipment, iron ore, soybeans, footwear, coffee,
automobiles. Its top imports are machinery, electrical and transport equipment, chemical
products, oil, automotive parts, electronics.
The top export destinations China 19%, US 12.6%, Argentina 7.3% and Netherlands 5.6%. The
top import origins are machinery, electrical and transport equipment, chemical products, oil,
automotive parts, electronics.

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5.3 MAIN ECONOMIC SECTOR PERFORMANCE:

GDP COMPOSITION BY SECTOR: (est. 2016)

Agriculture: 5.8%

Industry: 20.9%

Services: 73.3%

PERCENTAGE OF LABOR FORCE EMPLOYED BY EACH SECTOR:


Agriculture: 10%

Industry: 39.8%

Services: 50.2%

Agriculture Sector:

Agribusiness contributes to Brazil's trade balance, in spite of trade barriers and subsidizing
policies adopted by the developed countries.
In the space of fifty five years (1950 to 2005), the population of Brazil grew from 51 million to
approximately 187 million inhabitants, an increase of over 2 percent per year. Brazil created and
expanded a complex agribusiness sector. However, some of this is at the expense of the
environment, including the Amazon.
The importance given to the rural producer takes place in the shape of the agricultural and cattle-
raising plan and through another specific subsidy program geared towards family agriculture
(Pronaf), which guarantee financing for equipment and cultivation and encourage the use of new
technology. With regards to family agriculture, over 800 thousand rural inhabitants are assisted
by credit, research and extension programs. A special line of credit is available for women and
young farmers.
With The Land Reform Program, on the other hand, the country's objective is to provide suitable
living and working conditions for over one million families who live in areas allotted by the
State, an initiative capable of generating two million jobs. Through partnerships, public policies
and international partnerships, the government is working towards the guarantee of an
infrastructure for the settlements, following the examples of schools and health outlets. The idea
is that access to land represents just the first step towards the implementation of a quality land
reform program.
Over 600,000 km² of land are divided into approximately five thousand areas of rural property;
an agricultural area currently with three borders: the Central-western region (savanna), the
northern region (area of transition) and parts of the northeastern region (semi-arid). At the
forefront of grain crops, which produce over 110 million tonnes/year, is the soybean, yielding 50
million tonnes.
In the cattle-raising sector, the "green ox," which is raised in pastures, on a diet of hay and
mineral salts, conquered markets in Asia, Europe and the Americas, particularly after the "mad

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cow disease" scare period. Brazil has the largest cattle herd in the world, with 198 million heads,
responsible for exports surpassing the mark of US$1 billion/year.

A pioneer and leader in the manufacture of short-fiber timber cellulose, Brazil has also achieved
positive results within the packaging sector, in which it is the fifth largest world producer. In the
foreign markets, it answers for 25 percent of global exports of raw cane and refined sugar; it is
the world leader in soybean exports and is responsible for 80 percent of the planet's orange juice,
and since 2003, has had the highest sales figures for beef and chicken, among the countries that
deal in this sector.
Industrial Sector:
Brazil has the third-largest manufacturing sector in the Americas. Accounting for 28.5 percent of
GDP, Brazil's industries range from automobiles, steel and petrochemicals to computers, aircraft,
and consumer durables. With increased economic stability provided by the Plano Real, Brazilian
and multinational businesses have invested heavily in new equipment and technology, a large
proportion of which has been purchased from US firms.
Service:
The service sector is the main contributor to Brazil’s GDP and job creation, but it’s currently
suffering from structural weakness and poor international performance.
The service sector’s contribution to Brazil’s GDP is the highest out of all other sectors, including
the manufacturing and agricultural sectors.
Brazil has a diverse and sophisticated services industry as well. During the early 1990s, the
banking sector accounted for as much as 16 percent of the GDP. Although undergoing a major
overhaul, Brazil's financial services industry provides local businesses with a wide range of
products and is attracting numerous new entrants, including U.S. financial firms. On 8 May
2008, the São Paulo Stock Exchange (Bovespa) and the São Paulo-based Brazilian Mercantile
and Futures Exchange (BM&F) merged, creating BM&F Bovespa, one of the largest stock
exchanges in the world. Also, the previously monopolistic reinsurance sector is being opened up
to third party companies.
In the last four decades, Brazil’s economic structure has undergone profound changes as the
service sector’s share has grown rapidly at the expense of the manufacturing sector to reach 66%
in 2015. Brazilian services are focused on serving domestic demand and have underperformed in
export markets. However, this structure could be helpful when global trade is on the downtrend.
Services inflation is also rising, driven by a high tax burden and lagging productivity levels
following the other sectors of the economy. The growth of Brazil’s services exports compared to
those of other large emerging economies (VWO) (EEM) has been slow, leading to a widening
services trade deficit. The flows of foreign investments have also fallen in recent years.
However, Brazilian services still receive significant foreign investors aiming to serve the local
market.
The financial sector is largely driven by consumerism and movement in interest rates. Improved
consumer confidence, as we discussed earlier, and support for monetary policies could help this
sector to continue its performance in 2017. Some of the companies to watch in this sector include
Banco Bradesco (BBD) and Itaú Unibanco (ITUB).

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MEDIA AND COMMUNICATION.

The Brazilian press has its beginnings in 1808 with the arrival of the Portuguese royal family to
Brazil, hitherto forbidden any activity of the press – was the publication of newspapers or books.
The Brazilian press was officially born in Rio de Janeiro on 13 May 1808, with the creation of
the Royal Printing, National Press by the Prince Regent Dom João.
Radio broadcasting began on 7 September 1922, with a speech by then President Pessoa, and
was formalized on 20 April 1923 with the creation of "Radio Society of Rio de Janeiro."
Television in Brazil began officially on 18 September 1950, with the founding of TV Tupi by
Assis Chateaubriand. Since then television has grown in the country, creating large public
networks such as Globo, SBT, Record and Bandeirantes. Today it is the most important factor in
popular culture of Brazilian society, indicated by research showing that as much as 67% of the
general population follow the same daily soap opera broadcast. Digital Television, using the
SBTVD standard (based on the Japanese standard ISDB-T), was adopted 29 June 2006 and
launched on 2 November 2007. In May 2010, Brazil launched TV Brasil Internacional, an
international television station, initially broadcasting to 49 countries.

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5.4 INVESTMENT:

Brazil has invested 16.4% of total GDP in fixed capital. Fixed capital consists of total business
spending on fixed assets, such as factories, machinery, equipment, dwellings, and inventories of
raw materials, which provide the basis for future production. It is measured gross of the
depreciation of the assets, i.e., it includes investment that merely replaces worn-out or scrapped
capital. Brazil has invested minor part of its GDP in fixed capital that’s why its growth rate
declined in 2016.
Brazil’s investment in inventories -0.9%. Investment in inventories consists of net changes to the
stock of outputs that are still held by the units that produce them, awaiting further sale to an end
user, such as automobiles sitting on a dealer’s lot or groceries on the store shelves. This figure
may be positive or negative. If the stock of unsold output increases during the relevant time
period, investment in inventories is positive, but, if the stock of unsold goods declines, it will be
negative. Investment in inventories normally is an early indicator of the state of the economy. If
the stock of unsold items increases unexpectedly – because people stop buying - the economy
may be entering a recession; but if the stock of unsold items falls - and goods "go flying off the
shelves" - businesses normally try to replace those stocks, and the economy is likely to
accelerate. In case of Brazil this investment is in negative which shows economy has huge
potential for growth it can boost its output level and can fulfill nation’s needs.
FOREIGN INVESTMENT:
Foreign direct investment (FDI) into Brazil boomed over the period 2009-2011, but has been
slowing down ever since. After reaching USD 73 billion in 2014, FDI inflows to Brazil declined
to USD 64 billion in 2015. The flows continued to decline in 2016, reaching USD 58 billion.
However, Brazil remains the largest recipient of FDI in Latin America and the eighth largest
recipient in the world. The country is currently the fourth largest investor in emerging markets
and the largest investor in Latin America. The main investors in Brazil are the United States,
Spain and Belgium. Key sectors attracting foreign investment include finance, beverages, oil and
gas and telecommunications. The plan of concessions (airports, sections of highways) launched
by the Government is likely to attract investors.
INVESTMENT ATTRACTIVENESS:
Brazil is attractive for international investors due to several factors:
- A domestic market of nearly 210 million inhabitants
- Easy access to raw materials
- A diversified economy that is less vulnerable to international crises
- A strategic geographic position that allows easy access to other South American countries
However, investment in Brazil remains risky because of the country's economic crisis, the large
embezzlement scandal revealed by the Lava Jato investigation and the high rate of inflation.
Other negative factors affecting FDI include cumbersome and complex taxation, bureaucratic
delays and heavy and rigid labor legislation. Brazil ranked 123rd out of 190 countries in the
World Bank's 2017 Doing Business ranking, falling by 7 places.

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ECONOMIC RISK:
The Brazilian economy has been experiencing a contraction in GDP since 2014. During the early
2000s, the country was able to exploit high demand for commodities, especially from China.
However, in recent years, due to falling commodity prices, this trend has reversed. The recession
caused a fall in internal demand that discourage possible business investments in the country.
Lower income levels and the reduction in consumers’ confidence were what made up this
decrease in demand.
One possible way in which companies can reduce this risk is to adapt supply to the new features
characterizing changing demand. Considering the fall in disposable income caused by the
recession, Brazilian consumers are now more sensitive to the prices of goods they buy.
Companies should therefore adapt their production to this new trend in consumers’ preferences,
focusing on the issue of costs in the current environment. This adaptation can be made through
an attentive managing of prices or services associated with the product. Obviously, this may be
difficult especially for marketing teams that are used to a different way of thinking.
In conclusion, Brazil, despite the opportunities of investments offered, does not seem to be as
attractive as it could, due to the weaknesses that characterize its internal environment.

9. PRODUCTION & RESOURCE STRUCTURE:

9.1 MAJOR NATURAL RESOURCES:

Natural resources are defined as those resources which do not need the manual help for their
existence. They occur naturally without the actions of humankind. Magnetic, electrical,
gravitational forces and properties are associated with the natural resources. Many countries are
blessed with the natural resources and Brazil is one of them. Proven mineral resources are
extensive. Large iron and manganese reserves are important sources of industrial raw materials
and export earnings. Deposits of nickel, tin, chromite, uranium, bauxite, beryllium, copper, lead,
tungsten, zinc, gold, and other minerals are exploited. High-quality coking-grade coal required in
the steel industry is in short supply. These natural resources of Brazil are responsible for the
growth of financial status of the country. Some of the best natural resources of Brazil are
discussed below:
1. Iron Ore
It is one of the most useful natural resources of the country. Brazil is very famous for the
production of iron ore all over the world and is world’s third largest producer and exporter of the
iron ore. Vale company which is the top most Brazilian multinational company is associated with
mining and metals of various natural resources. It is the most popular company of the iron ore in
the whole world.
2. Manganese
Brazil country is blessed with the manganese resource in sufficient quantity. This country used to
be the major manganese producer but now the scenario has been changed as now Australia and
some other countries are producing manganese in the larger amount than Brazil.

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3. Petroleum
The country was not rich in the petroleum resource from the early stage. Due to the oil crisis in
the 1970s, the country faced a disastrous condition. About 80 percent of the total country’s oil
consumption was imported leading to the high prices of the oil which were enough to put the
economic burden on the country. This dependence of the country on the imported oil was
reduced with the help of domestic production and conservation.
4. Timber
Brazil is blessed with the great variety of flora and fauna. This country is very famous for the
plant species. The main reason behind the economic success of the country is the presence of
timber industry. Timber is produced in these industries on a large scale.The use of timber wood
is made at a large extent so as to produce different wooden items.
5. Steel
The major part of the export of country involves steel. The steel is being produced in the Brazil
country since the 1920s. In 2013, this country was declared as the ninth largest producer of the
steel in the whole world as the country was responsible for the 34.2 million tons of steel. Even
till date large amount of steel is exported every year to other parts of the world from Brazil.
6. Plastics
Brazil is the seventh largest country in the world in the plastic consumption. The development of
the Brazilian financial status is related to the plastic market of the market. Plastic rubber and
plastic industry occupies an important position in the market of the country. Many multinational
companies has adopted different recycling techniques so as to recycle and reproduce waste
plastic material.
7. Gems
The priciest gems of the world are produced by the mine of the Brazil country and these gems
are produced under fire and dangerous conditions. Crime, poverty, worker exploitation are some
disadvantages associated with the production of dazzling and precious gems. Apart from these
Brazilian gems are well known for its quality in the world trading market of gems.
8. Phosphates
Anglo American is one of the largest integrated phosphate producers in the Brazil. MBAC is
another company associated with the integrated phosphate production in the country.
Development within the country’s borders has indicated that Brazil does have a fair amount of
phosphates reserves.
9. Bauxite
Brazil is the world’s third largest producer of bauxite. Porto trombetas mine owned by MRN is
the largest bauxite mine in the country. A few years ago this mine produced more than 17 million

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tons of bauxite. The Paragominas bauxite mine located in the northern Brazil is one of the
world’s richest sources of bauxite.
6.2 MAJOR COMPANIES:

Top 5 companies from Fortune 500


In 2017, 20 Brazilian companies were listed in the Forbes Global 2000 list – an annual ranking of the top
2000 public companies in the world by Forbes magazine. Largest Companies were:

Revenue Profits Assets Market Value


World Rank Company Industry
(billion $) (billion $) (billion $) (billion $)
38 Itaú Unibanco Banking 61.3 6.7 419.9 79.2
62 Banco Bradesco Banking 70.2 4.3 362.4 53.5
132 Banco do Brasil Banking 57.3 2.3 430.6 29
156 Vale Mining 27.1 3.8 99.1 45.4
399 Petrobras Oil & Gas 81.1 - 4.3 247.3 61.3

10. BUSINESSES IN BRAZIL

10.1 POTENTIAL BUSINESS OPPORTUNITIES

Being the ninth biggest economy in the world and the fourth largest country, with a population of
207,1 millions of people, with a large territory and a favorable weather, Brazil have great
opportunities of investment and economic development. See below the 5 best industries sectors
to invest in Brazil:
AGROBUSINESS
Brazil is the second biggest food producer in the world (behind USA). Approximately, 60% of
the country’s territory is used to farm, 77% of the production is exported and the government
incentives to agricultural production reached, in 2017, USD$175,5 billion. It's a great option for
investment.

AUTOMOTIVE & TRANSPORTATION


Brazilian roads are the primary carriers of freight and passenger traffic. The road system totaled
1.98 million km (1.23 million mi) in 2002. The total of paved roads increased from 35,496 km
(22,056 mi) (22,056 mi) in 1967 to 184,140 km (114,419 mi) (114,425 mi) in 2002.

The first investments in road infrastructure have given up in the 1920s, the government of
Washington Luis, being pursued in the governments of Getúlio Vargas and Eurico Gaspar Dutra.
President Juscelino Kubitschek (1956–61), who designed and built the capital Brasília, was
another supporter of highways. Kubitschek was responsible for the installation of major car

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manufacturers in the country (Volkswagen, Ford and General Motors arrived in Brazil during his
rule) and one of the points used to attract them was, of course, support for the construction of
highways. With the implementation of Fiat in 1976 ending an automobile market closed loop,
from the end of the 1990s the country has received large foreign direct investments installing in
its territory other major car manufacturers and utilities, such as Iveco, Renault, Peugeot, Citroen,
Honda, Mitsubishi, Mercedes-Benz, BMW, Hyundai, Toyota among others. Brazil is the seventh
most important country in the auto industry.

Brazil's railway system has been declining since 1945, when emphasis shifted to highway
construction. The total length of railway track was 30,875 km (19,185 mi) in 2002, as compared
with 31,848 km (19,789 mi) in 1970. Most of the railway system belonged to the Federal
Railroad Corporation RFFSA, which was privatized in 2007. The Sao Paulo Metro was the first
underground transit system in Brazil. The other metro systems are in Rio de Janeiro, Porto
Alegre, Recife, Belo Horizonte, Brasília, Teresina and Fortaleza.

The country has an extensive rail network of 28,538 kilometres (17,733 miles) in length, the
tenth largest network in the world. Currently, the Brazilian government, unlike the past, seeks to
encourage this mode of transport; an example of this incentive is the project of the Rio–São
Paulo high-speed rail, that will connect the two main cities of the country to carry passengers.

There are about 2,500 airports in Brazil, including landing fields: the second largest number in
the world, after the United States. São Paulo–Guarulhos International Airport, near São Paulo, is
the largest and busiest airport with nearly 20 million passengers annually, while handling the
vast majority of commercial traffic for the country.

For freight transport waterways are of importance, e.g. the industrial zones of Manaus can be
reached only by means of the Solimões- Amazonas waterway (3,250 kilometers (2,020 miles)
with 6 metres (20 feet) minimum depth). The country also has 50,000 kilometers (31,000 miles)
of waterways.

Coastal shipping links widely separated parts of the country. Bolivia and Paraguay have been
given free ports at Santos. Of the 36 deep-water ports, Santos, Itajaí, Rio Grande, Paranaguá, Rio
de Janeiro, Sepetiba, Vitória, Suape, Manaus and São Francisco do Sul are the most important.
Bulk carriers have to wait up to 18 days before being serviced, container ships 36,3 hours on
average.
Although the economic crisis reached the automotive sector, there is a stipulation for its growth
in 2017 and 2018. This sector is the second most important to Brazilian economy, forming 22%
of the country’s GDP, and in an international scale, Brazil is the seventh largest market for
automobiles. Also in 2017, Brazilian government presented a new project, Route 2030, which

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assure security for the investors and strengthen the Brazilian competitiveness in a global
escale.
RENEWABLE ENERGY & ENVIRONMENTAL SOLUTIONS
By having a large territory and being the seventh country with the most concentration of natural
resources, Brazil has the great chance to develop its renewable energy. Basically, the sources of
energy in Brazil are formed by: hydropower, alternative energy (biofuel, wind and solar), thermo
energy (natural gas, industrial gas, oil and coal) and nuclear energy. The government, since
2003, has been creating programs to benefit the investors (by selling energy plans to private
companies).
OIL & GAS
Long-term growth in Brazil’s Oil and Gas (O&G) sector remains strong because of proven
below-ground resources, a developed and sophisticated O&G sector, and a diversified economy.
The 2017 estimate for purchases in Brazil’s oil and gas equipment and services market, including
the upstream, midstream, and downstream segments, as well as maintenance and operations
(M&O), is approximately US$21.5 billion. Of that amount, US$10.5 billion will likely be
imported, with approximately US$2.6 billion being imported from the United States, according
to CS Brazil estimate.
Petrobras’s investments and other oil companies’ estimated market share. The Brazilian Foreign
Trade Office does not publish complete oil and gas equipment/machinery import and export
statistics in a single chapter, as many types of equipment also apply to other industry sectors. The
import statistics on the above table were partially based on the Brazilian Federal Income
REPETRO data available for 2014 and 2015. In 2015, Brazil imported US$9.37 billion worth of
oil and gas equipment; however not all types of oil and gas equipment are eligible under the
REPETRO (*).
In 2015, Brazil ranked 12th in world crude oil production, 5th in the Americas, 3rd in Latin
America, and 2nd in South America, according to Brazil’s National Oil Regulator (ANP) and
BP. According to ANP, Brazil owns the 15th largest world proven reserves of 12.67 billion
barrels of oil and 372 billion cubic meters of gas. Estimated possible reserves are 22.7 billion
barrels of oil and 638 billion cubic meters of gas. The BP Energy Outlook forecasts a 16 percent
and 43 percent increase in oil and natural gas consumption, respectively, in Brazil, by 2035.
With a positive outlook from OPEC, Brazil can become the third-largest oil and gas producer,
only behind the US and Russia. With programs like “Gas para Crescer” and “REATE”, the
brazilian government expect to bring foreign investment and create a diversity of competition in
the sector.

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TOURISM

World’s largest tropical wet land.

Igazu falls
Tourism in Brazil is a growing sector and key to the economy of several regions of the country.
The country had 6.36 million visitors in 2015, ranking in terms of the international tourist
arrivals as the main destination in South America and second in Latin America after Mexico.

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Revenues from international tourists reached US$6 billion in 2010, showing a recovery from the
2008–2009 economic crises. Historical records of 5.4 million visitors and US$6.8 billion in
receipts were reached in 2011.
Natural areas are its most popular tourism product, a combination of ecotourism with leisure and
recreation, mainly sun and beach, and adventure travel, as well as cultural tourism. Among the
most popular destinations are the Amazon Rainforest, beaches and dunes in the Northeast
Region, the Pantanal in the Center-West Region, beaches at Rio de Janeiro and Santa Catarina,
cultural tourism in Minas Gerais and business trips to São Paulo city.
In terms of the 2015 Travel and Tourism Competitiveness Index (TTCI), which is a
measurement of the factors that make it attractive to develop business in the travel and tourism
industry of individual countries, Brazil ranked in the 28st place at the world's level, third in the
Americas, after Canada and United States.
Brazil's main competitive advantages are its natural resources, which ranked 1st on this criteria
out of all countries considered, and ranked 23rd for its cultural resources, due to its many World
Heritage sites.
According to the World Tourism Organization (WTO), international travel to Brazil accelerated
in 2000, particularly during 2004 and 2005. However, in 2006 a slow-down took place, and
international arrivals had almost no growth in 2007–08
Bonito, Mato Grosso do Sul. The rivers in the region are known for their crystal clear waters.
The city of Rio de Janeiro is featured in tourism in Brazil
In spite of this trend, revenues from international tourism continued to raise, from USD 4 billion
in 2005 to 5 billion in 2007, despite 330 000 fewer arrivals. This favorable trend is the result of
the strong devaluation of the US dollar against the Brazilian Real, which began in 2004, but
which makes Brazil a more expensive international destination This trend changed in 2009, when
both visitors and revenues fell as a result of the Great Recession of 2008–09. By 2010, the
industry had recovered, and arrivals grew above 2006 levels to 5.2 million international visitors,
and receipts from these visitors reached USD 6 billion. In 2011 the historical record was reached
with 5.4 million visitors and US$6.8 billion in receipts.
\Despite continuing record-breaking international tourism revenues, the number of Brazilian
tourists travelling overseas has been growing steadily since 2003, resulting in a net negative
foreign exchange balance, as more money is spent abroad by Brazilians than comes in as receipts
from international tourists visiting Brazil. Tourism expenditures abroad grew from USD 5.8
billion in 2006, to USD 8.2 billion in 2007, a 42% increase, representing a net deficit of USD 3.3
billion in 2007, as compared to USD 1.5 billion in 2006, a 125% increase from the previous year.
This trend is caused by Brazilians taking advantage of the stronger Real to travel and making
relatively cheaper expenditures abroadBrazilians traveling overseas in 2006 represented 4% of
the country's population.

In 2005, tourism contributed with 3.2% of the country's revenues from exports of goods and
services, and represented 7% of direct and indirect employment in the Brazilian economy. In
2006 direct employment in the sector reached 1.9 million people. Domestic tourism is a

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fundamental market segment for the industry, as 51 million people traveled throughout the
country in 2005, and direct revenues from Brazilian tourists reached USD 22 billion, 5.6 times
more receipts than international tourists in 2005.

In 2016, Rio de Janeiro, Foz do Iguaçu, São Paulo, Florianópolis and Salvador were the most
visited cities by international tourists for leisure trips. The most popular destinations for business
trips were São Paulo, Rio de Janeiro and Porto Alegre.In 2015 Rio de Janeiro and Fortaleza were
the most popular destinations for business trips.
HEALTHCARE & LIFE SCIENCES

The Albert Einstein Hospital in São Paulo is one of the most well-known health units in
Brazil.

Having the fifth biggest population in the world, Brazil saw the health market as a must. Almost
10% of the country's GDP were invested in the healthcare in 2015, which is an increase of 50%
from 2006. The country expect to have fifth largest market until 2021, surpassing the UK and
France, opening the sector to the foreign investment.
The Brazilian public health system, the Unified Health System (SUS), is managed and provided
by all levels of government, being the largest system of this type in the world. On the other hand,
private healthcare systems play a complementary role. Public health services are universal and
offered to all citizens of the country for free. However, the construction and maintenance of
health centers and hospitals are financed by taxes, and the country spends about 9% of its GDP

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on expenditures in the area. In 2009, the Brazilian territory had 1.72 doctors and 2.4 hospital
beds for every 1,000 inhabitants.

Despite all the progress made since the creation of the universal health care system in 1988, there
are still several public health problems in Brazil. In 2006, the main points to be solved were the
high infant (2.51%) and maternal mortality rates (73.1 deaths per 1000 births). The number of
deaths from no communicable diseases, such as cardiovascular diseases (151.7 deaths per
100,000 inhabitants) and cancer (72.7 deaths per 100,000 inhabitants), also has a considerable
impact on the health of the Brazilian population. Finally, external but preventable factors such as
car accidents, violence and suicide caused 14.9% of all deaths in the country. The Brazilian
health system was ranked 125th among the 191 countries evaluated by the World Health
Organization (WHO) in 2000.

10.2 REASONS TO INVEST IN BRAZIL:

STRATEGIC LOCATION AND MARKET

 The Brazilian total area is 8,514,876,599 km²


 190 million of inhabitants
 The Brazilian GDP measured in PPP represents 35% of the whole Latin America GDP,
reaching more than US$2 trillion PPP in 2007.
 The consumption market covers more than 900 million of potential consumers,
considering Brazil, Latin America and North America.
 Brazil borders almost all the South America countries, except Chile and Ecuador.

SUSTAINABLE GROWTH

 Brazil is the world’s sixth biggest economy, together with the United Kingdom, France
and Italy, ahead of Spain, Mexico and South Korea.
 The Brazilian economy presents a sustainable and strong growth. The Brazilian GDP
growth rate reached 5.3 per cent in 2007, with an inflation rate of 3.7 per cent.
 More than 32% of the jobs created in Latin America in 2007 were in Brazil.
 Since 2003, the Brazilian exports have shown a growth rate bigger than that of the world
imports, resulting in a higher Brazilian participation on the world trade.

INNOVATION AND TECHNOLOGY

 Brazil has the biggest and most diversified science, technology and innovation system of
Latin America.
 It has a competitive differential within the sectors of aircraft building, oil exploration in
depth water and software development.

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 Brazil has internationally consolidated its competence in producing ethanol and biodiesel
fuel.
 Excellency in the equipment production and medical hospital services supply.
 In 2006, there were 9.396 new graduated students at the doctor’s level and 29.761 at the
master’s in Brazil.
 The growth rate in number of personal computers between 2002 and 2007 increased more
than 120%, reaching more than 29 million. This number represents 40% of the whole
Latin America personal computers during those years.
 The Brazilian Internet users’ number increased more than 270% in the last five years,
representing 53 million users.

INFRASTRUCTURE

 67 airports with annual flow of 110 million people.


 46 ports with capacity for over 600 million tons/year.
 29,596 km of railways – the eleventh world railway mesh.
 1.6 million km of roads – the third world road mesh.
 100% digital telephone lines in Brazil.
 Brazil has one of the best communication structures with 125 million mobile lines, at
about 42 million fixed lines and more than 1 million public telephones.
 Brazil will, through the Growth Acceleration Program of the Brazilian Government,
invest (considering public and private resources) US$16,5 billion in roads, US$ 3,9
billion in railways and US$ 1,3 billion in ports.

INVESTMENT PROFITABILITY

 In the last years the Brazilian return on investment overcame the 26% annual mean.
 The foreign companies settled down in Brazil are free to send their profits to their
country of origin.
 Brazil received, in 2007, 30% of the Foreign Direct Investment intended to the Latin
America, resulting in a 99% growth rate.

WORK FORCE

 Brazil’s economically active population represents 36% of Latin America total


population, having reached 92 million people in 2007.
 16 million people with higher education level have technical-scientific activities.
 6 million was the total number of registered students in technical and higher education in
2006.
 There has been an increased growth in the Brazilian work productivity, in the latest
years.

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NATURAL RESOURCES

 One of the worldwide largest producer and exporter of agricultural products.


 The world’s largest producer of ethanol, with 308 installed production plants, producing
17,7 billion liters per year.
 The world’s largest producer of iron ore.
 The worldwide largest producer and exporter of coffee, sugar cane and fruit juices.
 The world’s largest exporter of soy, meat, chicken and leather.
 Self-sufficient in oil, going from net importer in 2005 to net exporter, representing the
sixth exportable sector in the Brazilian foreign trade.

The Brazil’s energetic matrix has 45% of renewable sources whilst for the world this ratio is
14%

Geopolitical importance & Challenges

The world's seventh largest has been one of the BRICS for a decade, but when it comes to its
geopolitical role, Brazil wants to be seen as a rock.

After a century of a coffee economy, the 20th century brought revolution, protectionism, an
economic miracle amid a series of military juntas, a debt crisis, a decade of hyperinflation and
the impeachment of a civil president.

"In the past, Brazil's reach has always exceeded its grasp," says Eric Farnsworth, VP of the
Council of the Americas, and a former Clinton administration official. "It always saw itself as a
leader, but has been frustrated that the world saw it another way. The Brazilian economy is
developing to the point where it does have the global heft that people have to take it seriously."

Brazil´s geopolitical and diplomatic “rise” has been heralded by many commentators in the last
few years. A member of important new groupings of states including the expanded G20, IBSA
(India, Brazil and South Africa), BRICS (Brazil, Russia, India, China and South Africa) and the
Union of South American Nations (UNASUR) in its own region, Brazil has also been a
prominent voice in global negotiations over and initiatives involving trade, climate change,
sustainable development, global public health, internet governance, peacekeeping, and
international security.

Brazil became an important participant in international development cooperation in the late


2000s, increasing its spending in this area significantly, before the impact of its economic
slowdown led to a significant retreat.

An energetic and capable foreign policy, skillful leaders and a facilitating international
environment is required in Brazil. The Brazilian leadership has recently faltered in South
America and internationally. This was partly due to recent economic and political crises,
including a severe recession, the impeachment of the president in 2016, and a major corruption
scandal, but also due to structural factors and limitations in Brazil´s resources and capabilities.

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The second set of puzzles, related to the first, concerns the current world order. What are the
system´s primary characteristics and trajectory?

Brazil will take time to determine its strategy as it enters uncharted territory. The path to Brazil's
current success was a rocky one, due in no small part to the country's vexing geography. The
Brazilian landmass borders 10 countries. With the exception of the pampas to the south, Brazil's
densely forested interior effectively buffers the country from most of its neighbors, permitting it
to focus on the challenge of developing the Brazilian interior. In contrast to the United States'
Mississippi River system, Brazil's rivers are not conducive to the kind of cheap, long-distance
transport that propels rapid development. Instead, Brazil had to invest an extraordinary amount
of resources to build an artificial transportation system consisting of railroads, roads, airports and
seaports to link industrial and population centers along the Atlantic coastline with the country's
rural interior. Equally problematic, the country's colonial legacy, which entailed the massive
importation of slaves from Africa, resulted in tremendous socio-economic distortions that persist
to this day. These constraints meant the Brazilian economy has been slow to develop and has
experienced extreme swings between hyperinflation, overheating and recession. It was not until
the launch of the Real Plan in 1994 that the country developed the economic discipline needed to
bring in the capital and investment that has propelled Brazil into its current favorable state.
Brazil can only devote attention to its immense internal economic challenges when Argentina,
the main Atlantic sea power and Brazil's only real competitor on the continent, is distracted. The
fertile lowlands of the Rio de la Plata region to Brazil's south put the country in a natural
competition with Argentina. Between these two South American rivals lie the buffer states of
Bolivia, Paraguay and Uruguay. Control over this buffer is the first, critical step toward exerting
dominance over the Rio de la Plata region of the southern cone. While Brazil has to find the
time, money and resources to fight for control of these lands, Argentina is already sitting on one
of the most naturally interconnected river transport systems in the world, giving it a source of
rapid development, wealth and population growth it can use to keep Brazil in check. Much of the
19th century was marked by successful Argentine attempts to keep the Rio de la Plata basin out
of Brazilian hands through direct military conflict, the creation of Uruguay, and support of
separatist rebels in Brazil's south. For the past several decades, however, Argentina has been
consumed with internal issues and a steadily declining economy. The more Argentina is
embroiled internally and the less attention it can devote to maintaining authority in the Rio de la
Plata region, the better the odds Brazil can project southward in a bid for continental dominance.
The two primary checks on Brazilian power are socioeconomic development at home and
competition with Argentina abroad. Brazil has made notable progress in the former, and
Argentina is self-destructing on the latter. Brazil thus has an extraordinary geopolitical
opportunity. Still, it remains unclear whether the country's leadership has the political coherence
and vision to consolidate influence over the South American heartland and more urgently,
address an intensifying currency appreciation problem that could undermine the economic
success it has achieved to date.

Why Brazil is an emerging economy


Brazil has been in the headlines of the world media for some time. The reason for this is simple,
as the Economist summarized in its November 14, 2009 Brazil survey "Brazil takes off". Of all

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the BRIC (Brazil, Russia, India and China) countries, Brazil’s popularity among investors is a
result of the adoption of winning social economic policies which have put it among the top of
many macroeconomic indexes of the last few years. It is little wonder that Allianz Global
Corporate & Specialty announced a new Brazilian office in 2009 and has expanded it this year.
Not even the financial crisis had a major effect on the biggest economy in Latin America. While
the big industrial economies struggle to boost sales, job creation, industrial production and
investments, policy makers at Brazil’s Ministry of Finance have been doing everything they can
to slow down growth and improve the stock market in order to attract long-term resources to
finance a sustainable evolution of the Brazilian economy.
At the beginning of 2010, projections indicated GDP growth of 4.5 percent. At the beginning of
the second half of the year, this was adjusted to 7.5 percent, according to reports released by
several financial institutions. Conservative estimates by the International Monetary Fund (IMF)
show that the Brazilian economy is expanding by 7.1 percent in 2010 and may advance by 4.2
percent in the following year. The United States by comparison may expand by 3.3 percent in
2010, while the Euro Zone ought to see a more modest increase of one percent this year.

Secrets of their success


There are several factors in Brazil's favor. The rising economic links with China, demonstrated
by the increase of trade to $36 billion in 2010, make the Brazilian market even more attractive to
investors. Another advantage mentioned by investors comes from President Luiz Inácio Lula da
Silva’s social policies.
According to research by Cetelem, in the last five years 30 million consumers entered the middle
class. A July report by Brazil’s Institute of Applied Economic Research states that extreme
poverty, defined as families with an income per capita below one quarter of the monthly
minimum wage of BRL 510 (approx. €225), will be eliminated from the country by 2016.
These new consumers are demanding everything from mobile phone to new homes. The State
Bank Caixa Econômica Federal registered an increase of 95 percent in the volume of real estate
financing. Brazilian banks, which are strongly capitalized, estimate an increase of up to 25
percent in the volume of credit in Brazil in 2010.
Another important factor in the sustainable growth of Brazil is the projection of the rate of
investment, which could reach 21.5 percent of GDP in the next four years, according to the
estimate of the National Bank of Social and Economic Development (BNDES). Indeed, one of
the main challenges Brazil faces is to expand the sources of funding for infrastructure work.
Today, finances are concentrated in the BNDES. There are bottlenecks in important areas such as
energy, airports, railways and roads – which have had little investment for the last three decades
– along with sanitation, logistics and security.
Infrastructure investments

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BNDES statistics show investments in infrastructure of BRL 311 billion (€137billion) for the
four-year period of 2010-2013. A similar survey in 2008 – before the credit crunch but also
before Brazil was chosen to host the 2014 soccer World Cup – indicated investments of BRL 273
billion for the same period. The difference represents an increase of some €10 billion despite
shortcomings in the regulatory framework in important areas such as railways, ports and
sanitation.
President Luiz Inácio Lula da Silva ("Lula") reiterated the government’s commitment to Brazil’s
preparation for the World Cup 2014. "I find it inappropriate for anybody to be concerned about
the World Cup 2014," Lula said at a news conference. "The government has secured an
investment of BRL 1.1 trillion ($624 billion) in the [Program to Accelerate Growth], and by
2014, it will have invested more in infrastructure than it has invested in the past 30 years."
Other senior ministers have also put forward ways to develop domestic sources of savings on a
larger scale, such as the investment of corporate profits in Brazil, the increase of social welfare
savings, the development of the capital market and the issuing of papers with longer terms. In
mid-July, the Ministry of Finance announced regulatory changes to make long-term financing
more attractive and thus stimulate investment in large infrastructure projects such as the
hydroelectric dam of Belo Monte and Rio Madeira.
Measures such as this aim to overcome obstacles in growth opportunities for investors attracted
by attractive Brazilian interest rates and the maturing Brazilian stock market BM & FBovespa. It
is already one of the largest stock markets in the world and lists of some of the world’s largest
companies, such as Santander Brasil and Banco do Brasil. In July, the BM & FBovespa
announced an ambitious plan to attract 200 companies which are to be opened in the next five
years, an increase of nearly 50 percent from the 450 companies currently listed.
"The equities industry has a great opportunity to capture the resources required for the country to
host the world sports championships whilst enjoying sustainable growth," says Demosthenes
Pinho Neto, vice- president of Anbima, the Brazilian Association of the Entities of Financial and
Capital Markets. According to Anbima, the Brazilian financial sector is already the sixth largest
in the world, with assets of nearly one trillion dollars and 10.1 million shareholders.
THE END

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Resources:

http://www.worldbank.org
https://www.cia.gov/library/publications/the-world-factbook/geos/br.html
https://www.wikipedia.org/
http://www.oecd.org/brazil/
https://www.imf.org/
http://www.emergingmarketsmonitor.com/analysis/emerging-markets-
monitor/brazil
http://www.google.com.pk

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