Brazil is a federative republic located in the Eastern South America bordering the Atlantic Ocean. The bordering countries include Argentina, Paraguay, Uruguay, Guyana, Peru, Venezuela and the Atlantic Ocean. The countries capital is Brasilia with its major cities which include Sao Paulo, Rio de Janeiro and Brasilia. Currently the country’s population is estimated to be around 180 million people. Cultural environment in Brazil has influenced the country’s economy and plays an important role in the country’s business and investment arena. Adekola and Sergi say that the culture of modern Brazil has been transformed through time as early Portuguese settlers combined their customs with original Native Americans (188).
Business Interactions in Brazil
Adekola and Sergi outlined that work ethics in Brazil are very influential in the business environment of the country. Global business management: a cross-cultural perspective noted that “business interactions in Brazil involve a process of socializing in order to establish a comfortable social climate before starting to discuss business” (191). Global business management: a cross-cultural perspective established that “the Department of Commerce in Brazil is able to help foreign companies locate bilingual support staff that help to strengthen the relationship between parent companies and their subsidiaries. This is a major factor why Brazil has potential for business opportunities because it promotes marketing of industrial products (191).
According to the article “Doing business in Brazil”, Brazil is a federative republic organized in three separate branches (1). These branches include executive, legislative and judiciary. The article Legal Aspects of doing business in Brazil the country has 26 states and over 5000 municipalities where the federal Capital is Brasilia located in the federal district (Doing business in Brazil1). The Journal Legal Aspects of doing business in Brazil continues to say that “the basic law is the Brazilian Constitution which establishes that the system of the government in place, division of powers to the legislative, executive and judiciary branches of government” (Legal Aspects of doing business in Brazil).
In addition the legal rules governing business activities in Brazil are put down in federal legislation as indicated in the article (Doing business in Brazil 1). The article Doing business in Brazil further states that the Constitution of the country thus allows the federal government, the states and the federal district to monitor some matters related to business activities. The business activities that can be monitored at this level include tax, financial and economic issues, liability for environmental and consumer damages (Doing business in Brazil 1). In such cases the federal government’s power is limited to enacting general rules on these issues but the state and the federal district have authority to legislate on supplementary basis (Doing business in Brazil 1).
Brazil is ranked as the tenth biggest economy in the world. The country presents several sectors with great opportunities for doing business which include agriculture, oil and gas, healthcare and life sciences, sports and leisure, infrastructure and chemicals (Luff 2). Luff continues to say that the combination of these factors plus the resource pressures which necessitate limiting the number of priority markets are the major aspects which have contributed to the growth of these opportunities. The article Doing business in Brazil states that “Brazil offers countless business opportunities for domestic or foreign investors” (1).
“Doing business in Brazil”
The article Doing business in Brazil continues to say that in the light of its enormous economic potential, its diversified economy and also the countries big domestic market it is considered as one countries a round the globe with the potential for business opportunities (Doing business in Brazil 1). Other investment opportunities in Brazil lie within the agro-industry and favorable conditions of the world sugar market. The article continues to say that exceptional conditions to become a large world supplier as it can make use of available land and highly developed technology in the sector (Doing business in Brazil 1).
The article Doing business in Brazil further continues to say that Brazil presents a favorable business environment because under the Brazilian law foreign capital is ensured the same treatment as that afforded to domestic capital and that any discrimination not expressly prescribed by law is prohibited (2). The article Doing business in Brazil further states that in Brazil the Central Bank is charged with registering, monitoring and following up on foreign investments and this encourages more foreign investments.
A Forbes article Growth risk in Brazil commented that the countries growth in industrial production implies that Brazil presents ideal business investment opportunities. For example the article states that the “increasing confidence in the governments economic policy and in particular monetary and fiscal policies have boosted by a record primary surplus and current account surplus increasing foreign investments”. In addition the industrial sector bears a significant role in the composition of the total production of the country accounting for 39% of the GDP. The article Growth risk in Brazil also indicated that the country presents a high degree of technology hence enabling it to export its commodities to various parts of the world (Forbes).
Growth Risk in Brazil
The risks associated with doing business in Brazil according to Jennings, revolved around the level of corruption which led to a climate of murder and espionage in the past years (385). As a result many foreign firms have elected not to do business in Brazil because of so many uncertainties and risk which are beyond the normal financial risks associated with international investment. Jennings continues to say that economists in Brazil document hyperinflation and systematic corruption (385). He continues to say that privatization that has for example helped some economies such as Chile and Mexico cannot take place in Brazil because government officials enjoy the benefits of wages and returns from the businesses they control and own. Brazil predicament has occurred over time as graft, collusion, and fraud have become entrenched in the government controlled economy.
Another risk according to the Forbes article “Growth risk in Brazil” is that in the financial sector high interest rates (in a global context of low real rates) have over the time encouraged the entry of speculative short-term capital, which in turn tends to distort the variables of real economy. The article further states that the countries “vulnerability to external trends will imply that any international payment crisis will have immediate repercussions” (Forbes “Growth risk in Brazil”).
The difficulty of maintaining an attractive exchange rate for exporters which on the other hand tends to slow export growth presents another risk associated with doing business in Brazil (Forbes, “Growth risk in Brazil”). This effect in turn leads to rise in industrial production. Also the article Growth risk in Brazil notes that exchange rate volatility makes it more difficult to maintain long term export plan for both domestic and foreign investors. It has been noted that Brazil faces a heavy tax burden on the industrial sector. The country according to Forbes article Growth risk in Brazil also remains under pressure from external factors hence it remains vulnerable despite record trade figures and from inflation (Forbes).