Business Environment of BRAZIL

MAP OF BRAZIL

The word "Brazil" comes from brazil wood, a tree that once grew plentifully along the Brazilian coast.

Brazil, officially the Federative Republic of Brazil, is the largest country in both South America and the Latin American region. It is the world's fifth largest country, both by geographical area and by population.

Capital: Brasília

Dialling code: +55

Currency: Brazilian real

President: Dilma Rousseff

Official language: Portuguese

Life expectancy : 74

Over All Idea about the Country

Other Data of Brazil

Currency : Brazilian real (BRL, R$)

Population Total : 200.4 Million

Fiscal year : Calendar year

Trade organisations: Unasul, WTO, Mercosur, G-20 and others

GDP : $ 2.246 Trillion (2013 East) (Nominal), $2,309 trillion (PPP)

GDP rank : 7 th (Nominal), 7 th (PPP)

GDP growth :2.3% (2013 est.)

GDP per capita: $12,789 (2013) (nominal), $11,845 (2011) (PPP; 74th)

GDP by sector: Agriculture 5.5 %,Industry : 27.5%,Services: 67%,

Inflation (CPI): 6.52 % (2014)

Unemployment : 4.3% (December 2013)

Economic Indicators

1. GDP and GDP Growth rate 2. Inflation

3. Unemployment

4. Export-Import 5. Current account balance

6. FDI

Public Debt : 54.9 %

Revenues :$911.4 billion

Expenses : $ 846.6 Billion

Credit Rating : Standard & Poor (BBB+), Fitch : BBB Outlook: Stable (Fitch Ratings Inc. is a jointly owned subsidiary of Hearst Corporation and FIMALAC SA.)

Foreign reserves : $377.5 billion

(Main data source :

CIA World Fact Book)

Public finances

Brazil -47,273,101,647 -52,480,127,065 -54,246,393,412 -81,062,946,972

Brazil has the seventh largest economy by nominal GDP in the world, and seventh largest by purchasing power parity. The Brazilian economy is characterized by moderately free markets and an inward-oriented economy.

Brazil’s economy is the largest of Latin America and the second largest in the western hemisphere.

From 2000 up 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, making Brazil the world's sixth largest economy with its economy in 2012 surpassing that of the United Kingdom, making Brazil the world's sixth largest economy.

Economy of Brazil

Brazil's economy growth has however decelerated in 2013 and had almost no liquid growth throughout 2014, and the country's economy is expected to grow by only 1.8% in 2015.

Currently, with a population of over 190 million and abundant natural resources, Brazil is one of the ten largest markets in the world, producing tens of millions of tons of steel, 26 million tons of cement, 3.5 million television sets, and 3 million refrigerators.

Economy of Brazil

Main products : Coffee, soybeans, wheat, rice, corn, sugarcane, cocoa, citrus, beef. Agriculture growth rate: 9.2%, Labor force : 15% of total labor force, GDP of sector : 3.5% of total GDP

Main industries: Automobile industry, petrochemicals, machinery, electronics, cement and construction, aircraft, textiles, food and beverages, mining, consumer durables, tourism. Industrial growth rate: 8.8%, Labor force : 21% of total labor force, GDP of sector : 29.7% of total GDP

Economy cont…

Main industries are textiles, shoes, chemicals, cement, lumber, iron ore, tin, steel, aircraft, motor vehicles and parts, other machinery and equipment.

Ease of doing Business: 130th (2013)

Exports : $ 256 billion (2012)

Export goods: Transport Equipment, iron ore, soybeans, footwear, coffee, autos.

Main export partners : China (17.0) USA(11.1) Argentina (7.4) Germany (6.4) South Korea (4.1)

Gross external debt: 397.5 billion (31 December 2011 est.)

Main Industries & cont……

Exports are defined as movable goods produced within the boundaries of one country, which are traded with another country.

The sale of these goods generates foreign currency earnings in the country that produces them and boosts its economic growth.

Brazil’s economy grew meagrely in Q3 2014 and more recent data suggest that the economy is still struggling.

Retail sales recorded the largest contraction on record in December and economic activity hit a six-month low.

Meanwhile, on top of the challenge of boosting the ailing economy, the government is under increasing pressure in Congress over the Petrobras scandal.

Export of Brazil

2009 2010 2011 2012 2013

Exports (USD billion)

153.0 201.9 256.0 242.6 242.0

Brazil - Exports Data

Exports in Brazil decreased to 13704.04 USD Million in January of 2015 from 17491 USD Million in December of 2014. Exports in Brazil averaged 4205.02 USD Million from 1954 until 2015, reaching an all time high of 26158.51 USD Million in August of 2011 and a record low of 75.06 USD Million in January of 1965.

Top 5 Products imported by Brazil: Refined Petroleum (7.3%), Crude Petroleum (5.7%), Cars (4.3%), Vehicle Parts (3.1%), and Petroleum Gas (2.7%)

Top 5 Import origins of Brazil : China (15%), United States (14%), Argentina (7.4%), Germany (6.6%), and South Korea (4.6%)

Brazil is ranked 56 with an Economic Complexity Index (ECI) of 0.315644 The top ten Imports of Brazil are:

Crude oil: 6.2%, Automotives : 5,3%, Liquid oils: 3,5%, Autoparts : 2,8%, Drugs and medicine: 2,6%, Naphtha: 2,1%, Electronic components: 1,9%, Bituminous coal: 1,9%, Reception and transmission parts: 1,6%, Potassium chloride: 1,5%

Import of Brazil

2009 2010 2011 2012 2013

Imports (USD billion) 127.7 181.8 226.2 223.2 239.6

Before starting the major agendas of government considered the facts and elements of the country that are:

Major Agenda of Government

Sustainable urban transport emerges as a priority on Brazil’s political agenda.

Brazil will be able to, by 2050, consolidate as the world's 4th largest economy while being able to offer good and sustainable living conditions to its 260 million people.

Funding for infrastructure supporting technology research is also on the government agenda.

The Brazilian government will also continue its educational, innovation and entrepreneurship programs focused on science, technology and innovation.

Brazilian government promises major broadband investment.

Major Agenda of Government Cont……

Brazil is removing the last vestiges of tax cuts and government spending aimed at bolstering the economy as officials work to correct the fiscal slippage of the last few years, Finance Minister Joaquim Levy told investors on Wednesday.

"We are just taking these anti-cyclical measures away, and this will put us on better footing," Levy said in his first public address to investors in the United States.

"I'm not pretending that you should not be worried about the fiscal situation," Levy said. "I'm confident that we should get the house in order. We will get back to the path of growth."

Brazil's Levy tells investors fiscal adjustment to correct 'slippage'

One of Levy's first challenges will be to convince lawmakers to pass controversial legislation to cut unemployment and pension benefits.

Levy has already raised taxes and limited public expenditures to plug the overall budget deficit that doubled last year to 6.7 percentof GDP.

A series of tax breaks and expenditures cost the government 104 billion reais in revenue, or about 2 percent of GDP last year, Levy said.

Levy, a fiscal conservative who took office in January, acknowledged a "slippage" in Brazil's fiscal results in recent years, but said the government was going to correct them.

Cont…..

Brazil’s oil industry : Pitfalls at Petrobras

Anti-poverty programmes: Helping the poorest of the poor

Brazil’s economy : Rough weather ahead

GDP expands in Q3, Brazil exits technical recession

Brazil’s economy grew meagrely in Q3 2014 and more recent data suggest that the economy is still struggling.

Brazil’s coffee exports registered an increase of 9.9 % in volume during the FY 2013-2014 but declined by 11.6 % in revenues.

Latest Economic Trends

With a weak economic panorama in which the only indicator bringing good news is the unemployment level, which continues to register under 5%, closing forecasts for 2014 and 2015 are still being revised downwards. The level of growth this year is expected to be 0.2% and will not reach 1% in 2015; the trade balance and current account are still suffering the effects of an economy that has been underpinned by domestic consumption and has been damaged by a stagnated external sector. For its part, the industrial sector is still failing to respond to the stimuli applied by the government.

Cont….

Brazil also is struggling to keep inflation from getting out of hand. A price-index used by the central bank for monetary policy stubbornly has remained around 6%, within the bank's 2.5%-to-6.5% tolerance range but above the official 4.5% target. That means interest rates are high, after rising to 10% from 7.25% last year, and likely getting closer to 11% this year.

Consumer and retail businesses in Brazil can anticipate a promising future. Employment rates and consumer groups are growing, while political risk, economic uncertainty and inflation continue to stabilize. Overall, the retail market grew by 15.7% in 2009; slightly over the 14% forecast growth. The segments presenting the highest growth were automobiles, at a record 32%, furniture and domestic appliances (25%), clothing and shoes (16%), tobacco and beverages (15.5%) and pharmaceutical and cosmetic items (15%).

Latest Business Trends

Continued consolidation

Latin American hub

Base for manufacturing

Robust economic growth

Large domestic market

Impact of social media trends

The potential of the “unbanked”

Greater credit card penetration

Emphasis on being eco-friendly

An aging population

Major trends of Business Environment in Brazil

Exchange rate volatility: MEDIUM

The dollar’s strength and the recent elections have led to the Brazilian real falling to its lowest level in ten years.

Sovereign Risk: MEDIUM

This indicator has remained unchanged since our last report , except that the country’s investment grade is under threat; agencies are closely monitoring the evolution of public finances and growth.

Overall Interpretation

Public Sector Financing: MEDIUM

The announced and rapid replacement of the finance minister, once again highlights the urgency in Brazil to start a new phase with regard to the public accounts. For now, the new minister is confident in his resolve to halt borrowing and meet the new surplus target.

Socio-political situation: MEDIUM

At the political level, the corruption scandals surrounding the state company Petrobras are still in the news. According to different sources, the scandal involves up to $3,900 million that was destined for, among other purposes, financing Dilma Rousseff’s party.

Cont…..

Conclusion and Recommendation

1. Brazil’s fiscal strategy remains questionable.

2. Infrastructure investment will be needed for leading productivity to a higher and sustainable path.

3. Complex taxation is one reason for the poor performance of GDP growth in Brazil.