Business In Brazil: an Introduction

Business in Brazil- an introduction - June 1, 2011

Recent Significant Developments Standard & Poors nudged Brazil closer on May 23 to a higher credit rating, a move that reflects a resilient economy at a time some countries in Europe are suffering downgrades. Brazil was raised to investment grade in 2008 by all three credit rating agencies. Brazils GDP rose by 4.2% year-on-year in the first quarter of 2011. The figure marks a slowdown from the 6.3% growth rate Brazil posted in the accumulated 12 months ending on the third month this year. Brazil replaced Italy as the world’s seventh-largest economy last year. The domestic consumption, supported by high demand for commodities, continue to set the stage for high economic growth. Brazil is by far the biggest Internet retail market in Latin America, accounting for 70 percent of all regional sales. The country also enjoys the highest per capita spend online in the region – at $42.

Contents Brazil’s Significance Key Economic Indicators Foreign Trade Internet Usage Doing Business in Brazil Political & Business Environment

Brazil is an economic powerhouse and is quickly surpassing some European countriesRank Country GDP 2010 2011 GDP Rank Country GDP 2010 Per Capita Rank per US$ bn Growth Est. PPP US$ bn PPP US$ capita PPP 1 U.S.A. 14,658 2.8% 1 U.S.A. 14,658 47,284 7 2 China 5,878 9.6% 2 China 10,086 7,519 94 3 Japan 5,459 1.4% 3 Japan 4,310 33,805 25 4 Germany 3,316 2.5% 4 India 4,060 3,339 126 5 France 2,583 1.6% 5 Germany 2,940 36,033 20 6 U.K. 2,247 1.7% 6 Russia 2,223 15,837 52 7 Brazil 2,090 4.5% 7 U.K. 2,173 34,920 22 8 Italy 2,055 1.1% 8 Brazil 2,172 11,239 71 9 Canada 1,574 2.8% 9 France 2,145 34,077 24 10 India 1,538 8.2% 10 Italy 1,774 29,392 29 11 Russia 1,465 4.8% 11 Mexico 1,567 14,430 59 12 Spain 1,410 0.8% 12 Korea 1,459 29,836 26 13 Australia 1,236 3.0% 13 Spain 1,369 29,742 27 14 Mexico 1,039 4.6% 14 Canada 1,330 39,057 13 15 Korea 1,007 4.5% 15 Indonesia 1,030 4,394 120Source: IMF (International Monetary Fund)

Brazil’s size provides it with natural resources and a large consumption base Rank Country Area km² Rank Country Population (million) (million) 1 Russia 17.1 1 China 1,341 2 Canada 10.0 2 India 1,216 3 U.S.A. 9.8 3 U.S.A. 310 4 China 9.6 4 Indonesia 234 5 Brazil 8.5 5 Brazil 193 6 Australia 7.7 6 Pakistan 167 7 India 3.3 7 Bangladesh 164 8 Argentina 2.8 8 Nigeria 156 9 Kazakhstan 2.7 9 Russia 140 10 Sudan 2.5 10 Japan 127 11 Algeria 2.4 11 Mexico 109 12 Congo 2.3 12 Philippines 94 13 Greenland 2.2 13 Vietnam 88 14 Saudi Arabia 2.1 14 Ethiopia 85 15 Mexico 2.0 15 Germany 82Sources: IMF (2010 pop.) and CIA

Brazil is on par with China and USA on Brazil’s Significance three power-driving attributes Mexico Countries with populationCountries with area > 100 million > 7 million km² Bangladesh Russia Australia Pakistan Brazil Indonesia USA Nigeria China India Canada Japan France Germany Spain Countries with GDP United Kingdom > US$ 1.5 trillion Italy

Brazil’s GDP is resilient and sustainable with a long term expected growth of 4.2% 7,000 8.0% 7.0% 6,000 6.0% 5,000 5.0% 4.0% 4,000 GDP (R$ bn, current prices) 3.0% GDP (US$ bn) 3,000 GDP (US$ bn; PPP) 2.0% GDP Growth % (right scale) 2,000 1.0% 0.0% 1,000 -1.0% 0 -2.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 actual forecastSource: IMF

Inflation is under pressure, despite a strong and consistent monetary policy Consumer Price Inflation % Current Account Balance - % of GDP 2.0% 7.0% 6.0% 1.0% 5.0% 0.0% 4.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -1.0% 3.0% 2.0% -2.0% 1.0% actual forecast actual forecast -3.0% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -4.0% Key Interest Rate % Exchange Rate R$ per US$ 20 2.50 18 16 14 12 2.00 10 8 6 actual forecast actual forecast 4 1.50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Sources: IMF, Banco Central do Brasil.

Sound economic policies are attracting FDI and shielding the country from int’l crisis Foreign Direct Investment International Reserves 50 350 US$ billions 45 300 40 35 250 30 Total US$ billions 200 25 Services 20 150 Manufacturing 15 Agriculture 100 10 5 50 0 - 2007 2008 2009 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Contribution to GDP - 2010 Origin of FDI 2009 % of total Agriculture 6% Netherlands 19 USA 16 Industry Spain 11 26% Germany 8 Services 68% France 7Source: CIA, Banco Central do Brasil.

Brazil has been achieving trade surpluses despite a strong valuation of the Real (R$) Balance of Trade 250 200 FOB (US$ bn) 150 Exports of goods 100 Imports of goods 50 0 2006 2007 2008 2009 2010Source: Ministério do Desenvolvimento, Indústria e Comércio Exterior

The economy is diversified, with manufacturing playing a key role in exports Leading Markets 2010 % of total Leading Suppliers 2010 % of total China 15.3 USA 15.0 USA 9.6 China 14.1 Argentina 9.2 Argentina 7.9 Netherlands 5.1 Germany 6.9 Major Exports 2010 % of total Major Imports 2010 % of total Primary products 44.6 Intermediate products & 46.2 raw materials Manufactured products 39.4 Capital goods 22.6 Semi-manufactured 14.0 products Consumer goods 17.3 Special Operations 2.1 Fuels & lubricants 14.0Source: Secretaria de Comércio Exterior, MDIC

Brazil is a net importer of services, havingbought US$3 bn in information services in 2009 Imports of Other Services - 2009 Trade in Services - 2009 Communications, $166 Construction, $4 50 Personal, cultural and Financial services, recreational services, Insurance, $1,612 45 $958 Government $1,815 Other services services n.i.e., 40 $2,899 Computer and Travel information, 35 $2,795 Transport 30US$ billions 25 20 Royalties and licence fees, $2,512 15 10 Other business 5 services, $15,348 - Exports Imports In 2009 Brazil imported a total of US$12 billion in Information & Communication Technology goods, representing 9.4% of total imports Source: UNCTAD

Brazil is a net exporter of Creative Services, with strengths in R&D and technical services Trade in Creative Services - 2009 $7 $6 Audiovisual and related services $5 Personal, cultural, and recreational services US$ billions $4 Architectural, engineering and $3 other technical services Research and development $2 Advertising, market research and $1 public opinion polling $- Exports Imports In 2009 Brazil exported a total of US$5.6 billion in architectural, engineering and other technical services, representing 3% of total exportsSource: UNCTAD

Internet access at the household doubled in the 3 years to 2009, to 27% % of homes with: Computer & Internet Penetration TV 36% Radio 28% 27% Cellular Phone 24% Fixed Line Phone 20% 20% 17% Desktop 14% Satellite DishCellular w/ Internet Game Console Paid TV 2006 2007 2008 2009 Laptop Households with Computer Households with Internet 0% 20% 40% 60% 80% 100% Source: CETIC.br

Access from “Lan Houses” is a popular form of internet access in Brazil Place of Internet % of All Activities Performed on the % of All Access Internet Users Internet Internet Users Home 48% Communication & social 90% Work 22% Leisure 86% Online searches for 89% School 14% information and services Other person’s home 26% Training & education 72% Free public access 4% Financial services 14% Paid public access 45% Cellular phone 3% Other 1%Source: CETIC.br

Brazil has the 5th largest number of internet users, with 4% of the world total Country Internet Users (millions) % Penetration USA 239.2 77.3% Brazil 72.0 36.2% Russia 59.7 42.8% India 81.0 6.9% China 420.0 31.6%Source: Internet World Stats

The number of .br domains has doubled in the past 3 years in Brazil Brazil World Site Address Rank Rank 1 30 Google Brasil google.com.br 2 1 Google google.com Number of .br domains 3,000 3 2 Facebook facebook.com Thousands 4 3 YouTube youtube.com 2,500 5 82 Universo Online uol.com.br 2,000 6 89 Orkut Brasil orkut.com.br 1,500 7 8 Windows Live live.com 1,000 8 105 Globo globo.com 500 9 5 Blogger.com blogspot.com - 10 4 Yahoo! yahoo.com Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 11 93 Orkut orkut.com 12 201 Terra terra.com.br 13 9 Twitter twitter.com 14 11 MSN msn.com 15 315 iG ig.com.brSources: Alexa, CETIC.br

Top growing country for Facebook in May was Brazil, with growth of more than 11% Top Growing Countries in May 2011 on FacebookSource: Socialbakers

Doing Business in Brazil  Portuguese is the language spoken in Brazil (not Spanish!)  Relationships and face-to-face contacts are very important  Taxation laws and fiscal issues are complex and change frequently  Labor laws and social costs are burdensome and favor the employee  The business culture is sophisticated and westernized  Laws and contracts are respected and enforcedSource: Enosis Global

The South-East region has most of Brazil’s Brazil’s Significance wealth creation, driven by São Paulo state A 8% 5% 13% B 28% 45% A: North E 56% B: North-East 42% 18% C: South-East C 11% D: South 7% E: Center-West D São Paulo 17% 14% 19% 7% 9% Population GDP AreaSource: IBGE -2010

Brazil’s government structure is very similar to the Unites States’  Official name: Federative Republic of Brazil.  Form of state: Federative republic.  The executive: The president, who is elected for a term of four years, chooses a cabinet, which s/he heads .  Head of state: Elected president, who controls the budget.  National legislature: Bicameral national Congress: 81-seat Senate (the upper house) with representatives of 26 states, plus the federal district of Brasilia; 513-member directly elected Chamber of Deputies (the lower house). The 26 states and the district of Brasilia each has a legislature.  Legal system: Each state has its own judicial system; the country has a system of courts for dealing with disputes between states and matters outside the jurisdiction of state courts.Source: EIU

Despite a strong democracy, businesses suffer from a burdensome tax system  National government: Dilma Rousseff is Brazil’s first female President, having succeeded in January 2011 the very popular Luiz Inácio Lula da Silva.  National elections: Municipal elections every four years, with the next due in October 2012; presidential, congressional and state elections every four years, with the next due on October 2014. A consolidated democracy has led to peaceful transitions and continuity of sound macroeconomic policies.  Business Environment: Modest improvements, mainly driven by the consolidation of macroeconomic stability and better domestic financing conditions, will keep the country’s position broadly stable in the global and regional rankings. But the tax system will remain complex and burdensome, the pension system will weigh on public-sector finances and vested interests will continue to distort productivity gains.Source: EIU

Contact information James P. Locke CEO Enosis Global LLC +1-302-766-7926 jlocke@enosisglobal.com

Business In Brazil: an Introduction

by James Locke on Jun 01, 2011

Accessibility

Categories

Upload Details

Usage Rights

2 Embeds 41

Statistics

Business In Brazil: an Introduction Presentation Transcript

http://theminit.wordpress.com	34
http://www.linkedin.com	7