This document provides an overview and comparison of the economies of Brazil and Chile. It discusses the countries' histories, demographics, cultures, economies, and risks. Brazil has a larger population and economy than Chile, with its GDP estimated at $3.275 trillion compared to Chile's $392 billion. Both countries rely heavily on natural resource exports such as copper, soybeans, and oil. Their economies face risks from fluctuations in commodity prices and economic recessions.

1. Doing Business below the Equator:
Comparing the Economies of Brazil and Chile
When you think of the large players in the global market, who comes to mind? Most
would say the United States and China right away, with the additions of Mexico, Europe, and
probably India. But one area that many overlook is that continent just below the equator; South
America. More specifically, the focus here is on the countries of Brazil and Chile, their histories,
resources, and overall financial standings in the world markets. From here, we will mainly
analyze the characteristics of Brazil and compare them to various components of Chile and
determine whether or not to invest in each of these countries based on their current and future
conditions.
1. Country Background Information
Brazil is located in the Northeast region of South America, covering over 8,500,000
kilometers of land and water, making it the fifth largest nation in the world. Its eastern seaboard
meets with the Atlantic Ocean and is bordered by ten other South American countries. The
country is also home to famous geographic features such as the Amazon River, El Pico da
Newline, and the Río de la Plata basin. Minerals like gold, iron ore, manganese, and tin are major
components in Brazil’s economic output. In addition to minerals, Brazil boasts a massive trade in
coffee, sugar, soya beans, and a rich supply of ethanol. This ethanol and bio diesel is made from
sugar cane, making green fuels a growing industry for Brazil. As for Chile, it is located on the1
"Brazil – Facts and Stats." Landcorp International Introducing Global Predevelopment Land1
Investment Opportunities. http://www.landcorpinternational.com/developments/brazil/brazil-
facts-and-stats-for-the-potential-investor/. (May 7, 2016).
Michael Cooler
5-09-2016
IBUS 441

2. Western seaboard of South America, occupying a strip of over 1,250,000 kilometers of land and
water. Unlike Brazil, Chile is most known for its abundance in copper, yet has large supplies in
timber, iron ore, precious metals, and hydropower. Of its geographical landscape, Chile is known
best for its proximity with the Andes Mountains, the Atacama Desert, and Easter Island.
Continuing with Chile, its history begins with the rule of the Incas until the arrival of the
Spanish in the 16th century. For years, the country was further colonized by the Spanish empire
until it achieved independence in the War of the Pacific in 1818. By the year 1880, the Mapuche
people of Chile were brought under government control and experienced marxist and military
rule until democracy in 1990 to today. Like Chile, Brazil contained indigenous people until the
first foreign settlers came in 1500 with Portuguese navigator Pedro Cabral. A few decades later
colonies began to be set up and eventually Brazil earned its name from the valuable red wood
trees known as “pau-brasil.” In 1533, King John III divided the coastline into fifteen sections2
under Portuguese courtiers for centuries to come. It wasn't until 1822 that Brazil became
independent from Portugal’s rule until it was dominated by populist and military rule later on. In
1985, power was given over to civilian rulers and a republic was established. Today Brazil is ran
by the first ever woman president, Dilma Rousseff.
In the early stages of Brazil’s creation, the country was under Portuguese empirical rule
for several centuries however, the eventual fall of the empire in 1889 brought about military
regime control. In 1964, military rule once again took over and allowed for only two parties to
form: “The Alliance for Nation Renewal” and “Brazilian Democratic Movement.” Eventually in
"HISTORY OF BRAZIL." HISTORY OF BRAZIL. accessed May 4, 2016. http://2
www.historyworld.net/wrldhis/PlainTextHistories.asp?ParagraphID=gtt.

3. 1979, Congress passed a law abolishing the two military style parties and from there, the
Brazilian Worker’s Party formed and today’s government under a republican style system with
military control no where in sight. Regarding Chile, its political system following independence
included one with civilian rule and a strong constitutional system of government. Whereas
military intervention was rare, Chile experienced stable democracy begging in the early 1930 but
experienced socialism and dictatorship from the 1970s to 1990s. From there Chile once again
and to this day operates under a democracy.
2. Demographics
Following history comes the demographics of these two countries and their overall
GDPs. As you may have already guessed, Brazil’s population is massive with approximately 206,
077, 898 people and growth rate of 0.886% annually. In addition to population size, the age3
makeup includes age 65 and older at 7.58%, ages 15-64 with a staggering 68.9%, and age 0-14
with approximately 23.53%. Surprisingly enough, 47.7% of Brazil’s population is white, with
mulattos making up 43.1% and the most spoken language is Portuguese. As for the religious data
spread, 64.6% of citizens claim to be Roman Catholic, and Protestant being the second largest at
22.2%. In comparison to Brazil, Chile’s population shows substantially less with 17, 363, 894
people and a growth rate of 0.84%. (Footnote). In addition, its 65 and older aged citizens holds
about 9.30%, ages 15-64 containing 70.21%, and ages 0-14 with 20.49%. Unlike Brazil, whites
take up a much larger percent of the population with 89% whereas Mapuche is about 11%. In
“South America :: Brazil." Central Intelligence Agency. 2016. accessed May 7, 2016 https://3
www.cia.gov/library/publications/the-world-factbook/geos/br.html.

4. addition, Roman Catholic (66.7%) and Protestant (16.4%) make up the largest religious
percentages with Spanish being the primary language.4
In relation to population makeup comes a significant measure of a country’s efficiency in
production that is its Gross Domestic Product. Initially, Chile’s GDP is 392.0 billion with a
growth rate of 1.894% in 2014. Furthermore, its GDP per capita is $22,071 following a close
unemployment rate to Brazil with 6.4%. According to the OECD , Chile has one of the widest5
inequality gaps with a Gini Index of 50.5. In close similarity, Brazil’s current Gini Index gave it a
score of 0.55, ranking 17 out of 136 countries for unequal distribution. Approximately 8.5% of
Brazilians live on less than US $1.30 a day, with the minimum wage at US $335 a month. This
means even though Brazil has been credited with reducing its poverty rates, there is still a
considerable amount of unequal distribution of the family income. Brazil shows a GDP estimate
approximating around 3.275 trillion dollars and an annual growth rate of .103%. In addition to6
this, the GDP per Capita ranges in $15,893 with an unemployment rate of 6.8%.
3. Cultural
When it comes to being in another country, there are a variety of “do’s and dont’s” that go
into a visit in an area such as Brazil. For example, in areas such as San Paolo, punctuality is an
extremely important concept whereas in Rio de Janeiro, being late is not so bad. Brazilians favor
"South America :: Chile." Central Intelligence Agency. 2016. accessed May 4, 2016. https://4
www.cia.gov/library/publications/the-world-factbook/geos/ci.html.
"Chile." OEC. accessed May 4, 2016. http://atlas.media.mit.edu/en/profile/country/chl/.5
"Brazil." OEC. accessed May 4, 2016. http://atlas.media.mit.edu/en/profile/country/bra/.6

5. eye contact, talk of the arts, and hospitality. In contrast, Brazilians look down upon those who get
drunk, hold a strong dislike of Argentina, and do not appreciate ethnic jokes. Brazilians pride
themselves on both their work and their heritage, and therefore it is apparent as a tourist or
outsider, that one respects their upbringing. For Chile, eye contact, personal conversation, and
hospitality are some of its key elements when it comes to socializing in Chile. Whereas Brazil
favors the art of punctuality in the business world, Chile favors diplomacy and respect as two of
the most significant pieces in a meeting or negotiation. Nevertheless, the two have strong
disregard against Argentina and favor the art of familial type conversation that allows the two
parties to become personal with each other.
Whereas the country’s lifestyle and some economic standards has been previously stated,
another valuable topic of discussion is the overall work ethic of most Brazilians and Chileans.
When the question of work ethic is brought up, answers vary from Brazilians being some of the
most hard workers to some of the laziest. However in a recent news article from Rio reporter
Melissa Free, she stated, “According to Rafael, how we arrive at Brazil having just about the
world’s worst service combined with probably the world’s biggest epidemic of over-staffing.
Which also explains why finding a job is not a problem but making a livable wage is.”7
Ultimately, the businessman Rafael explains that the reason behind Brazils’ muddled work ethic
is due to that levels of dysfunction in management structure that creates such a gap between
income and production. When we observe the characteristics of Chilean work ethic, the results
are about the same with different opinions. Overall, the most general synopsis is that Chile is
"The Brazilian Work Ethic." Like I See It. 2013. accessed May 3, 2016. https://7
fromwhereitisthatiamnow.wordpress.com/2013/05/06/do-they-or-dont-they/.

6. known to have a more relaxed work ethic (compared to the US), with large breaks taken in the
day, however continuing productivity into the night. There is a strong mix between the social and
work lives of many of the people of Chile.
4. Economy
Initially, the aforementioned natural resources are an important drive in each country’s
economic output. As far as exports go, Brazil’s top products are iron ore ($26.9B), soybeans
($23.6B), and crude petroleum ($16.4B). Its top exporters are: China, the United States, and
Argentina. Brazil’s top imports are refined petroleum ($16.4B), crude petroleum ($14B), and8
petroleum gas ($8.24B). Nonetheless, Brazil’s top importers are the same as its exporters,
showing a very momentous trading relationship between Brazil and the three previously
mentioned countries. For Chile, its top exports are refined copper ($18 B), copper ore (16.6B),
and sulfate chemical (2.98B). Those who receive these exports are China (18.9B), the United
States (9.3B), and Japan (7.81B). Moreover, the top three imports include crude petroleum
($5.43B), refined petroleum ($5.33B), and cars ($3.8B).9
In this analysis, much if not all of the numerical dollar values calculated have been in US
currency and translated to US values. It must be mentioned that the currency of Brazil is the
Brazilian Real ($R), and the exchange rate to USD is 1.00 BRL=0.283605 USD. The Chilean10
"South America :: Brazil." Central Intelligence Agency. 2016. accessed May 4, 2016. https://8
www.cia.gov/library/publications/the-world-factbook/geos/br.html.
"South America :: Chile." Central Intelligence Agency. 2016. accessed May 4, 2016 https://9
www.cia.gov/library/publications/the-world-factbook/geos/ci.html.
"XE - The World's Trusted Currency Authority." XE - The World's Trusted Currency Authority.10
accessed May 4, 2016. http://www.xe.com/.

7. Peso, has a current exchange rate to of 1 CLP=0.0015 USD. It is relevant that one asks the11
ways in which currency is moved around the country and markets. Regarding taxes, Brazil’s
taxes make up approximately 35.1% of the countries GDP whereas the inflation rate holds a
steady value of 10.6% as of 2015. Chile’s taxes are only 20.2% of its GDP, an inflation rate of
4.4%, and an import-export balance of $56 billion to $61.82 billion in US dollars. Overall,
Brazil’s balance of trade does not reflect a trade deficit with its exports in total of $189.1 billion
(US) and imports showing a value of $174.2 billion (US).
In relation to each country’s economic characteristics, another area worthy of noting are
the regional economic organizations that Brazil and Chile are currently apart of. To begin,
Brazil’s and Chile’s first membership lies in ALADI (Asociación Latinoamericana de
Integración), the earliest trade block organization in Latin America. Both have heavy
involvement in Mercosur as well as the OEA (Organización de los Estates Americanos). Brazil
and Chile are also a part of G-20, an international forum seeking to bring together industrialized
countries to assist in bringing about global economic stability.
Aside from focusing on regulations through REOs, Brazil operates its social and political
spheres under a federative republic. Under the republic, the country constitutes a union of the
States, Municipalities, and the Federal District of Brazil. Chile operates under a civil law system
and a presidential republic. Its legislative branch consists of a bicameral congress with Deputies
and Senators. Because we are observing these two countries from a business stand point, it is
"XE - The World's Trusted Currency Authority." XE - The World's Trusted Currency Authority.11
accessed May 8, 2016. http://www.xe.com/.

8. necessary that we also observe the levels of foreign direct investment that their legal systems
allow for.
For the nation of Brazil, the country is generally open to FDI and strongly encourages it
in their markets. According to the United Nations Conference on Trade and Development, Brazil
has become the fifth most attractive country for FDI with restriction of ownership within sectors
like aviation, insurance, and media. In similarity, Chile has made FDI one of its primary
development strategies for several years with no real barriers in any sections.
In closing of the economic aspects of each of these countries, another meaningful area to
consider are the factors that drive their economies and give them their place in the global
markets. Chile holds onto copper as one of its leading drivers in the market as well as along with
its service and industry sectors making up more than 95% of the country’s GDP. As for Brazil, it
is widely known that Brazil has been the largest producer of coffee soybeans, and sugar cane for
over a century and a half. In another instance, the company known as Petrobras is Brazil’s largest
multinational energy corporation located in Rio de Janeiro and generated over $130 billion US
dollars in 2013 alone. The service industry, holds the banking sector that accounted for over 16%
of the economy’s GDP in the past couple decades.
5. Risk
With the combination of background, culture, and economy, it is important to look at
these two countries through the lenses of risk assessment. For Chile, the mid 2000s have shown
good potential for Chile with real growth average at around 5%. but growth has slowed due to
the economic recession of 2008. To combat this, Chile has used its accumulated sovereign wealth
funds and 22 trade agreements to help reverse the economic deficit caused by reduced copper

9. prices. As for Brazil, the economic recession of 2008 has created severe problems for its
economy including higher household indebtedness. A recent scandal with Petrobras has severely
damaged Brazil’s integrity, hindering investment activity in areas surrounding the energy sectors.
This pushes the government to have to sell assets like power stations, land, and warehouses.
More significantly, China has reduced much of its demand in minerals, thus reducing the price
for minerals and overall revenue brought in. In the political arena, President Rousseff is having
trouble being able to reduce inflation and the public deficit due to a lack of majority in Congress.
When evaluating the risk involved in investing in Brazil and Chile, the use of short
SWOT analysis is an important tool to consider. Chile’s strengths are its leading copper and
agricultural production, political stability, free trade agreements, being and a member of the
OECD, and favorable business situations. For weaknesses, these include having an economy
vulnerable to external shock, dependence on Chinese consumption, income disparity, and
persisting economic deficit. In addition, Chile’s opportunities range from expansion of foreign
trade, renewable energy, to a growing wine-tourism market. In contrast, threats are intense
competition, fluctuation in price of copper, damage from the recession, and infrastructure
damage due to natural disasters. For Brazil, its strengths include: having the 6th largest economy,
a relatively low GDP to debt ratio, a fair unemployment rate, as well as an active population. In
contrast, its weaknesses include an infective government financial policy, lower investments,
high public expenditure, and problems with infrastructure. As far as opportunities go, Brazil’s
natural resource market still has many untapped products, a diverse economy allows, and a
massive labor pool. Threats include the growing dependency on its consumers like China and the

10. United States that can drastically fluctuate prices for products like minerals and competition
from other South American countries.
As both of these countries have been evaluated from various aspects including history,
culture, and economy, the final question comes in whether or not to invest in Chile and Brazil.
Regarding Brazil, the decision is to not conduct investments in this country due to its overall
political and economic instability brought on by corruption and the economic recession. Whereas
Brazil has a very diverse and strong product market, the levels of demand have been reduced and
made find even further reduction as more competitors move in to offer cheaper substitutes. Brazil
has the necessary components, but currently lacks the stability and integrity to have any
investment made. As for Chile, it is decided that an investment should be made in this country.
Although growth has slowed due to the decline in the commodities market, Chile has the ability
to reduce its deficit through its free trade agreements as well as having a transparent and stable
infrastructure surrounding its economy. Future predictions show an increase in production for
Chile with investment being relatively low risk, therefore, investment is a clear decision.
Whereas these two countries are made up of a vast and unique system of people and culture, they
share the commonality of a rising market in the global economy today that is quickly becoming
more of a reality for investors and consumer alike.

11. Works Cited
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