Brazil Country Analysis

Historical overview After more than 300 years under Portuguese rule, Brazil gained its independency in 1822. From this time were maintaining a monarchical system of government until the abolition of slavery and the subsequent proclamation of a republic by the military in 1889. Although a republic was proclaimed, Brazil was ruled by military dictatorships. This period ended with a military coup that placed Getulio Vargas, a civilian in 1930. Until 1961 Brazil had democratically elected governments, who were making some efforts to balance the national budget and provide some social reforms (reduce living costs, increase salaries), and economic development plan.

But the industrial development slowed down, the inflation was growing, prodding social unrest which resulted in frequent strikes and riots by workers and students. After a military coup in 1964, Brazil had a series of military governments. João Baptista de Oliveira Figueiredo became president in 1979 and managed a return to democracy in 1985.

By the end of the military totalyitarisme there was a nationwide wave of optimism, but the political situation in the country stayed difficult for many reasons: the first democratically elected president, Neves died a few months later of his elections, in 1992 le president Collor de Mello had to resign because of a corruption scandal. Although the system politic was stable, Brazil faced big economical problems during the 80th and 90th. PESTEL analysis

Political System

The political system of the country is Federal Republic with three independent branches: executive legislative and judicial. The president heads the executive branch. Since 1985 le system politic is stable, the elections are democratic. There are many fiscal incentives to attract foreign investors, but the tax system is complex, there are many employee related regulations with high taxes and social charges.

Economical situation Brazil has a well developed agricultural, mining, manufacturing and service sector and permanently expanding his presences in world markets. The infrastructure system and distribution channels are established in the industrialized areas. The privatization is in a late stage. In the 80th and 90th the country faced with big and deep economic problems. The administration system was too big, the country had too many debts and the inflation became high. The government’s actions didn’t have the adequate effects and the inflation went out of control.

In 1990 the inflation rate was 30377 %. In 1995 they installed the new money the Real, and his currency was fixed to the US dollar. Because of the economical crisis and financial problems in 1999 Brazil had to let the currency float witch devaluated the real at one time with 40%. In 2002 the IFM landed $30 billion to avoid the further economic problems.

Sociological System: The population of Brazil is almost 200 million which is the 5th biggest population in the world. The population is young, only 6,4 % is over 65 years of age, and 27% of the population is under 15. Brazil’s inequality level is still among the highest of the world. It has the worst values of income distribution: about 45 % of the national wealth is concentrated in the upper 10% of population, and the lowest 20% controls only 2,4 % of the wealth.

But during the last several years, poverty reduction and income distribution indicators have dramatically improved. The full poverty rate fell from 34% of the population in 1995 to 25.6% in 2006. Although the labour force is semi-skilled and unskilled in certain developing areas, there flexibility and competitive cost is a big opportunity.

Technology The main industry sectors in Brazil the textiles, shoes, chemicals, cement, iron, ore, steel, aircraft, motor vehicles and parts and other machinery and equipments. In South America Brazil is the leader in science and technology. The researches in the bio fuels, in agriculture, in deep-see oil production are important and advanced. From 1990 they implemented technology, quality and productivity programs, but the implementation of them were often delayed or cancelled, so they had limited impact. Environmental issues

The one-third of the world’s remaining rainforests is in Brazil, but there is an average loss of 34,600 square kilometres (0,8 % of the forestation) per year between 2000 and 2005. The deforestation of Brazil is one of the most important global environment issues today.

A large portion of deforestation in Brazil can be attributed to land clearing for pastureland by commercial and speculative interests, misguided government policies, inappropriate World Bank projects, and commercial exploitation of forest resources. Road constructions in the Amazon lead to deforestation. Roads provide access to logging and mining sites while opening forest frontier land to exploitation by poor landless farmers. Brazil has important mineral and energy resources.

Legal System: The legal system is based in Civil law. The legislative power is exerted by the Congress. The judicial branch consists of system federal, state and local courts. Since October 5th 1988 the Federal Constitution is in force. Free trade agreements

Brazil is member of the following organizations:

* WTO member: 1 January 1995 * Brazil if joint to MERCOSUR 26 march 1991 (custom union) * Brazil has Partial Preferential Agreements with the fallowing countries. Suriname: 21 April 2005 Mexico: 3 July 2002 Guyana 27 June 2001 Colombia, Ecuador, Peru and Venezuela: 12 August 1999 Argentina: 20 December 1990 Uruguay: 30 September 1986

Hofstede Analysis

Brazil is similar to many Latin American countries when analyzing Hofstede's Dimensions Its highest Hofstede Dimension is the Uncertainty Avoidance (UAI), witch indicating the society’s low level of tolerance for uncertainty. Brazil also has high level of Power Distance rankings and this two makes that the typical Brazilian organization model characterized by formalized hierarchy and centralized power in decision making. Although they made big efforts to implement a modern and internationally used business practice, the cultural values did not change completely. Market definition – Attractiveness

We can divide Brazil five main regions, with very different economic characteristics: 1. Central-west: started to develop in the sixties, after that the new capital was established in the area. Here they are specialised in herding and agriculture. 2. North-east: economy is based in tourism of the big towns: Fortaleza, Recife, Natal, Salvador 3. North: mainly the forests Amazonian, with very low population rate, specialised in the wood and natural products (latex) 4. South-east: economic centre of the country. More than 80% of the industry is concentrated here. (Sao Paulo, Rio de Janeiro, Belo Horizonte,Victoria) 5. South: very industrial (textile, food industry, metal and mechanic) with the highest development rate.

The second commercial partner of Brazil after the USA is Europe. France is the 9th as a supplier and he has the 6th place as a customer. More than 400 French companies invested in Brazil (Peugeot, Renault, Suez, Lafarge). There are several advantages witch make Brazil attractive for the foreign investors: high growing rate, the skilled labour’s cost is moderated (790 euro average salary), proximity of the market of Mercosur. Automobile sector in Brazil

The automotive industry in Brazil started in the 50th-60th, with Toyota, Volkswagen, Chevroloet, Ford and Fiat. The market was limited until 1994, when the new national politics were established encouraging the new investments and the market was opened for import. At the moment Brazil is the 9th car manufacturer in the world and the 1st in Latin-America. At the moment there are twelve manufacturers producing cars in Brazil. Fiat, which began manufacturing in Brazil 32 years ago and now market leader, allows its Brazilian arm a lot of autonomy. All its senior managers are Brazilian.

They say they want Fiat to be seen as a Brazilian brand— by for example sponsoring Brazil’s best football teams. Volkswagen has 55 years long history in the country, which means the Brazilians strongly identify with them since when the Beetle was the country’s most popular car, even though the top management is mostly German. There are some new trends in the Brazilian car industry. The first is the alternative fuel engine (Flexfuel) production, which has already surpassed the gasoline and ethanol.

The market has discovered the advantages of mixing gas and ethanol to achieve an efficient cost benefit. Brazil emphasised and achieved the biggest growth in the small car segment, and the margin on the domestic produced vehicles has dropped. The Brazilian car manufacturers could remain competitive especially in the small car segment and the majority of the export is made to emerging market.

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