Brazil

“Ordem e Progresso”

Order and Progress

ECONOMIC- GEOGRAPHIC

ENVIRONMENT

Brazil’s Geographic Factors

• Largest country in South America and fifth largest country in the world per

area and population

• Contains Amazon River and Central Highlands

• The largest river in the world, the Amazon River contains over 4,000,000 sq.

meters and takes up over half of Brazil’s coastline

• Amazon rainforest contains as many as 3,000 different species in 1 sq. mile

and occupies roughly 40% of Brazil’s total geographical area

• Rains 250 days per year

• Rainforest contains 11 of 12 mammals that inhabit Western Hemisphere

• 1,600 species of birds, 100,000 invertebrates, and 70,000 species of insects

• Iron Ore is Brazil’s most occupied mineral

• Steel, automotive, petrochemical, and utilities are leading industries

• Leading exports: processed meat, electrical equipment, tobacco, oil, shoes,

iron ore raw sugar, and poultry

• Leading imports: milk and dairy products, beef, cars, electric integrated

circuits, car parts and accessories

Economy

• Slightly worse then average economy as ranked by The Heritage

Foundation

• Due to absence of successful functioning legal and regulatory

framework

• Plagued by corruption and lack of protection of intellectual property

rights

• 6% unemployment rate

• 6.6% inflation rate

• High inflation rates have been a problem in Brazil for the past

decade

• Government believes increases interest rates to abnormally high

rates will lower inflation and fix economic problem in Brazil

• “Plano Real” changed currency to the “real” to try and make fixed

exchange rate with the American dollar of 1:1

Recommendations

• Companies should ship products rather

then build factories in Brazil

• Poor regulatory structure makes it hard

introduce new companies in Brazil

• Reduce costs to make product to make

product cheaper for consumers

• Brazilian consumers have fewer

disposable income due to high interest

rates

SOCIO- CULTURAL

ENVIRONMENT

Overview of demographic

Trends• Brazil is the 5th most populated country in the world, with a current population of

200,674,130.

• However, population growth rates are slowly declining as the country’s wealth

increases and as it becomes more urbanized.

• Brazil is currently the 6th largest economy in the world and it is 107th fastest growing

country, which generates more consumer spending and growth opportunity for firms

from all around the world. In a country this big, there are great chances that different

industries will succeed if they can make their products desirable.

• Brazil’s population is also very young. 27% of the population is under the age of 15,

62% are 29 years old or younger, and only 7% of the population is older than 65.

• With a better economy comes a larger middle-class and a significant growth in "new

money”. Families who couldn’t afford basic necessities such as kitchen appliances

and cell phones, now have enough money to buy not only that, but a second car and

private schools.

• The number of women entering the workforce and attaining an education has

increased significantly. Today, two-thirds of women have a job.They stay longer in

school than men, and represent three-fifths of graduates.

Cultural factors, Social institutions,

and Informal trade barriers• Brazilians really like imported goods. Since having such items is a “status” and

“power” symbol, Brazilian consumers are more than willing to pay high prices for

them.

• They also enjoy celebrating their culture at all times. Not only on Fridays after work,

but basically everyday there is a reason to drink and celebrate.

• Brazil has one of the world’s first sustainable biofuels economies and is the biofuel

industry leader. They have “flex-fuel” vehicles that run on 100% ethanol or 25%/75%

ethanol/gasoline blend, or any combination of the two.

• Brazilians are used to flex-fuel cars and like the way they work, so some consumers

may be a little reluctant to switch to a Hybrid since they have been using flex-fuel

cars for so long.

• Some informal trade barriers that may affect the company are for instance the way

the company will negotiate with Brazil.

• Shipping can become a problem. If products aren’t delivered on time or are damaged

upon arrival, the company’s image can be hurt.

• The government may also impose informal measures to favor domestic products over

imports by requiring costly testing, standards, and certifications requirements for

international products, in order to favor the domestic industry.

Recommendation

• The first step to ensure the company succeeds in Brazil is to have satellite or

corporate offices in Brazil and to hire local talent and business school graduates to

work in these offices. This will help the company understand the needs of the market

and will minimize the cultural differences of having an American company move into a

new country.

• Even though Brazil isn’t a conservative country and there are few chances of cultural

blunders where someone actually ends up offended by an advertisement, the

company still needs to be careful

• When it comes to food and beverages, costumers are more likely to buy products or

services they are familiar with, because they know what to expect.

• If they see a commercial that shows a cool drink they can make with Bacardi, using

ingredients they have at home, they will be excited to try it.

• With the rising number of educated females in the workforce who need cars and want

to be up-to-date with the newest technology, offering “girly” iPad Mini covers and

accessories would be a good way to help sell more iPads to women.

• Commercials where women are leaving work and getting in their Camry’s will make

many of these consumers relate and want to buy the car.

POLITICAL-LEGAL

ENVIRONMENT

Regulations, trade barriers,

taxes

• Regulations

• INMETRO

• CONMETRO

• SINMETRO

• Trade Barriers

• Brazil ranked 130 out of 183 countries in the World Bank’s

2012 Doing Business Report International Agreements.

• High tariffs

• Uncertain customs system

• Brasil Maior showed a rise in trade protections

• Taxes

• Import Duty

• Ranges from 10% to 35%

• Industrialized Product tax (IPI

• Ranges from 0% to 15%

• Merchandise and Service Circulation tax (ICMS)

• Varies between states, around 7% to 18%

Intellectual Property Rights

• In the past, Brazil was very much against foreign intellectual

property but have slowly been reforming their laws.

• 1995, Brazil joined the world Trade Organization and finally

came to agreements with international intellectual property laws.

• Although the Brazilian intellectual rights are coming together,

trademarks are still taking too long to get registered which is

very displeasing to the foreign company.

• The president of the INPI, Brazil’s patent office, has realized that

they must protect their own intellectual property to encourage

innovation.

• the Brasil Maior (Greater Brazil) plan, we have seen a rise in

trade protections such as tax breaks to benefit local

manufacturers, increased tariffs, and local content requirements

Recommendations

• We need a strong local presence in Brazil

• A great way to do this is through building relations with

local distributors

• Though intellectual property rights and tariffs are

becoming more efficient, it is still difficult for a US

company to enter a public market in Brazil without the

help of a reputable partner

• Not only do tariffs pose a conflict, Brazil also holds

complex customs and corruption in the legal system

• We need to visit Brazil and make strong relations with

local partners and distributors.

PRODUCTS/SERVICES

RECOMMENDATIONS

Products

• Bacardi Gold Rum

• IPAD mini

• 2014 Toyota Camry Hybrid

Bacardi Gold Rum

Product Description

• Smooth & Mellow

• Toasted oak barrels,

shaped through secret

blend of charcoals

• By Ron Bacardí in 1862

• “Original Cuba Libre”

Recommendations

• Adapt the price of the

rum but the flavor

should not change

• Continue to use social

media outlets to

promote the product

IPAD mini

Product Description

• 7.9 inch retina display

• Up to 4x CPU

performance, Up to 8x

graphics performance, up

to 10 hr. battery

• advanced wireless

• ios7

Recommendations

• Make sure product

meets standards to

comply with the

existing technology in

Brazil

2014 Toyota Camry Hybrid

Product Description

• 4 Door LE Sedan

• Continuously variable

transmission

• Fuel efficiency 39/43/41

(mpg hwy/city/combined)

• 6 Gallons of Gas,

Southeast Toyota

Distributor Plus

Recommendations

• Ensure its reliability to

get consumers from

point A to point B

• Promote eco-friendly

concept

• Additional financing

programs or

specialized prices

ASSESSMENTS OF

INTERNATIONAL BUSINESS

SUCCESS

Economic Benefits

• Home Country

• Increase in overall sales volume and market share

• Increasing economies of scale

• Accessing inexpensive labor and cheaper production methods

• Rum: Build assembly operation in Brazil to have greater access to raw

materials

• Hybrid Car: Subsidies and tax concessions from government

• Host Country• Jobs created, provided capital, tax revenue increases, new skills and

technologies learned

• Greater choice of products for consumers

• Opportunity's for other MNC’s to do business in Brazil

Social Costs and Benefits

• Rum

•Drinking in moderation can alleviate stress and be healthy for the heart

•Drinking and driving can adversely affect Brazil’s roadways

• Hybrid Vehicle

•Lower toxic emissions and release less carbon dioxide into the

environment

•Cheaper fuel costs

•Helps fight the growing global warming crisis, and creates cleaner air

• IPAD

•More efficiency in a smaller device

•Reduce amount of paper used in offices and schools

•Helps small businesses