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EMERGING MARKETS BRAZIL Michael Lauenstein

Emerging Markets Presentation

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Brazilian market benefits and difficulties in doing business in Brazil and comparison to other BRIC countries

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Page 1: Emerging Markets Presentation

EMERGING MARKETSBRAZIL

Michael Lauenstein

Page 2: Emerging Markets Presentation
Page 3: Emerging Markets Presentation

BRAZIL

• Pop. 186 Million

• Pop. Concentrated along the coast

• Immigrant population

• Largest Market in SA– +50% of all SA

• Developed infrastructure, continual investment in roads, ports and airports

Page 4: Emerging Markets Presentation

BRAZIL

• Higher interest rates (currently 8.2%)• Stable currency (FX - 2.06BR = 1USD)• Stable inflation (currently 4%)• Largest Export in $ - Airplanes• Positioning itself as a leader of developing

nations/Mercosur• Looks to Europe / Looks away from US

– Political Alliances– Design– Business

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BRAZIL• Local Presence/Product

– Large market, difficult to manage from 5,000 miles away– Used import delays – Don’t want product outs

• Non-Hispanic– Prefer English over Spanish – Can be difficult to find a Portuguese speaker in US– Don’t want to work with non-Brazilian S. Americans

• Business is modernizing – Managers well trained and worldly– Product/Sales Analysis– Accustomed to Technology

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BRAZIL

• Brand conscious consumers

• Important to build a relationship first, then do business

• Love to negotiate

• Will always figure a way to get something done.

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BRAZIL• Complicated Tax system

– Varying state taxes– Various levels of taxes

• Import Procedures – Bureaucratic– Main ports expensive– Unions strong

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Sample Import Costing

US TO BRAZILModel 1 Model 2 Model 3 Model 4

ModelBemis Mfg Price 10.00 25.00 10.00 25.00Freight&Insurance 35.00% 3.50 8.75 3.50 8.75Duty Plastic 19.50% 1.95 4.88 0.00 0.00Duty MWD 14.00% 0.00 0.00 1.40 3.50IPI Plastic 10.00% 1.00 2.50 1.00 2.50IPI MWD 0.00% 0.00 0.00 0.00 0.00ICMS 18.00% 1.80 4.50 1.80 4.50TOTAL $USD 18.25 45.63 17.70 44.25Brazilian Reals FX 2.06 37.60 93.99 36.46 91.16INTER Margin 15% 2.74 6.84 2.66 6.64Store Cost 40.33 100.83 39.12 97.79Store Margin % 40.00% 40.00% 40.00% 40.00%Store Margin $ 16.13 40.33 15.65 39.12Retail Price 56.47 141.16 54.76 136.91

Plastic Wood

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BRAZIL

• Foreign Companies in Brazil

• Wal*Mart

• Carrefour

• GM, Ford, Chrysler, Renault, Peugeot, VW

• SC Johnson

• Johnson Controls

• Nestle

• Brazilian Multinationals

• Embraer

• AmBev

• Tramontina

• Azalea

• Varig / TAM Airlines

• Zoomp / ING

• Café do Ponto

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EMERGING MARKETS

Brazil China India Russian FederationPopulation (millions) 184 1,300 1,100 144Population Growth 1.4% 0.6% 1.4% -0.5%GDP Per captia $3,000 $1,500 $62 $3,400Inflation 8.2% 6.9% 5.3% 18.1%Imports as a % of GDP 13% 31% 23% 22%No. of Day to star a business 152 48 89 36Internet users per 1,000 119 73 111 32Cel phone/Land line users per 1,000 587 499 85 508Source: World Bank 2004