Business In Brazil: an Introduction
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Doing Business in Brazil: an Introduction Brazil’s Significance Key Economic Indicators Foreign Trade Internet Usage Doing Business in Brazil Political & Business Environment
Transcript of Business In Brazil: an Introduction
June 1, 2011
Business in Brazil
- an introduction -
Recent Significant Developments
Standard & Poor's 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.
Brazil's 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 $42.
Contents
Brazil’s Significance
Key Economic Indicators
Foreign Trade
Internet Usage
Doing Business in Brazil
Political & Business Environment
Contents
Brazil’s Significance
Key Economic Indicators
Foreign Trade
Internet Usage
Doing Business in Brazil
Political & Business Environment
Brazil is an economic powerhouse and is
quickly surpassing some European countries
Rank Country GDP 2010
US$ bn
2011 GDP
Growth Est.
1 U.S.A. 14,658 2.8%
2 China 5,878 9.6%
3 Japan 5,459 1.4%
4 Germany 3,316 2.5%
5 France 2,583 1.6%
6 U.K. 2,247 1.7%
7 Brazil 2,090 4.5%
8 Italy 2,055 1.1%
9 Canada 1,574 2.8%
10 India 1,538 8.2%
11 Russia 1,465 4.8%
12 Spain 1,410 0.8%
13 Australia 1,236 3.0%
14 Mexico 1,039 4.6%
15 Korea 1,007 4.5%
Source: IMF (International Monetary Fund)
Rank Country GDP 2010
PPP US$ bn
Per Capita
PPP US$
Rank per
capita PPP
1 U.S.A. 14,658 47,284 7
2 China 10,086 7,519 94
3 Japan 4,310 33,805 25
4 India 4,060 3,339 126
5 Germany 2,940 36,033 20
6 Russia 2,223 15,837 52
7 U.K. 2,173 34,920 22
8 Brazil 2,172 11,239 71
9 France 2,145 34,077 24
10 Italy 1,774 29,392 29
11 Mexico 1,567 14,430 59
12 Korea 1,459 29,836 26
13 Spain 1,369 29,742 27
14 Canada 1,330 39,057 13
15 Indonesia 1,030 4,394 120
Brazil’s size provides it with natural
resources and a large consumption base
Rank Country Area km²
(million)
1 Russia 17.1
2 Canada 10.0
3 U.S.A. 9.8
4 China 9.6
5 Brazil 8.5
6 Australia 7.7
7 India 3.3
8 Argentina 2.8
9 Kazakhstan 2.7
10 Sudan 2.5
11 Algeria 2.4
12 Congo 2.3
13 Greenland 2.2
14 Saudi Arabia 2.1
15 Mexico 2.0
Rank Country Population
(million)
1 China 1,341
2 India 1,216
3 U.S.A. 310
4 Indonesia 234
5 Brazil 193
6 Pakistan 167
7 Bangladesh 164
8 Nigeria 156
9 Russia 140
10 Japan 127
11 Mexico 109
12 Philippines 94
13 Vietnam 88
14 Ethiopia 85
15 Germany 82
Sources: IMF (2010 pop.) and CIA
Brazil’s Significance
Countries with area
> 7 million km²
Countries with GDP
> US$ 1.5 trillion
Countries with population
> 100 million
Canada
Australia
India
Indonesia
Pakistan
Bangladesh
Nigeria
Japan
Mexico
Germany
United Kingdom
France
Italy
Spain
Russia
China
USA
Brazil
Brazil is on par with China and USA on
three power-driving attributes
Contents
Brazil’s Significance
Key Economic Indicators
Foreign Trade
Internet Usage
Doing Business in Brazil
Political & Business Environment
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
GDP (R$ bn, current prices)
GDP (US$ bn)
GDP (US$ bn; PPP)
GDP Growth % (right scale)
Brazil’s GDP is resilient and sustainable with
a long term expected growth of 4.2%
Source: IMF
actual forecast
4
6
8
10
12
14
16
18
20
Key Interest Rate %
1.50
2.00
2.50
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Exchange Rate R$ per US$
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Current Account Balance - % of GDP
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Consumer Price Inflation %
Inflation is under pressure, despite a strong
and consistent monetary policy
Sources: IMF, Banco Central do Brasil.
actual forecast
actual forecast
actual forecast
actual forecast
Sound economic policies are attracting FDI
and shielding the country from int’l crisis
Source: CIA, Banco Central do Brasil.
Origin of FDI 2009 % of total
Netherlands 19
USA 16
Spain 11
Germany 8
France 7
-
50
100
150
200
250
300
350
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
US$
bill
ion
s
International Reserves
Agriculture6%
Industry26%
Services68%
Contribution to GDP - 2010
0
5
10
15
20
25
30
35
40
45
50
2007 2008 2009
US$
bill
ion
s
Foreign Direct Investment
Total
Services
Manufacturing
Agriculture
Contents
Brazil’s Significance
Key Economic Indicators
Foreign Trade
Internet Usage
Doing Business in Brazil
Political & Business Environment
Brazil has been achieving trade surpluses
despite a strong valuation of the Real (R$)
Source: Ministério do Desenvolvimento, Indústria e Comércio Exterior
0
50
100
150
200
250
2006 2007 2008 2009 2010
FOB
(U
S$ b
n)
Balance of Trade
Exports of goods
Imports of goods
The economy is diversified, with
manufacturing playing a key role in exports
Leading Markets 2010 % of total
China 15.3
USA 9.6
Argentina 9.2
Netherlands 5.1
Major Exports 2010 % of total
Primary products 44.6
Manufactured products 39.4
Semi-manufactured
products
14.0
Special Operations 2.1
Leading Suppliers 2010 % of total
USA 15.0
China 14.1
Argentina 7.9
Germany 6.9
Major Imports 2010 % of total
Intermediate products &
raw materials
46.2
Capital goods 22.6
Consumer goods 17.3
Fuels & lubricants 14.0
Source: Secretaria de Comércio Exterior, MDIC
Brazil is a net importer of services, having
bought US$3 bn in information services in 2009
Source: UNCTAD
-
5
10
15
20
25
30
35
40
45
50
Exports Imports
US$
bill
ion
s
Trade in Services - 2009
Other services
Travel
Transport
Communications, $166
Construction, $4
Insurance, $1,815
Financial services, $1,612
Computer and information,
$2,795
Royalties and licence fees, $2,512
Other business services, $15,348
Personal, cultural and recreational services,
$958 Government
services n.i.e., $2,899
Imports of Other Services - 2009
In 2009 Brazil imported a total of US$12 billion in Information & Communication
Technology goods, representing 9.4% of total imports
Brazil is a net exporter of Creative Services,
with strengths in R&D and technical services
Source: UNCTAD
In 2009 Brazil exported a total of US$5.6 billion in architectural, engineering and
other technical services, representing 3% of total exports
$-
$1
$2
$3
$4
$5
$6
$7
Exports Imports
US$
bill
ion
s
Trade in Creative Services - 2009
Audiovisual and related services
Personal, cultural, and recreational services
Architectural, engineering and other technical services
Research and development
Advertising, market research and public opinion polling
Contents
Brazil’s Significance
Key Economic Indicators
Foreign Trade
Internet Usage
Doing Business in Brazil
Political & Business Environment
Internet access at the household doubled in
the 3 years to 2009, to 27%
0% 20% 40% 60% 80% 100%
Laptop
Paid TV
Game Console
Cellular w/ Internet
Satellite Dish
Desktop
Fixed Line Phone
Cellular Phone
Radio
TV
% of homes with:
20%
24%
28%
36%
14%17%
20%
27%
2006 2007 2008 2009
Computer & Internet Penetration
Households with Computer Households with Internet
Source: CETIC.br
Access from “Lan Houses” is a popular form
of internet access in Brazil
Place of Internet
Access
% of All
Internet Users
Home 48%
Work 22%
School 14%
Other person’s home 26%
Free public access 4%
Paid public access 45%
Cellular phone 3%
Other 1%
Activities Performed on the
Internet
% of All
Internet Users
Communication & social 90%
Leisure 86%
Online searches for
information and services
89%
Training & education 72%
Financial services 14%
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
-
500
1,000
1,500
2,000
2,500
3,000
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11Th
ou
san
ds
Number of .br domains
Brazil
Rank
World
Rank
Site Address
1 30 Google Brasil google.com.br
2 1 Google google.com
3 2 Facebook facebook.com
4 3 YouTube youtube.com
5 82 Universo Online uol.com.br
6 89 Orkut Brasil orkut.com.br
7 8 Windows Live live.com
8 105 Globo globo.com
9 5 Blogger.com blogspot.com
10 4 Yahoo! yahoo.com
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.br
Sources: 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 Facebook
Source: Socialbakers
Contents
Brazil’s Significance
Key Economic Indicators
Foreign Trade
Internet Usage
Doing Business in Brazil
Political & Business Environment
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 enforced
Source: Enosis Global
Brazil’s SignificanceThe South-East region has most of Brazil’s
wealth creation, driven by São Paulo state
D
Source: IBGE -2010
C
E
B
A
São Paulo
7% 9%19%
14%17%
7%
42%
56%
11%
28%
13%
18%
8% 5%
45%
Population GDP Area
A: North
B: North-East
C: South-East
D: South
E: Center-West
Contents
Brazil’s Significance
Key Economic Indicators
Foreign Trade
Internet Usage
Doing Business in Brazil
Political & Business Environment
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
