GLobal Business Environment analysis (UK and Brazil)

Comparative Analysis Between UK & Brazil

Presented by:Shaon Biswas

Kelly Goodridge

Baihui Liu

George Raju Polepaka

Content• Country Profile• PEST analysis• Risk analysis• National economic system• Economic freedom• Business interaction between UK &

Brazil• Potential market sector for UK into Brazil• Success and Failure story of BP in Brazil

United KingdomHistorically played a leading role in developing parliamentary democracy and in advancing literature and science. First Country to get industrialised.• Located: Europe (Western)• Countries: England, Wales, Scotland and Northern Ireland• Area: 243,610 sq km• Nationality: British• Ethnic Groups: White 87.2%, Black 3%,

Asian/Asian British: Indian 2.3%, Pakistani 1.9%,

Mixed 2%, other 3.7% (2011 est.)• Language: English• Population: 63,742,977 (July 2014 est.)• Religion: Christian 59.5%, Muslim 4.4%, Hindu 1.3%,

Other 2%, None 25.7%, Unspecified 7.2% (2011 est.)• Economy: Leading trading power and financial centre. Third largest in Europe after

Germany and France. • Currency: British Pound (GBP); 1 USD = 0.60 GBP

Source: CIA World Factbook

BrazilMore than three centuries under Portuguese rule. Got independence in 1822. Underwent more than a half century of populist and military government until 1985. Today South America's leading economic power and a regional leader and one of the BRIC countries.• Area: 8,514,877 sq. km (5th Largest)• Nationality: Brazilian• Ethnic Groups: White 47.7%,

Mulatto (mixed white and black) 43.1%,

Black 7.6%, Asian 1.1%,

Indigenous 0.4% (2010 est.)• Language: Portuguese (Official), Spanish, German etc.• Population: 202,656,788 (July 2014 est.) (6th)• Religion: Roman Catholic 64.6%, Protestant 22.2% • Economy: Large and well-developed agricultural, mining,

Manufacturing, and service sectors. • Currency: Brazilian Real, 1 USD = 2.28 BR


Political FactorsUK Brazil

• Government: Constitutional Monarchy (Symbolic)

• Parliamentary Democracy• Executive Monarch (head of state),

Prime Minister (head of government)

• Political Stability• Investor Friendly• Government protect the rights of

local or foreign staff working• Local or foreign, are taxed alike

(21%)• The personal income tax rate 20%• Use GBP over Euro though part of

EU.• Corruption rate: Very low

• Government: Federal Republic• High Control over Central Bank

Policy• More stable public and private

sector than other BRIC countries• Better proven legal framework than

come other BRIC countries.• Complex tax rules• High Political Corruption • Slow legal process

Source: CIA World Fact book & others

Economic Factors ComparisonFactors UK Brazil

Key Industry Agriculture: 0.7%, Industry: 20.5%, Services: 78.9% (2013est.)

Agriculture: 5.5%, Industry: 26.4%, Services: 68.1%(2013 est.)

GDP (PPP) $2.378 trillion (2013 est.) (9th) $2.422 trillion (2013 est.) (8th)

GDP (Per Capita) $37,300 (2013 est.) $12,100 (2013 est.)

Growth Rate 1.4% (2013 est.) 2.5% (2013 est.)

Labour Force 32.32 million(2013 est) (49.29%) 107.3 million (2013 est.)(47.05%)

Unemployment 7.7% (2013 est.) 5.7% (2013 est.)

Inflation rate 2.7% (2013 est.) 6.2% (2013 est.)

Foreign Exchange & Gold

$105.1 billion (31 December 2012 est.)


Debt $9.457 trillion (31 December 2012 est.)



Export Import ComparisonFactors UK Brazil

Export $475.7 billion (2013 est.) $244.8 billion (2013 est.)

Export Commodities Manufactured goods, Fuels, Chemicals; Food, Beverages, Tobacco

Transport equipment, Iron ore, Soybeans, Footwear, Coffee, Autos

Export Partner Germany 11.3%, US 10.5%, Netherlands 8.8%, France 7.4%, Ireland 6.2%, Belgium 5.1% (2012)

China 17%, US 11.1%, Argentina 7.4%, Netherlands 6.2% (2012)

Import $646 billion (2013 est.) $241.4 billion (2013 est.)

Import Commodities Manufactured goods, Machinery, Fuels, Foodstuffs

Machinery, electrical and transport equipment, chemical products, oil, automotive parts, electronics

Import Partner Germany 12.6%, China 8%, Netherlands 7.5%, US 6.7%, France 5.4%, Belgium 4.4%, Norway 4% (2012)

China 15.3%, US 14.6%, Argentina 7.4%, Germany 6.4%, South Korea 4.1% (2012)


Social FactorsUK Brazil

• High level of migration. Multicultural Environment.

• Racial equality • Social security payments for

disabled and unemployed.• National Health Service free at the

point of entry. • Football• Food and drink• Age ration• 25-54 years: 41%

• Increasing middle class• Unequal income distribution• Crime and poverty• Lack of Education• High infant mortality rate• Football• 25-54 years: 43.7%


Technological FactorsUK Brazil

• The European Innovation

Scoreboard 2008 ranks the UK

one of the innovation leaders

(Above EU avg.)

• 23 Nobel prizes in the life sciences

• R&D tax credits are available for

large corporations and SMEs

investing in R&D

• 1% of GDP for R & D.

• Technological agreement:

European Union-Agreement for

Scientific and Technological

Innovation (2004)

• Highest Level of Patents application

from South America.

Source: Global EDGE Country Comparator & others

Doing Business ComparisonFactors UK Brazil

Region OECD high income Latin America & Caribbean

Income Category High income Upper middle income

GNI Per Capita 38,250 11,630

Starting a Business 28 123

Getting Credit 1 109

Protecting Investors 10 80

Paying Taxes 14 159

Trading Across Borders

16 124

Source: Doing Business.org

Risk AnalysisUK

Strengths• Bank of England’s flexible monetary policy• Hydrocarbon production meeting three

quarters of energy needs• Government determination to adjust public

finances

Weaknesses• Economy heavily dependent on financial

services• Instability of the coalition government over the

high level of public debt and deficit• Record level of private debt• Weakness of the banking system• Growing proportion of the young in

the unemployment figures a source of social tension

Brazil

Strengths• Attractive scale and potential of the market• Mineral and agricultural resources• Significant manufacturing industry• Capacity to resist exogenous shocks:

considerable foreign exchange reserves• Infrastructure offensive

Weaknesses• Lack of skilled labour • Insufficient domestic savings and heavily

dependent on foreign capital • Weak investment (19% of GDP) and

infrastructure shortcomings• Exposed to raw materials price fluctuations• Considerable public debt and still high interest

rates• Heavy taxes • Corruption and inequalities

Source: Global EDGE

National Economic System

Liberal

• Capitalist economic system in which supply, demand and prices are determined by free markets

• This model values free enterprise and the legal protection of private property

• Government intervention is perceived as necessary but its role is very limited.

Mixed

• Economic system which combines market element and state elements

• Many mixed economies are making the transition from a planned economy to one built on market forces

• Emerging markets are benefiting from globalization to advance their economic development

Morrison, J. (2011). The global business environment: meeting the challenges. 3rd ed., Palgrave Macmillan, Basingstoke

National Economic System Characteristics

Liberal Market Economy

UK• Capitalist free market

• Individualist

• Democratic values

• Minimum government intervention

Mixed Economy

Brazil• Capitalist elements

• Elements of state control

• Weak individualism

Morrison, J. (2011). The global business environment: meeting the challenges. 3rd ed., Palgrave Macmillan, Basingstoke

Economic Freedom• Economic freedom is the ability freely decide how to produce,

sell, and use your own resources, while respecting others’ rights to do the same (Economic Freedom 2014).

• A society with high levels of economic freedom leads to:• Higher incomes• Lower poverty• Less unemployment• Longer life expectancies• Cleaner environments

More economic freedom improves well-being and leads to a higher quality of life.

Source: Economic Freedom (2014)

UK Economic Freedom

Source: The Heritage Foundation (2014). Index of Economic Freedom.

Brazil Economic Freedom


Economic Freedom Comparison

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Trade

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Financ

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10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

BRAZIL

UK


Business Interaction Between UK & Brazil

• 2nd largest investor in Brazil.

• 45 UK projects in Brazil in 2011.

• US$12b in FDI value.

• 21,040 jobs created from UK projects in

Brazil.

• 38% of total FDI projects from UK into

business services.

• 58% of total FDI projects from UK into the

Southeast region, primarily São Paulo.

Closed Business Ties

• The Brazil-UK Joint Economic and Trade Committee (JETCO), established in

2006

Source: Capturing the momentum, Brazil: UK investors' perspectives


Business in Brazil Business in UK

Several large British companies suchas Rolls-Royce, GlaxoSmithKline, BP, Royal

Dutch Shell, British American Tobaccoand BG Group are present in Brazil.

Brazil was the only country from Latin America to have invested in the UK over these five years.



While business services attracted the

maximum of projects in 2011 with 38% of the

total FDI projects from the UK, Mining and

Metals created the highest number of jobs

(12,482) and 59% of the total FDI jobs.

Finance and business services are the

the most attractive sector in the UK for

Brazilian investors. Both accounted for more

than half (54%, or seven projects) of the total

FDI projects undertaken by Brazil in the UK

between 2007 and 2011.


Further Potential Market for UK in Brazil

• Open doors for UK companies to meet Brazil’s

infrastructure requirements due to 2014 FIFA Word Cup

and the Rio 2016 Summer Olympic Games.

• British companies’ opportunities lie in:

Provision of high-end planning, design and engineering services

Supply of construction materials, equipment and technology

Project management and sustainability


Success of BP in Brazil

BP and Brazil has more than 50years of partnership and commitment.

BP Group began operations in Brazil in 1957.

It operates in five segments: exploration and production of oil and natural gas, production BP Biofuels, lubricants (Castrol), aviation fuel (Air BP) and marine fuels (NFX) and is present in 14 Brazilian states.

In Brazil, the BP Group companies have over 5000 employees.

The aim is to generate revenue for the country, train Brazilian professionals and contribute to the development of local suppliers. http://www.bp.com/en/global/corporate/about-bp/bp-

worldwide/bp-in-brazil/bp-no-brasil.html

Economy of BP in the World

Profit ended by Dec 2013 was $23,451 million.

In 2014, Brazil has made $135 million quantities of oil and gas.

BP generate profits at the rate of £1.3 million an hour.

Brazil energy production rises by 98% while consumption grows by 71%.

Brazil’s energy production as a share of consumption rises from 92% today to106% by 2035.

http://www.dailymail.co.uk/news/article-44255/BP-announces-record-profits.html#ixzz2yIHBmyTT

Source: Annual Report; British Petroleum, 2013

Failure of BP in BrazilBP to write off $1 billion on failed well. BP said the Pitanga exploration well on

Block BM-CAOL 13 in the Camamu-Almada basin, offshore Brazil, found no commercial quantities of oil or gas.

To write off $1.08 billion in costs, of which $850 million relates to the value of the block and the rest covers the costs of drilling.

Brazilian protested against BP for drilling at Pitanga block in the Camamu-Almada Basin.

http://platformlondon.org/2014/02/04/drilling-the-pre-salt-is-brazil-still-a-land-

of-opportunity-for-bp-and-shell/

Conclusion UK business environment is better than Brazil

considering all the aspects. Although Brazil has corruption and political issues, they

have better Central Bank Policy and legal framework than other BRIC countries.

Brazil has more central bank reserve and less debt. UK and Brazil have a high level of business interactions. Success and Failure of British Petroleum, people

concerned about environment and even BP is has taking standard precautions.

References• Morrison, J. (2011). The global business environment: meeting the challenges. 3rd ed., Palgrave

Macmillan, Basingstoke.• The Heritage Foundation (2014). Index of Economic Freedom. [online]. Last accessed 02 April

2014 at: http://www.heritage.org/index/heatmap• Economic Freedom (2014). [online]. Last accessed 02 April 2014 at:

http://www.economicfreedom.org/about/what-is-economic-freedom/• Ernst & Young's (2012) Capturing the momentum, Brazil: UK investors' perspectives. [online]. Last

accessed 05 April 2014 at: http://www.ey.com/Publication/vwLUAssets/Capturing-the-momentum/$FILE/Capturing_the_momentum.pdf

• https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html• http://globaledge.msu.edu/comparator/home/results?year=&field=IS-AIR-GOOD-MT-K1&field=IS-

ROD-TOTL-KM&field=IS-RRS-GOOD-MT-K6&field=IS-RRS-TOTL-KM&field=IT-NET-BBND&country=107&country=78

• http://globaledge.msu.edu/countries/brazil/risk• http://globaledge.msu.edu/countries/united-kingdom/risk• http://www.businessinsurance.com/article/99999999/NEWS040102/120309899?tags=|59|332|338|

76|313|80|84|342• http://www.bp.com/en/global/corporate/about-bp/bp-worldwide/bp-in-brazil/bp-no-brasil.html• http://platformlondon.org/2014/02/04/drilling-the-pre-salt-is-brazil-still-a-land-of-opportunity-for-bp-

and-shell/

GLobal Business Environment analysis (UK and Brazil)

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