Brazil is located in South America and is the fifth largest country in the World by land area and population. It is a diverse country with a rich history, culture, and natural resources. Brazil has great potential for international business due to its large and growing economy, vast natural resources, and strategic geographic location. The country is slightly smaller than the United States, with an area of 8 511 965 square kilometers (National Archives). Brazil is the largest economy in Latin America and the eighth-largest economy in the World. It has a large and diverse market with a population of over 210 million, making it an attractive destination for businesses looking to expand internationally. One of the most intriguing aspects of Brazil is its natural resources. Brazil is home to the Amazon rainforest, which contains over 20% of the World’s oxygen and is the largest and most biodiverse tropical rainforest in the World. Brazil is also a significant producer of agricultural products such as soybeans, coffee, and sugar, as well as natural resources such as oil, gas, and minerals. In addition, the country is a member of the BRICS group of fast-growing economies, along with Russia, India, China, and South Africa. The BRICS countries are considered among the fastest-growing economies in the World, and their increasing economic power and influence make them an essential players in the global economy.
Other intriguing aspects that made me choose Brazil are its cultural diversity, education, health, and energy. Brazil is a multicultural and multilingual country with a rich history, diverse ethnic groups, and unique cultural practices. The country comprises Portuguese, Japanese, Africans, Italians, Germans, and indigenous people. It also has a complex and diverse health system. It is home to several world-renowned health research institutions and a well-established education system, with several universities and research institutions highly regarded in the international community. In addition, it is a significant producer of oil, gas, and renewable energy sources, such as hydroelectric power and ethanol. This essay will discuss the environmental factors in Brazil, challenges and opportunities, and product entry.
Environmental Factors
Political Environment
Brazil gained independence on 1882 September 7. The constitution was promulgated on 1998 October 7 (National Archives). Brazil has a presidential representative democratic system with a federal government. The political system of Brazil is divided into three arms: the judiciary, legislature, and executive. The president heads the executive branch and holds the position for a maximum of eight years. The legislative branch comprises the National Congress, which consists of the Senate and the Chamber of Deputies (National Archives). The Senate consists of eighty-one members, usually elected for an 8-year term, while the Chamber of Deputies has five hundred and thirteen associates, typically elected for a four-year term. The judiciary branch includes the Federal Supreme Court, the Superior Court of Justice, and the Regional Federal Courts. Brazil has a multi-party system with a large number of political parties. The main parties in Brazil include; the Workers’ Party (PT), the Brazilian Social Democracy Party (PSDB), the Brazilian Democratic Movement Party (PMDB), Brazilian Progressive Part (PPB), and Liberal Front Party(PFL). There is also the Brazilian Progressive Party (PPB), Social Democratic Party (PSD), and The National Mobilization Party (PMN). Nevertheless, many other smaller parties have significant representation in the National Congress (National Archives).
Political risk in Brazil is high due to the country’s history of corruption, crime, and social inequality (National Archives). The country has faced several political crises recently, including the impeachment of former President Dilma Rousseff in 2016 and the imprisonment of former President Luiz Inácio Lula da Silva in 2018. In addition, Brazil’s political environment is influenced by external factors, such as its relationship with other countries and international organizations. Brazil is a member of several international organizations, including the United Nations, the World Trade Organization, and the Union of South American Nations.
The Legal Environment in Brazil
Brazil follows the civil law tradition, where the laws and regulations have been written. Congress passes the statutes and codes. The courts of Brazil are responsible for applying them to support their decisions. The president of Brazil is the head of government and state and the commander in chief of the defense forces. The Brazilian judiciary has the state and the federal courts (Harvard Law School Library, 2023). The highest court in the country is the federal supreme court. The legal system in Brazil also follows the constitution, which is written in the country’s official language, Portuguese. The constitution guarantees several individual protections and rights and is considered the country’s supreme law. It is a foundation for all other laws and legal decisions, as the courts call it. The country also has laws and regulations governing environmental protection, labor, and criminal activities (Harvard Law School Library, 2023).
Organizations or countries doing international business in or with Brazil may encounter several legal issues. Some of these issues include; labor laws, as the country has strict laws regarding workers’ benefits, salaries, working hours, and other employment-related matters. In addition, the country has complex tax laws, such as high taxes on exports and imports, which the organizations doing business with the country must adhere to. The country also has laws regarding environmental protection relating to pollution control and waste management. Foreign organizations must also register with the government before investing in specific industries such as banking and telecommunications. Additionally, the country is specific and detailed on contracts that foreign countries and organizations must abide by since breaching a contract may lead to financial losses or legal actions (Harvard Law School Library, 2023).
The legal risks of companies operating in Brazil include corruption. The country has been struggling with corruption for far too long. Foreign organizations in Brazil may be subject to demands for bribes or kickbacks from business partners or public officials. In addition, the strict labor laws in Brazil may make it difficult for foreign investors to hire or terminate employees, and the enforcement of intellectual property rights such as patents, copyrights, and trademarks may be difficult in Brazil, with piracy and counterfeiting being recurring issues. Additionally, Brazil’s legal system may be slow, posing a challenge for foreign organizations to resolve problems on time (Harvard Law School Library, 2023).
Economic Environment
Brazil has a mixed economy system consisting of both socialism and capitalism elements. The country has a large and diversified economy as it is number one in Latin America in terms of economy. Brazil has a Gross Domestic Product (GDP) of $ 3.4 trillion (Heritage Organization, 2023). The country also has a strong focus on the provision of services, manufacturing, and agriculture. Brazil’s government plays an essential function in the economy by providing various goods and services and interventions to regulate businesses through offering subsidies and taxation. In recent years, the country has also implemented market-oriented reforms such as fiscal austerity measures, privatization, and trade liberation (Glezer et al., 2015).
Brazil’s primary services and products cover various industries, including agricultural products. The country is among the World’s top producers of citrus fruits, poultry, beef, soybeans, sugar, and coffee. Brazil also has minerals and engages in mining since it has a wealth of mineral resources such as nickel, bauxite, copper, gold, and iron ore and large oil and gas reserves offshore in the Atlantic Ocean (Glezer et al., 2015). The country also engages in manufacturing in the pharmaceuticals industry, textile, electronics, and automobiles and offers financial and professional services, including legal services, insurance, and banking. In addition, Brazil also engages in tourism as it has tourist attractions such as the beaches in the Northeast, Rio de Janeiro, and the Amazon rainforest (Glezer et al., 2015).
Brazil faces significant economic risks, such as high inflation. The country recently experienced an 8.3% inflation rate (Heritage Organization, 2023). Brazil also experiences a history of volatile economic performance and political instability. The country is highly dependent on exports of commodities such as crude oil, iron ore, and soybeans. For this reason, price fluctuations of these products in foreign markets can critically impact the country’s economic performance. The country also struggles with a massive public debt of 93% which can limit it from responding effectively to the country’s economic challenges (Heritage Organization, 2023). Moreover, the corruption scandals in the country have lowered potential investors’ confidence, who would have otherwise boosted the country’s economy.
Monetary Environment
Brazil’s new currency system, the Brazilin Real (BRL), was introduced in 1994 to substitute the older currency, the cruzeiro real. The country’s currency is managed by its central bank. The real is divided into a hundred centavos and comes in portions of BRL one, two, five, ten, twenty, and one hundred reais (Moreira et al., 2021). Coins come in portions of one, five, ten, twenty-five, and fifty centavos. The country’s currency has fluctuated against major currencies such as the United States dollar. However, the Brazilian government puts the monetary policy through the Central Bank to control its currency exchange rate and inflation.
The currency risk in Brazil is linked to economic and political instability. The currency value changes based on demand and supply in the foreign market exchange rates. Due to the high inflation in the country over the years, the Real has depreciated. The instability and uncertainty in Brazilian policy decisions and leadership have contributed to the violent capital fight and market sentiment resulting in the loss of the real’s value (Moreira et al., 2021).
Trade Environment
Brazil’s major exports are iron ore, crude oil, soybeans, beef, coffee, and sugar. These products are mainly exported to Japan, China, and the United States. On the other hand, the significant imports are vehicles, electrical equipment, and machinery, mainly from the United States, Germany, and China. Furthermore, the major Brazilian trading partners are China, the United States, Germany, the Netherlands, Mexico, India, South Korea, Japan, and Argentina (Sehnem et al., 2023).
Brazil is part of regional trade agreements such as the Pacific Alliance and the Mercosur. These trade agreements have benefited Brazil in various ways, leading to economic growth since it has increased trade between Brazil and its neighbors. Moreover, Brazil has actively participated in bilateral trade agreements with neighboring countries such as the United States and other European Union members (Sehnem et al., 2023).
Brazil has put various trade barriers and tariffs in place to promote local production and protect its industries. These include import tariffs on various commodities imported into the country. The country also imposes non-tariff interventions such as technical and licensing requirements and quotas to make it challenging for foreign markets to enter the Brazilian market (Sehnem et al., 2023). Moreover, the Brazilian government restricts the exports of specific products, such as minerals and timber, to prevent environmental degradation.
On the other hand, the Brazilian government also offers incentives for companies to conduct business in the country. These include giving them low-interest loans, subsidies, and tax benefits. In addition, the government has decreased bureaucratic barriers and established free trade zones to attract foreign investors (Sehnem et al., 2023).
Cultural Analysis
Brazil is a culturally diverse country containing individuals from various ethnic, racial, and cultural backgrounds. The cultural determinants in Brazil are indigenous heritage, African influence, Portuguese colonization, and catholic influence. Brazilian geography and the immigration of people into the country have also influenced its culture. The dimensions of Brazilian culture lie in the family, religion, language, and social hierarchies. The norms of the Brazilians include a strongly patriarchal culture, with men being dominant in the country by holding essential positions and being respected more. At the same time, women are seen to do more womanly duties, such as being at home cooking for the children (Torres & Dessen, 2018). In addition, it is a Brazilian norm to respect the cultural diversity in the country, and religion also shapes them as most believe in the roman catholic church. In Brazil, personal space is also given less priority, and people stand close to each other during conversations. Additionally, Brazilians are known for their love of partying, love, dance, and music. The most famous tradition is known as Carnaval (Torres & Dessen, 2018). Moreover, Brazilian society is collectivist, emphasizing the significance of group values and harmony over individual accomplishment.
Challenges and Opportunities
The opportunity to do business in Brazil is that the country has high technology that will support the production of various goods and services. The country also has a high population, meaning it has enough workers to work in the organizations that want to invest in the country. Additionally, the country offers subsidies, free trade zones, and reduced technical requirements for organizations wishing to invest in the country. The country also has a good infrastructure that supports the swift movement of products from where they are produced to the markets.
The challenges for conducting business in Brazil include; high taxes, which can reduce profitability, and high corruption in the country will make the organizations subject to bribing political leaders or other persons. The country also has strict labor laws that can make it difficult for foreign investors to hire or terminate employees. The currency in Brazil is also lower in value compared to other countries, such as the United States. This will make investors from foreign countries see that they will not make good profits in a country with a lower currency value that keeps fluctuating.
Product Entry
A product I can propose to enter the Brazilian economy is eco-friendly laundry detergents. Brazil is a rapidly developing country with an increase in middle-class residents who are conscious of the environment. In addition, the country has natural resources that many residents are willing to protect. Nevertheless, there is an increase in demand for eco-friendly products in the country by many residents who may not be able to afford them as they are expensive. This presents a chance for an organization to enter the market with sustainable, effective, and innovative cleaning products like laundry detergents. This will attract customers willing to use more eco-friendly products while living in clean spaces. Moreover, with an increase in government incentives for sustainable products, the company producing sustainable laundry detergents will make huge profits.
Conclusion
During the research, I learned various things relating to international trade. I have learned that various things can attract or limit foreign investors’ activities in a country. The things that can promote foreign investors’ activity include a friendly legal, economic, trade, political, and cultural environment. For instance, a politically stable country can attract more investors as they will have faith in the security of their business dealings. A fast legal system can also attract investors as the courts will deal with disputes arising from conducting business in the area. A diverse culture can also promote investors’ activity in an area since it will encourage the production of various goods and services as it is sure a particular part of the population will consume them. Things that can discourage foreign investors’ activities may include high taxes, political instability, strict labor laws, extraordinarily technical and legal requirements, corruption, and poor currency value. I have also learned more about the theory of absolute advantage in international trade when doing the assignment. The theory states, “If one country has an absolute advantage over another in one line of production, and the other country has an absolute advantage over the first country in another, then both countries would gain by trading” (Wild & Wild, 2021). In my research, I have learned that Brazil operates using this theory. Its exports include soybeans, coffee, beef, iron ore, crude oil, and sugar which it exports to China, the United States, Germany, and Japan. On the other hand, it does not mainly produce specific products, so it must import. The country, therefore, imports vehicles, machinery, and automobiles from the United States, Germany, and China. In this way, these countries benefit from each other through trade as one provides for the other something they do not produce, and vice versa is correct.
References
Glezer, R., M Dias, V., Brito, A. S. D., & Zanatta, R. A. (2015). Transforming legal capacity in Brazil: International trade law and the myth of a booming practice. Available at SSRN 2683561.
https://doi.org/10.1017/9781316871959.010
Heritage Organization. (2023). 2023 index of economic freedom.
https://www.heritage.org/index/country/brazil
Harvard Law School Library. (2023). Brazilian legal research.
https://guides.library.harvard.edu/law/brazil
Moreira, T. B. S., Mendonça, M. J., & Sachsida, A. (2021). Fiscal and monetary policy rules in Brazil: empirical evidence of monetary and fiscal dominance. CEPAL Review.
https://repositorio.cepal.org/bitstream/handle/11362/47818/1/RVI135_Moreira.pdf
National Archives. Brazil-the White House.
https://clintonwhitehouse3.archives.gov/WH/New/SAmerica/brazil.html#:~:text=Political%20parties%3A%20Brazilian%20Democratic%20Movement,(PSB)%2C%20Communist%20Party%20of
Sehnem, S., Provensi, T., Kuzma, E. L., dos Santos, F. M., & Godoi, L. (2023). Circular economy in Brazil and alignment with the SDGs: Interfaces, gaps, and opportunities for future research. Contextus: Revista Contemporânea de Economia e Gestão, 2.
https://doi.org/10.19094/contextus.0.81400
Torres, C. V., & Dessen, M. A. (2018). Brazilian culture, family, and its ethnic-cultural variety. Arizona Journal of Hispanic Cultural Studies, 189-202.
https://doi.org/10.1353/hcs.0.0038
Wild, J., & Wild, K. (2021). “International Business: The Challenges of Globalization,” (9th ed.). Pearson.
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