Brazil - Pestl Analysis and Swimwear Industry Review

Topics: International trade, World Trade Organization, Free trade Pages: 18 (5582 words) Published: August 14, 2010
Brazil: Swimear & Surfwear|
Warwick Brown (87354922)|



Brazil is the largest economy in South America, with GDP of $US 1,314 billion and a population of 192 million. It is also one in which there is enormous inequality of wealth distribution, which presents challenges for the government, and the economy. Largely internally focused, Brazil is opening its doors to more international trade, though biased towards exports rather than imports. For the foreign company doing business in Brazil, there are few barriers to entry, however there are significant tax, legal and social implications which must be evaluated before deciding to enter the Brazilian market. These can increase the cost of goods by more than 100% of their value, and impact the ability of a firm to compete. The local swimwear industry is worth approximately US$3bn and is dominated by several highly successful brands with an international presence. Opportunities exist for differentiated products to enter the market, however the market entry strategies must be carefully considered. For established brands a licensing strategy may be appropriate, and for smaller businesses, an aggressive export strategy through local distributors is recommended. SITUATION ANALYSIS

Brazil has been dominated by a series of military and populist governments since gaining independence from the Portuguese in 1822. In 1985 the military regime transferred power to civilian rulers. It is a federal republic composed of 26 states and a federal district, with three tiers of government.  Each state has its own government structure which mirrors that at the federal level. There are over 5,500 municipal councils. Voting is universal and compulsory for all literate citizens from 18-70, and optional for those aged 16-17 and over 70, or who are illiterate.  Under Brazil’s Constitution, the president and vice president are elected by popular vote for four-year terms. The National Congress consists of the Federal Senate with 81 members serving eight year terms, and the Chamber of Deputies consisting of 513 members elected by proportional representation to serve four-year terms. (Department of Foreign Affairs & Trade 2009) Throughout most of its modern history, Brazil has tended to focus on its relationship with other Latin American neighbours. In the 1990’s under the administration of President Fernando Cardoso (1995-2003), Brazil broadened its approach to international trade as part of a greater industrialisation strategy to coincide with the growth in the export of manufactured goods, not just raw materials. President Luiz Inacio Lula da Silva took office in 2003, and began a second and final term in 2007 (the Brazilian constitution does not permit a President to seek office for a third). President Lula has been a strong proponent of developing countries and has fostered relationships with other developing nations such as China, India and South Africa. Economic reform is a key platform, and the current government has been instrumental in controlling inflation, reducing government spending and improving trade. Brazil is very active in global forums such as the World Economic Forum and the G8 forum, lobbying for free trade agreements and removal of anti-competitive subsidies. For example, in 2002 through the World Trade Organization (of which it became a member in 1995), Brazil initiated a dispute against the United States claiming subsidies of its cotton industry were unfair to the Brazilian cotton industry. The WTO handed down its final ruling in August...

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