Market Issues in the Federative Republic of Brazil

Topics: Brazil, Investment, Macroeconomics Pages: 6 (1783 words) Published: May 13, 2012
The Federative Republic of Brazil is the largest country in South America. With a population of 190 million, it is very ethnically diverse. It is the only Portuguese-speaking nation in the Americas. This analysis will delve into the potential opportunities for the household water filtration and cartridge product to be developed by Orca Water, Inc. First, I will consider the host country issues, and then I will dive into the market issues that need to be considered.

Political stability

Brazil is a federal republic. According to Jonathan Ball, “Brazil is a peaceful country that enjoys a stable democratic political system, with no political enemies, no ethnic or cultural conflicts and no threat of terrorism or civil unrest” (Ball, 2009). In the last ten years, their democratically elected presidents have made strong changes toward economic reform and growth. Their current president, Dilma Vana Rousseff, became the first woman president of Brazil (Bureau of Western Hemisphere Affairs, 2011). President Rousseff is a big advocate of human rights and social inclusion.

Legal protections

Contractual disputes in the Brazilian court system can often take years to move through the system. According to the Bureau of Economic, Energy and Business Affairs, “on average it takes 45 procedures and 616 days to litigate a contract breach at an average cost of 16.5 percent of the claim” (2011). However, they are now working to this process easier. Employees in Brazil have relatively high salaries because of the high demand for skilled workers. They have certain restrictions and requirements for hiring foreign employees. For example, employers are not allowed to have more than one-third of their total workforce consist of foreign workers. Employees can be fired with or without cause. Any employee that is terminated with cause does not need notice before hand nor are they entitled to severance packages. Employees fired without cause will receive thirty days notice and severance pay in accordance with Brazilian law (Joseph, 2011).

Openness to FDI:

Brazil is very open to foreign direct investment. According to the Bureau of Economic, Energy and Business Affairs “Brazil is consistently the largest FDI recipient in Latin America and typically receives close to half of all South America’s incoming FDI” (2011). While they are very open to foreign direct investment, there are still tax and regulatory requirements that can be oppressive. Most of these restrictions apply to both foreign and domestic firms. Certain industries, such as media and communications, aviation, highway freight, mining of radioactive ore and land, are subject to foreign ownership limitations (Bureau of Economic, Energy and Business Affairs, 2011). In order to continue growth, Brazil must continue to gain and attract foreign direct investment. To prove this point, “the Brazilian government uses a variety of tax incentives and attractive financing through the National Bank for Economic and Social Development (BNDES) to actively encourage both national and foreign investment” (Bureau of Economic, Energy and Business Affairs, 2011). They also give tax benefits for investment in less developed parts of the country. Economic stability (including currency risks):

Brazil is now a global power. They stayed very strong during the 2009 global financial crisis. In 2010, they experienced growth of 7.5% and this growth is expected to continue in the four to five percent range. The Brazilian economy is one of the worlds largest; placing eighth in the world now, it is expected to rise to fifth in a couple of years. Brazilian growth has been majorly based on domestic consumption. This is a positive factor four our product if we decide to use foreign direct investment. One of the current presidents economic policies is to have inflation control and a floating exchange rate. Brazil’s currency, the Real, has had a forty percent appreciation against the United States dollar...

References: Advameg, Inc. (2011). Brazil – Infrastructure, power, and communications. Encyclopedia of the Nations. Retrieved from
Ball, J. (16 Oct 2009) Investing in Brazil. International Investment. Retrieved from
Bureau of Economic, Energy and Business Affairs. (Mar 2011). 2011 Investment Climate Statement – Brazil. U.S. Department of State. Retrieved from
Bureau of Western Hemisphere Affairs. (8 Mar 2011). Background Note: Brazil. U.S. Department of State. Retrieved from
General Electric. (25 Aug 2008). Press Release: GE expands assembly facility in Brazil to meet growing demand for advanced water filtration technologies. Retrieved from
Joseph, C. (28 June 2011). Brazil: Employment Law Basics for a Country with a Robust Labor Market. Retrieved from
Luxembourg for Business. (Feb 2011). Market Entry Guide Brazil. Retrieved from
Melo, D. (18 Feb 2011). Brazil seeking skilled workers: Companies create training centers to educate workforce. Retrieved from
Seeking Alpha. (15 Nov 2011). Investing in Brazil’s Upcoming Infrastructure. Retrieved from
Tradin Biz. (2011). Brazil Water Filters. Retrieved from
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