Pest Analysis of Brazil

PEST ANALYSIS OF BRAZIL COUNTRY PROFILE: Brazil, officially known as the Federative Republic of Brazil, is the fifth largest country in the world, in terms of both population and area, and the largest country in the Latin America and South America region. With a population of more than 200 million people, Brazil ranks seventh in the list of the largest economies in the world and is home to a variety of natural resources, natural environments and wildlife. The country suffered a recession in 2009. However, tough fundamentals have led the country out of the crisis. Brazil's economy is the world's ninth-largest by nominal GDP and seventh-largest by GDP (PPP) as of 2015.A member of the BRICS group, Brazil until 2010 had one of the world's fastest growing major economies, with its economic reforms giving the country new international recognition and influence. Brazil's national development bank plays an important role for the country's economic growth. Brazil is a founding member of the United Nations, the G20, BRICS, Unasul, Mercosul, Organization of American States, Organization of Ibero-American States, CPLP and the Latin Union. Brazil is a regional power in Latin America and a middle power in international affairs, with some analysts identifying it as an emerging global power. One of the world's major breadbaskets, Brazil has been the largest producer of coffee for the last 150 years. POLITICAL FACTORS: The government is proactive and stable and there is no political instability in the country at the moment. However, for how long? This is something which cannot be predicted, as the modern history of Brazil indicates things can change overnight, especially during elections, as the political situation tends to heat up a great deal. Corruption still remains a big issue in the country and it’s worsening. It has escalated to the extent that even opening a small business (at times) may require you to make payments to government representatives and officials. According to a survey by Transparency International, Brazil is ranked 72nd out of 180 countries when it comes to corruption. This is even higher than economies like Turkey, Bulgaria and Cuba.

ECONOMIC FACTORS: Thanks to a large population and FDI inflow, Brazil’s potential for growth is extremely high. There is a substantial trend of a growing middle-class and the gap between the rich and poor is declining steadily. Additionally, the Central Bank has successfully reduced the risk of currency devaluation and has also brought inflation under control. However, when it comes to the dollar, the currency is considered to be overvalued, which is adversely affecting the exports

of the country.

Both domestic and foreign enterprises are treated equally and labour costs are considerably low. For import duties, a system is in position, which gradually decreases the tariff depending on the amount of successful importing years. Furthermore, the corporate tax is set at 15% and there are no incentives for leaving profits in the country. Compared to other economies, such as Greece and Ireland, the tax rates are considerably high.

SOCIAL FACTORS: There is economic inequality with the population as around 20% of the population lives under the poverty line. Looking at the class distribution, there are a considerable number of wealthy citizens and a huge segment of people with minimal incomes. The middle class is growing. However, there is still time for it to establish. This tells as that there is large consumer population (18 million) of quite rich individuals that could be successfully targeted with our product. Brazilian people are considered as modern and up-to date with fashion movements in the world. They are aware of luxury brands and are willing to buy expensive products. South and southeast region are the most developed parts of the country and hold the best standard of living. These areas are the most-densely populated and account for the biggest portion of GDP per head. Southeast is the home to cities of Rio de Janeiro and Sao Paolo, where the largest part of population is located. In addition, Brazilians are up-to-date in the fashion world and are considered modern, as they are aware of big brands and are keen to buy expensive and luxurious products. The country hosted the FIFA World Cup 2014 and a majority of the population has a keen interest in football.

TECHNOLOGICAL FACTORS: Compared to countries like the US and Russia, Brazil possesses a weaker technological infrastructure, as well as investment, but there are efforts being made to push the development of technology centres all over the country. However, IT is a sector in which Brazil has been constantly improving and it currently ranks 53rd in the world. Technological research in Brazil is largely carried out in public universities and research institutes, with the majority of funding for basic research coming from various government agencies. Brazil's most esteemed technological hubs are the Oswaldo Cruz Institute, the Butantan Institute, the Air Force's Aerospace Technical Centre, the Brazilian Agricultural Research Corporation and the INPE. The Brazilian Space Agency has the most advanced space program in Latin America. Uranium is enriched at the Resende Nuclear Fuel Factory, mostly for research purposes (as Brazil obtains 88% from its electricity from hydroelectricity) and the

country's first nuclear submarine will be delivered in 2015 (by France). Brazil is one of the three countries in Latin America with an operational Synchrotron Laboratory, a research facility on physics, chemistry, material science and life sciences. And Brazil is the only Latin American country to have a semiconductor company with its own fabrication plant, the CEITEC.

LEGAL FACTORS: Brazilian law is based on Roman-Germanic traditions and civil law concepts prevail over common law practice. Most of Brazilian law is codified, although noncodified statutes also represent a substantial part, playing a complementary role. Court decisions set out interpretive guidelines; however, they are seldom binding on other specific cases. Doctrinal works and the works of academic jurists have strong influence in law creation and in law cases. Supreme Federal Court of Brazil serves primarily as the Constitutional Court of the country. The legal system is based on the Federal Constitution, which was promulgated on 5 October 1988, and is the fundamental law of Brazil. All other legislation and court decisions must conform to its rules. As of April 2015, there have been 53 amendments. States have their own constitutions, which must not contradict the

Federal Constitution. Municipalities and the Federal District have "organic laws" (leis orgânicas), which act in a similar way to constitutions. Legislative entities are the main source of statutes, although in certain matters judiciary and executive bodies may enact legal norms. Jurisdiction is administered by the judiciary entities, although in rare situations the Federal Constitution allows the Federal Senate to pass on legal judgments. There are also specialized military, labor, and electoral courts. The highest court is the Supreme Federal Court. This system has been criticized over the last few decades for the slow pace of decision-making. Lawsuits on appeal may take several years to resolve, and in some cases more than a decade elapses before definitive rulings. Nevertheless, the Supreme Federal Tribunal was the first court in the world to transmit its sessions on television, and also via YouTube. More recently, in December 2009, the Supreme Court adopted Twitter to display items on the day planner of the ministers, to inform the daily actions of the Court and the most important decisions made by them.

ENVIRONMENTAL FACTORS: As a developing or newly industrialized nation, Brazil is notable for taking a lead in environmentally friendly initiatives. In the field of biofuels, Brazil is the secondlargest producer of ethanol in the world. It is also home to two sustainable cities. Nevertheless, environmental issues remain a major concern in Brazil. Deforestation in Brazil is a major issue; the country once had the highest rate of deforestation in the world. By far the most deforestation comes from cattle ranchers that clear rainforest (sometimes illegally, sometimes legally), so as to make room for sowing grass and giving their cattle the ability to graze on this location. An important route taken by cattle ranchers and their cattle is the Trans-Amazonian Highway. Deforestation has been a significant source of pollution, biodiversity loss, and greenhouse gas emissions worldwide, but deforestation has been Brazil’s foremost cause of environmental and ecological degradation. Since 1970, over 600,000 square kilometres of Amazonian rainforest have been destroyed and the level of deforestation in the protected zones of Brazil's Amazon rainforest increased by over 127 percent between 2000 and 2010. Recently, further destruction of the Amazon Rainforest has been promoted by an increased global demand for wood and soybeans. Other environmental issues in Brazil include illegal wildlife trade, illegal poaching, air and water pollution, land degradation and water pollution caused by mining activities, wetland degradation and severe oil spills, among others. As the home to approximately 13% of all known species, Brazil has one of the most diverse collections of flora and fauna on the planet. Impacts from agriculture and industrialization in the country threaten this biodiversity.