Investing Overseas in Brazil, Research Paper Example

Globalization has been the main driving force of the free flow of trade throughout international borders. Globalization, however is nothing but the same old thing revitalized. It has experienced a few patterns and stages to where the latest patterns can be portrayed by the expanded combination in exchange, the capital streams, and the expanded development of labor. It has to a great extent went about in automatic structure without any formal structure or frameworks that are set up to administer the procedure. Inside the most recent decade, the breaks of the defective framework started to demonstrate that threat of stability of the world’s economy, such as in the case of the global financial crisis. It has severely impacted emerging countries, such as those in Latin America. However, countries such as Brazil have quickly recovered, compared to other emerging companies and even the United States.

Brazil is perceived by the world, as the biggest economy in South America. The nation has been seen by numerous organizations to have incredible business potential for expanding international business. Brazil’s endless common assets and populace size are a part of its advance. However like any creating nation, Brazil has numerous difficulties to succeed. Understanding the variables that Brazil may face are key focuses for its venture and in addition realizing what Brazil’s inadequacies are key for any businessman. Through this report, one can take in the essentials in the business to fortify themselves while working together in Brazil. Brazil has a working class that is growing. A solid domestic demand and enormous undiscovered natural resources reserves. Supportive government arrangements, improvement of licensing process, easy finance options, subsidized credit, and regulatory framework.  Brazil’s facilitating of the 2014 FIFA World Cup and the 2016 Olympics has sparked great interests in their business sector. With large domestic market, wealth of their natural resources and a long-term economic growth trajectory, it is looking very attractive to foreign investment.

Looking at the elements of Brazil’s economy, the balance of trade has remained the same since 1959. “Balance of Trade in Brazil averaged 650.34 USD Million from 1959 until 2014, reaching an all-time high of 5659.37 USD Million in July of 2006 and a record low of -4058.14 USD Million in January of 2014” (Trading Economics 1) Brazil has been a growing force in the international trade market for the over the past few decades. The highest country’s current account was reached in 2007 with revenue over $800 billion. Within Latin America, behind Mexico, Brazil is the largest ICT. Their trade policy is among the highest priorities as it promotes growth of the economy, and is potentially trying to alleviate poverty in their country. The export promotion is a principle segment with produces development and lessens the defenselessness in the changes in the monetary financial market. Brazil is the world’s biggest maker of espresso, tropical tree grown foods, concentrated squeezed orange, sugarcane, and business dairy cattle crowd at 170 million creatures. Their competitive edge is lodged in the country being the 5^th largest country (mass) in the world, with the 5^th largest population. It has the 10^th largest economy, and the 4^th largest aircraft manufacturer in the world. They come in 5^th for the largest automotive manufacturer, the second largest wheat consumer in the world, and the single helicopter manufacturer in Latin America. Other important factors that helps with their competitive edge includes theirs place in the international trade market. They come in second in the commercial air fleet, private executive jet’s market, agriculture vehicles in the market, and the largest jeans consumer market in the world. They place third for the copying machines, market for TV sets, and soft drinks in the world, and forth in the largest refrigerators market in the world. There are many multinational corporations that are present in Brazil includes, ALCOA, Philips, Unilever, Samsung, Hyundai, HSBC, Merck, Cadbury Schweppes, BASF, IBM, LG, Siemens, Johnson and Johnson, Citibank, Motorola, Crhodia, and Tata.

Crediting to Brazil not feeling the brunt of the exchange breakdown is expected partially to Brazil representing pretty nearly one-third of the GDP is its different commercial enterprises in vehicles and parts, materials, shoes, machines, airplanes, hardware and gear, and customer durables. Brazil gives key fares in iron mineral, tin, timber, petrochemicals, and different minerals. Brazil’s prosperity is generally because of its differentiated economy that was less helpless to aftereffects of the United States battling economy. Their fares just makeup 2.5 percent of the GNP to the United States, as contrasted with Mexico, which make up 25 percent of the GNP. According to Trading Economics, “Brazilian trade gap increased to USD 1.18 billion in October of 2014 from a USD 0.22 billion shortfall a year earlier, as lower prices for key exports keep dragging sales down.” (Trading Economics 1)  The current GDP, is $3.12 billion, and the growth rate for the GDP is 2.49 percent. (Global Edge) Their economic history in being a competitive economy began more noticeably in 1998 with the inception of the International Monetary Fund (IMF) which provided a rescue package for the economy that was hit hard by the Asian stock market collapse. In 2001, the Brazilian government agreed to review their $40 billion seven year government program. It involved building hydroelectric systems, housing, railways, and roads in the Amazon Basin. 2002, their currency hit an all-time low and the markets went into a panic. It wasn’t until years later that the economy recovered, with the IMF stepping in with Brazil providing $10 billion to improve the availability of credit in developing countries in 2009. In 2010 they started their controversial hydroelectric dam in their rainforest. They launched their Brasil Sem Miseria (Brazil Without Poverty) in 2011, as their welfare program to help their population that is in extreme poverty. In 2013, they have safeguarded their economy against another global financial crisis by creating a currency swap deal with China. (Global Edge)

The policies of the government have long had an impact on the economy in Brazil. They have longed abandoned their monarchy, and they introduced separate state powers such as executive, judicial, and legislative branches. According to the Heritage Foundation, the corruption of the government undermines any economic freedom, and has continually sparked massive protest national wide over the poor public services, and effectiveness of the institutional and political infrastructure. The political powers were charged over their participation in the pay for votes scheme, and business contracts have largely been influenced from economic and political powers. (Heritage Foundation) There are areas in improvement for economic freedom, which includes trade, monetary, and investment freedoms, however they have slipped in the past few years. “The lack of progress toward greater economic freedom has discouraged private-sector growth and continues to undermine realization of the economy’s full potential.” (Heritage Foundation) The regulatory framework, takes an average 100 days that is needed to incorporate a company, and it takes over 400 days for a company to get the necessary permits. The labor market hinders job growth, and lacks flexibility. The Brazilian currency has largely been overvalued, and has pushed the economy on the brink of inflation. However, the export of goods in Brazil is $242 billion, the total imports is $223 billion, and the trade balance is $19 billion. (Global Edge) The percentage of GDP of exports is 12.55 percent, and the percentage of imports of goods is 15.04 percent. They regularly trade with China, the US, Argentina, the Netherlands, Japan, Germany, India, Venezuela, Chile, and Italy.

The investment opportunities in Brazil, includes their Ores which the export amount is $33 billion, oil and mineral fuels at $26 billion, oil seeds at $17 billion, industrial machinery at $13 billion, meat at $13 billion, sugar and confectionery at $12 billion, motor vehicles and parts at $12 billion, iron and steel at $10 billion, animal feeds at $6 billion, and cereals at $6 billion. (Global Edge) As far as their investment potential, they have extensive raw material resources, with a several good sectors for business opportunities, that is aided by their universities in which influence their reserved manpower. They have a diversified economy, in which they produce and export an extensive amount of manufactured goods. The biggest emerging sector for foreign investment is in their transportation systems. In which they have had problems with crowded airports. They are looking to increase their services, and for foreign companies could be a promising investment to boost sales and revenue in this growing economy. They have a good foreign domestic investment with their low cost of labor, and domestic market potential. However, they are crippled by their lax administrative barriers to international trade. Against the US dollar, they lose their competitive edge in the Asian markets. They have onerous labor laws, and placed their local businesses in the informal sector that involves substantial costs to foreign companies.

The investment would be on fixed income, in which over the past few years have generally been positive. The value of foreign stocks has been in the hundreds of billions, and the return on investments has been generally in the billions which is positive for investors. The performance of investment for fixed income has increased, which rates a positive investment performance, as well as a steady positive flow of foreign investment.

Works Cited

“Brazil.” The Heritage Foundation. 2014. Web. 9 November 2014. http://www.heritage.org/index/country/brazil

“Brazil Economic Indicators.” Trading Economics. 2014. Web. 9 November 2014. http://www.tradingeconomics.com/brazil/balance-of-trade

“Global Edge. Brazilian Economy” Global Edge. 2014. Web 9 November 2014. http://globaledge.msu.edu/countries/brazil/economy