Overview of Brazils macro environment

Overview of brazil-nut trees macro purlieuBeing ane of the members of the Big four BRIC countries, brazil nut experienced the scotch dumpturn and bust and has been hampered by overweening indebtedness and lavishly inflation in the past. Since 1990s, brazil-nut tree has implemented numerous policies with government and authorities support to launch the reform. brazil nuts economies started to growing rapidly afterwards policies and stabilization plan were implemented. Moreover, the on firing sound marco-economic and amicable policies have all-embracing the period of stability, ingathering and social gains ( existenceBank, 2010). Thus, the continuous development of its indoor for hosting the ground Cup and Olympic Games in 2014 and 2016 respectively provide pursue industrial and agricultural developing. With the vast vivid resources, labor pool and trading opportunities to other foreign countries therefore signifi hindquarterstly increased in brazil-nut tree and much foreign investors were attracted. Nowadays, it has become a regional loss leader with leading economic power of S go forthh America that is one of the source in the domain of a function to begin an economic recovery (InvestorPlace, 2010).Overview of brazil-nut trees macro-environmentIn this section, it is red ink to overview brazil-nut trees macro environment by applying PEST analysis and the few aspects ar being discussed as fol downhearted.PEST AnalysisPEST analysis is analyzing the external environment which is analyzing the factors of Marco-environment. It includes policy-making factors, Economic factors, Sociological factors and the Technological factors (Jobber, D., 2004).Political Factors rear to mannequin 2.1, brazil-nut tree has the permanent governmental climate which under the leadership of the communist party. The intelligent system of it is based on the Roman Codes (CIA, 2010). brazil-nut tree has 26 administrative divisions and the government is div ided into executive tell apart, legislative branch and judicial branch (CIA, 2010). In addition, it perceived the corruption problem as graded seventy-fifth position out of 180 nations of the transp arency Inter interior(a)s 2009 Corruption Perceptions Index (Transparency, 2010).In addition, Brazil involved within the free trade agreement that is sign(a) by the unify States, Central America and Dominican Republic which deriveed Brazil for trading opportunities (BusyTrade, 2010). Furthermore, it launched the increment Accele symmetryn Plan in 2007 to develop and energise the economic growth (WorldBank, 2010)Being one of the emerging economies in the world, Brazils deliverance is growing at a moderate solely steady train with continuous growing gross domestic reaping. Refer to ikon 2.2 which is figured out that the GDP of Brazil is constant growth during 2000 to 2007 significantly.and maintain the sustainable growth to 2008.From anatomy 2.3, Brazil weathered the world(p renominal) financial downturn with relatively nestling impacts.The state of matter was one of the last to fallinto recession in 2008 and among the first to resume growth in 2009. With the large growth in agricultural, manufacturing and mining, it be highest among the South American countries with the arduous position in the global delivery (Tradingeconomics, 2010).Brazil is the largest national prudence in Latin America, the worlds tenth largesteconomy at commercialize exchange rates and the ninth largest in buying power parity (PPP), according to the International Monetary Fund and the World Bank. It has large and developed agricultural, mining, manufacturing and wait on sectors, as well as a large labor pool. Thus, the expanding of its presence in worldwide financial and commodities food grocery stores can service Brazils economic keep on growthRefer to look 2.4, the interest rate in Brazil is kept on declining as to attract more foreign take a way of life enthronis ation. The government lowered down the interest rate, in consequence, to lower the inflation rate.From Figure 2.4, Brazil suffered serious-minded inflation rate in 2008. However, it declined during 2009. The deepst inflation rate is 4.6% in July of 2010 which means the prices measured against the standard purchasing power is still high. fit in to Figure 2.6, about currency convertibility, Brazil allows its currency to adjust in value in foreign exchange commercializes so long as the fluctuations in value.From Table 2.7, the mid-year creation is 201,103 thousands and ranked 5 out of 238 countries (CIA, 2010). Brazil was one of the largest population countries in the world. The growth rate of 2010 is 1.2 which was lower than 1995 and 2005.The nationality of Brazil was Brazilians (CIA, 2010) and the religions were mainly Roman Catholic (CIA, 2010). The languages of Brazilians were Portuguese (CIA, 2010).From Figure 2.8, Brazil does non suffer from aging problem. And the birth rate was maintained from 2009 that 18.43% in Figure 2.9 (UNICEF, 2010). unitedly with longer life expectancy with the index of life expecting at birth in 2008 is around 71.99 geezerhood old as maintained (UNICEF, 2009).The labour force is 101.7 million in 2009 that ranked 6th out of 228 countries (CIA, 2010). The unemployment rate is kept on dropping in these 2 years as refer to Figure 2.10.The role of female and male are vary by social classes (EveryCulture, 2010). Most of the Brazilian women had jobs outside kinfolk and employed in low-skill or low comporting jobs (EveryCulture, 2010). It meant that there was no gender e timber in that society.Source Tradingeconomics, 2010Despite the poverty ratio is decreasing as refer to Figure 2.11, Brazils inequality levels remains among the highest in the world. numerous passel still live in poverty with social exclusion is quantitatively and qualitatively pronounced and structurally ingrained (WorldBank, 2010). engine room FactorsBrazil is a leader in science and applied science in South America and in some fields as a global leader. About the technological research is largely carried out in Brazil which is mainly supported by government. Furthermore, the Brazilian information engineering science market is the largest in Latin America and the disbursal on IT product and go is expected to increase positively. Together with the expending economy lifting millions into core class for whom computers are no longer beyond reach. Brazils IT services market is expected to continue to grow besottedly in 2010, with total spending of around US$9.4bn as the economy continues to bounce back from recession. For a developing market, the percentage of Brazil IT market revenues commenced by services is high at around 38%, which corresponds more to developed market levels.Brazil government supported the technology development by providing the funding as it was the leader of science and technology development in South America. Re fer to Figure 2.12, Brazils research and development is keen on innovation of technology infrastructure.Ideological FactorsBrazilians had the strong national ideology that they called their land as the racial democracy (EveryCulture, 2010). They were seldom judge on the black and white people but classified racially depend on the social classes (EveryCulture, 2010). As a result, it meant that Brazilians were having heavy concepts on the social classes.Brazils Trade, enthronement and Migration PatternBrazil is in Group 4 which is the nearly new industrialised economies with the bonnie growth rate in pass decades (Thompson, G., 1998). Agricultural was vie an all- moant(a) role in Brazil. However, Brazil is turning from agricultural to industrialization. Agricultural should be a critical role to Brazil (Balassa, B., 1998). As a result, in order to develop the economics, Brazil needed to import the industrialization subsidiaries much(prenominal) as machinery and equipment.By the tr ade theory, the comparative advantage of the nation is goaded by factor endowments (Thompson, G., 1998). During the process of industrialization, the structure of comparative advantage shifts from simple, labour-intensive product to sophisticated capital and technology-intensive product (Thompson, G., 1998). As a result, Brazil as the latecomer industrialization (Thompson, G., 1998) begins to import the products from the advanced nations much(prenominal) as join States.The following are the indicators of imports and exports by values.From Figure 3.1, Brazils value of exports and imports is sustainable growth during 2007 to 2008. As the brought down by weaker economic activity and lower global commodity prices drive the total exports fell by 22.7% (in US dollar sign terms) and imports by 26% as economic recession (CIA, 2010).Furthermore, Brazils export major(ip) commodities are transport equipment, iron ore, soybeans, footwear, coffee, autos is ranked 26th when compare to the un iversal. And import major commodities are machinery, electrical and transport equipment, chemical products, oil, automotive parts, and electronics (CIA, 2010).Investment patternIn Latin America, Brazil is the largest recipient of foreign school investment (FDI) as Brazil is open to and encourages foreign investment. Only generate the domestic savings is non sufficient for sustainable long-term growth in Brazil (Investorplace, 2010), and then must continue to attract FDI. Together with the legislation promoting public-private partnerships and infrastructure development program known as the offshoot Acceleration Program can boost Brazils economic.From Figure 3.2, the foreign contain investment climate was not stable during 2002 to 2009. on that point are undulated changes during 2007 to 2009 because of low labour cost and rich natural resources, hence, many foreign direct investments were attracted to invest in Brazil. For many foreign direct investors, the most attractive f orce point was the growing local market and policies that encourage the foreign investment (Hubpages, 2010). The largest single source of the foreign investment in Brazil was the United States, then Germany, Japan as follow (Hubpages, 2010). Moreover, the biggest foreign direct investment activities were invested in manufacturing (Hubpages, 2010). In 2014 and 2016, it is going to held World Cup and Olympics encourage the investment by means of tourism sector (InvestBrazil, 2010).Migration patternAs economic growth, Brazilian started to move to urban to have a better living environment. There were two factors driven the movement, push and pull factors (Thompson, G., 1998). Push factor was Brazilian to avoid poverty and unworthy living standard. Pull factor was Brazilian to improve the living environment. As a result, there is now 88% of population is classified as urban (CIA, 2010). Only a few percent were still living near the coast. The net migration rate was -0.09 migrants/1,000 population (CIA, 2010).Relationship between Brazil and the international environmentPolitical FactorsIn 1990, Brazils government has radically changed the framework conditions for industrial development accompanied by technology and industrial policy programs. Moreover, Brazil is gradually opening the market to foreign competitors that remarked few regulations on trade and investment from foreign countries, thus creating an environment that requires international competitiveness and thereby forces companies to attain international levels of quality and efficiency (BrazilGov, 2010).There are a number of implications that Brazil is implementing to pull strings the Foreign exchange rate of currency with the policies and action programs. Moreover, the presence of effectual and regulatory trading protection for foreign investor doing vexation in Brazil. As refer to Figure 4.1, Brazil was ranked 73th out of the 183 best place economies countries (IFC, 2010). Together with foreign dir ect investment and government support that has mobilized a significantly large amount of capital to upgrade the infrastructure of interior (FloridaBrazil, 2010).Economical FactorsDespite the economic crisis, Brazils GDP showed continued growth through 2007-2008 while other regional countries GDP declined (Worldbank, 2010). In addition, the steady growth with strong consumer spending and job creation that stability of living forming a healthy economy, hence, Brazil certainly attract the foreign investors to catch up the duty opportunity (Obelisk, 2010).Brazil with large growing in agricultural, manufacturing and mining, thus, Brazil is keen on performing its potential to being emerging market. As a result, Brazil ranks among the 10th richest nations of the world by GDP and has maintained the lowest external debt when compared to other regional countries (SloanCenter, 2010).Sociological FactorsBrazil is one of the countries that has the largest population of the world with around 102 million labor force that ranked as 6th when comparing to the world as shown in Figure (CIA, 2010).Ideological FactorsBrazilians had strong sense of national ideology that proud of their countrys natural resources and diverse culture (EveryCulture, 2010). Besides, Brazilians are welcome the foreigners to travel and invest in such robust emerging market (FloridaBrazil, 2010).Foreign RelationsBrazil is a community leader in Linter American with collective gage efforts in economic cooperation of Western Hemisphere (BrazilGov, 2010). Moreover, as a member of Organization of American States and Inter American Treaty of Reciprocal attention that can figure out that Brazil has potential to expand relations with its neighbors (BrazilGov, 2010).In addition, Brazil is a founding member of the Latin American Integration Association and Union of South American Nations that has been a leader of G-20 group of nations (BrazilGov, 2010). In 2009, Brazil not only became a creditor country that tra ding with United States, Western Europe, and Japan, but also China is a growing market for Brazilian exports.Characteristics and Challenges of macro-environmental factors towards the trade, investment and migration patterns of emerging marketsMain drivers for doing business in BrazilBrazil is the 5th largest economy with population of 198 million.Many local companies are undervalued and in need of restructuring, capital and technologyGrowth potential and consumer marketBroad industrial base and infrastructure, and a diversify economyCreativity and flexibility of labor force, coupled with its competitive cost basisAbundant agricultural, mineral and energy resources and potentialEstablished imparting networks (railways, highways, ports) and distribution channels in most industrialized areasPrivatization in late stages and follow-on transactions still in developmentInflation under ascendency in the last 10 yearsIncreasing globalization and international trade, with Government policie s favoring exportsForeign investors are eligible for most available financial incentivesGoodwill generally tax deductibleNew regulations favoring minority shareholders emolument in local capital and debt marketsMain Challenges of doing Deals in Brazil thickening tax and employee related regulatory environment, with high taxes and social charges on payroll, gross sales and incomeMultiple taxes with fast changing legislation affecting business plans and increase risks of contingenciesEconomic environment still considered volatile as compared to more stable economiesFast-changing business conditionsLack of local financing coupled with high f material interest ratesQuality of historical financial information stirred by fluctuations in exchange rates and Generally Accepted invoice Principles differencesComplex transfer pricing and foreign capital registration rulesDifficulties in reorganizing companies quickly, including high costs for employee terminationsImportant cultural peculia rities, including a different erudition of the due diligence processSometimes the know-who is more important than the know-how in the local marketConsiderable bureaucratic rules and regulations for certain businesses and industriesHigh get hold of for investments in the distribution channels and infrastructureSemi-skilled and unskilled labor in certain developing areasSocial extremes with unequal distribution of wealth a significant portion of thePopulation not participating in the consumer marketJustification of selection of BrazilThere are many reasons of choosing Vietnam and going to identify its economic future as emerging market.First, Brazil has strong commitment that has made significant progress in developing a sustainable investment market over the last decade and justifiedly deserves its reputation as the leader among emerging economies in this regard. These achievements can create that foreign investors are tend to doing business in Brazil as refer to Figure 6.1, 6.2 .Second, the evolution of a sustainable investment market by Brazil has led other emerging markets to focus on the same issues and goals.Third, Brazil has strong business case that importance of sustainability in business and investment in Brazil that provide stable political climate and facilitated rules and regulations that maintained the economy steady growth.Finally, Brazil demonstrated stunning courage, determination, flexibility, and creativity in sustainable future. Together with Brazils stable economic and political environment that liberal investment and governments commitment to economic reform can direct Brazil being success.In order entering into Brazil, 4P is playing an important role to guide the investors as refer to Figure 7.1. point of intersectionProduct is a key component part in the overall merchandise offering. (Armstrong, G. Kotler, P., 2007).From Figure 7.2, there are three levels of products which are core benefits, actual product and augmented product. I n order to evaluate the product element in Brazil, it is important to understand their lifestyle, habit and their consumption behaviour.Nowadays, Brazilian requisite more IT products such as mobile phone, computers and software. Moreover, as Brazilian are change state more wealthy, the demand of housing and transportation are increase (Laposte, 2010).Most Brazilian including the low-income population is loyal to brands. Those people with the upper-middle classes are pay attention on the quality and the value-added services such as the imprimatur or after-sales services. They will not reject the foreign goods although they have the national pride (Laposte, 2010).As a result, based on the three levels of product, in order to design the product to enter into Brazil, it is recommended that import the convenience, shopping and persuasiveness products to satisfy both low and high income group. For the low income group, the core benefit of the product should be high quality commodities with low price such as toothpaste. For the high income group, the core benefit of the product should be strong brand preference such as luxury goods. worthPrice is the amount of money charged for a product or services (Armstrong, G. Kotler, P., 2007). As there is a wide gap of rich and poor in Brazil, the price committing should based on the target component which is the segmented pricing. Segment pricing is selling products or services at two or more prices which difference in price not differences in costs (Armstrong, G. Kotler, P., 2007). If the target segment is the low-middle class, the price setting should be lower. If the target segment is the high-middle class, the price can be higher as they are less price-sensitive.Place (Distribution Channel)Marketing channel is a set of independent organization that help make the product or service available for use or consumption by the consumer or business user (Armstrong, G. Kotler, P., 2007). When enter into Brazil, producers c annot sell the goods directly to the final users. As a result, the intermediaries are playing the important role to bring the products to the markets. In Brazil, supermarket is becoming more important for the distribution channel as it made 80% of sales (Laposte, 2010). There are several large local wholesalers and retailers in Brazil. When entering into Brazil, it can choose the major wholesaler as the intermediaries to help bringing the foreign products to Brazilian.PromotionPromotion shuffle is the specific mix of advertising, personal selling, sales advance, public relations and direct marketing that a company uses to persuasively communicate customer value and build customer relationships. (Armstrong, G. Kotler, P., 2007). In order to make the effective promotion in Brazil, it is going to discuss on the media environment in Brazil.Television has the lowest sightly Advertising Index in the world (Anonymous, 2006). However, it was the most effective promotion tools to Brazil ian. Refer to Table 7.1, TVs penetration is 97.4% which was dominant. Brazilian watched telly over quintette hours per day. As a result, the promotion should mainly focus on television which has a high coverage.Moreover, there is another new opportunity to pull ahead in Brazil which is direct e-marketing such as telemarketing, e-mail and so forth These can be used as the promotional tactics but not to maintain the relationship between the customers and companies (Laposte, 2010).The most effective way of the promotion strategy should be the pull strategy which spends a pack on advertising to create customers demand on products (Armstrong, G. Kotler, P., 2007). In addition, the promotional message on advertising should be reflecting Brazils culture such as Brazilian is enthusiasm.ConclusionBrazil has steadily improved macroeconomic stability, twist up foreign reserves, reducing its debt profile by shifting its debt nucleus toward real denominated and domestically held instrumen ts, adhering to an inflation target, and committing to fiscal responsibility. Brazils potential can be maintained and sustained in future of development.