Table of Contents
Acknowledgement ……………………………………………………………………… 02
Executive Summary………………………………………………………………….…. 02
Introduction …………………………………………………………………………….. 02
Culture of Brazil
Folkways ………………………………………………………….…………… 03
Mores ………………………………………………………………….….…… 03
Determinants of Culture …………………………………………………………….… 04
Economy…………………………………………………………………………… 04
Hofstede’s cultural dimension in Brazil Context ……………………………….…… 05
Overall attractiveness in terms of costs, benefits and risks
Benefits ………………………………………………………………………… 05
Risk ………………………………………………………………………….… 07
Cost ……………………………………………………………………………. 07
Factors Determining International Trade & Capital flows and impact of international
institutions ……………………………………………………………………...…… . 08
Allies ……………………………………………………………………………….…. 09
International competitiveness of Brazil and their attractiveness for international
business
Five Multinational Companies & Local Companies in Brazil …………………. 10
Five Important Local Companies……………………………………………… .... 11
Corruption Perceptions index ………………………………………………….… 12
Five Interesting facts about Brazil ……………………………………….……… 13
Conclusion ………………………………………………………………………… 13
Bibliography ……………………………………………………………………… 14
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Acknowledgement
We needed the support, assistance and guidance that were given upon us to complete this
project successfully. First of all, we owe our deepest appreciation and profound gratitude to
our honorable faculty Ms. Adina Malik who gave us the opportunity to make this project on
the topic “Promoting and Attracting FDI” and we have select Brazil, the third richest
country in Asia for our research of this project. We heartily thank her for help, suggestions,
valuable guidance and timely support.
Special thanks go to my team mates. Without their effort it was impossible to complete this
task. Finally, appreciation is extended to grateful “All Mighty Creator” for making us able
to complete this task.
Executive Summary:
Brazil is a huge country with a population of about 190 million on individuals. Among these,
about 140 million have the purchasing power comparable to that of scandinavians. It is rich
on natural resources and it also a key country in the Mercosur trading block. Despite its
problem with wealth distribution and the last years distribution and last years economic
recession, Brazil is considered a positive market for foreign investment according to the
least Standard and poor risk evaluation. Due to firm political efforts the country has avoided
inflation during the greater part of the 1990s, and even after the currency crisis in January
1999, the economy has managed to pick up without falling back into the grip of inflation.
The GDP is expected to rise around 3,6 % in 2006. Direct foreign investment reached a peak
of 20 billion USD in 2005, making Brazil the 3rd largest recipient of such capital. Forecast
for 2006 is 23 billion USD. International business of Brazil more relevant to develop the
bilateral co-operation and trade.
Introduction:
Brazil is half the continent’s landmass. Brazil stretches about 2700 miles from north to
south and from east to west to form a vast irregular triangle that includes a wide range of
tropical landscapes, wetlands and low mountains. Brazil has the world’s largest river system
and the biggest rainforest.
Brazil is the fifth most populated country in the world. Brazil sometimes has political and
financial problems. The benefits are including the size of market and present & future
wealth of the consumers. Brazil ranked 109th out of 190 countries in the World Bank's 2019
Doing Business report, an improvement from the previous year, when it ranked 125th (the
largest score improvement in Latin America and the Caribbean) it ranked 125th Brazil is
an attractive market for international investors due to several factors: a domestic market of
nearly 210 million inhabitants, availability of easily exploitable raw materials, a diversified
economy that is less vulnerable to international crises, and a strategic geographic position
that allows easy access to other South American countries. However, investment in Brazil
remains risky because of some negative factors including cumbersome and complex
taxation, bureaucratic delays and heavy and rigid labor legislation. As part of the country’s
ongoing effort to strengthen its business environment, Brazil introduced electronic
certificates of origin which reduced the time required for import documentary compliance,
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facilitating and simplifying the whole process. The country also made several infrastructure
concessions which have helped foster investment. In 2017, Brazil awarded the rights to
pump oil from its offshore “pre-salt” region to Shell (which got three blocks, out of six that
were being auctioned), BP (that got 2 blocks) and ExxonMobil (one block). The
Government expects the oil blocks to generate USD 30.2 billion in investment from the
winning companies and USD 39.3 billion in royalties and other revenues. Attracting FDI is
a core objective of Brazil’s international political economy. Since 2016, the Brazilian
government has been committed to improve, strengthen, and implement legislation and
regulatory procedures designed to provide investors with a favorable business environment
in the country.
Culture:
Brazilian people’s communication
style is very relaxed and informal.
Brazilian is quite direct in their
manner of speaking. Making brief
eye contact with stranger is acceptable
They are very friendly in nature. In
their relationship and family people
appreciate honesty, trust and respect.
While communicating local people
generally touched one another and
stand closely.
Mores: There are many things in Brazil which is prohibited such as gambling. Since
1967, hunting as profession is also prohibited. Smoking is prohibited in public places
etc.
Folkways: A close relationship is
indicated by rubbing the two index
figures together. Thumbs up
represents approval while thumbs
down represents disapproval and
unhappiness. Sucking your thumb
indicates a feeling of being left out.
Sticking your thumb between your
middle finger and index finger is a
symbol of wishing someone good
luck while this sign is a symbol of
rudeness in other countries
A close relationship is indicated by rubbing the two index figures together. Thumbs up
represents approval while thumbs down represents disapproval and unhappiness. Sucking
your thumb indicates a feeling of being left out. Sticking your thumb between your middle
finger and index finger is a symbol of wishing someone good luck while this sign is a
symbol of rudeness in other countries
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Determinants of Culture:
Language: The official language of Brazil is Portuguese. It is spoken by 99% of the
population.
Religion: About two third of the population are Roman Catholics. But in recent
Protestantism has risen in Brazil.
Music: There are various music of Brazil such as samba, choro and santenajo etc.
Festival: Brazil’s best
festival is carnival. This
festival takes place over
about five days, starting on
Friday Ash Wednesday and
ending on Ash Wednesday
itself. Besides this there is
much other festival such as
Festival de Cachaca,
Octoberfest, Festa Junina,
Rio de Janeiro carnival etc.
Business Style: Brazilian people usually do business through a business card. They present
their business card with Portuguese side facing the recipient. Meetings are generally
informal. Anyone can interrupt other while they are speaking or giving presentation. They
confirm meeting in writing.
Food: There are
various kinds of
traditional food of
Brazil such as picanha,
feijoada, vatapa,
empadao etc
Economy: Brazil is developing free market economy. It is the ninth largest in the world by
nominal GDP and eight largest by purchasing power parity. Their main economic resources
are gold, uranium, iron and timber.
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According to Hofstede theory there are four dimensions of Brazil. They are
Individualism Power distance Masculinity Uncertainty
avoidance
38 69 49 76
Individualism: Brazil’s individualism is very low as it is below 40. People are more
collective. They prefer to work together. They believe in trust and long lasting relationship.
In business, a meeting usually starts with general conversations to get to know each other.
Low individualism means Brazilian people are less competitive and less innovative.
Power Distance: Brazil has high power distance as the rate is above 60. It means they
inequalities to grow. Brazilian people believe that hierarchy should be respected and
inequalities among people are acceptable.
Masculinity: Brazil’s masculinity is moderately low as it is below 50. It means both
male and female can participate in any job. There is no gender discrimination in Brazil as
they place importance on masculine and feminine aspects of life.
Uncertainty Avoidance: Brazil’s uncertainty avoidance is very high as it is above 70. It
means they are risk averse and prefer more job security. They are not ready to accept any
challenges and entrepreneur activities are very low. They need to have good and relaxed
moments in their everyday life.
Overall attractiveness in terms of costs, benefits and risks
Political system:
Brazil is a federal constitutional republic. It is based on a representative democracy.
Benefits:
Political benefits:
FDI is encouraged and promoted by the Brazilian Government. The Brazilian development
bank, National Investment Bank (BNDES), encourages foreign investment. It has become
easier for foreign investors to invest as several restrictions have been removed, particularly
on the stock market. Over the last fifteen years, many public companies were privatized and
regulations and restrictions were removed from many sectors.
The government is trying to maintain proper relationships between big corporations and
political power after the rise of the difficult situation caused by the big corruption in 2010.
Attracting FDI is a core objective of Brazil’s international political economy. It is also
taking up a plan of macroeconomic reforms, which intends to rationalize the Brazilian tax
system. These efforts of the Temer administration allowed improvement of the FDI inflows
in 2016 and 2017.
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Economic benefits:
They have extensive natural resources such as the water from Amazon along with all the
minerals such as bauxite, gold, diamonds, iron ore, manganese, nickel, phosphates, platinum,
tin, clay, rare earth elements and uranium. It is also said that Brazil is the 12th largest
producer of oil in the world as petroleum is a major natural resource. This country is going
to be one of the leading global producers of oil. There is a major hydropower production
project called the Belo Monte project that is under construction in the northern region of
Brazil. It will be the world’s third largest hydroelectric power production plant when that
project is completed.
They have a large domestic market which is the fifth largest population in the world. They
also have a middle-class market.
They have a strategic geographic location where they lead the world in coffee production
(about a third of the global total). Most of Brazil's sugar cane production (12% of the world
total) is used to create gasohol, which powers a portion of the key industry of Brazilian
automobiles production.
Brazil has a diversified economy, well anchored in international exchanges (FDI inflows
and foreign exchanges reserves are important, low external debt)
There are great investment opportunities because of the weak real exchange rate in the
industry export sectors. The fight against corruption is getting bigger which could benefit
investment in the long-tern.
Foreign Direct 2016 2017 2018
Investment ( FDI )
FDI Inward Flow
52,751 67,583 61,223
(million USD)
FDI Stock (million
563,539 622,990 684,213
USD)
Number of
Greenfield 200 197 332
Investments***
FDI Inwards (in %
of GFCF****) 19.6 n/a n/a
FDI Stock (in % of
GDP) 34.8 n/a n/a
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Legal system: Brazil’s legal system is based on civil law tradition. But the new civil
procedure code of 2015 has brought elements of common law.
Risks: One country is following the three types of risk factors- political, economic, and
legal.
Political risks: The Federal Republic of Brazil is divided into 26 states and 1 federal
district. The National Congress is made up of the Federal Senate and the Chamber of
Deputies. Thirty years ago Brazil transitioned from a military dictatorship into a democracy
which sought to restore civil rights. Brazil holds elections for 4-year terms by popular vote
which is compulsory for those between 18 and 70 years of age, and voluntary between 16
and 18 and over 70.
Brazil faces a number of political challenges. Following the impeachment of then-President
Dilma Rousseff on 31 August 2016, President Michel Temer has taken office and his term
as President runs until the end of December 2018. Temer, from the centrist Brazilian
Democratic Movement Party has set out to restructure Brazil’s economy and his government
has formally applied for membership of the OECD.
Economical risks: Credits risks in Brazil are growing and insolvencies are forecast to
again increase as financial conditions in the market tighten. These in turn have a knock-on
effect to payment behavior trends and the way businesses protect themselves against risks.
Brazil’s overall country risk has been considered medium for 13 consecutive quarters,
though the improving political situation is expected to have a positive effect on economic
growth. However, the slowing growth may offer foreign investment opportunities; the
M&A sector grew by 5% in 2015, with investment opportunities ranging from IT to
pharmaceutical, insurance to mining, and energy, oil and gas. After almost 3 years of
economic recession, the Brazilian economy is slowly heading towards a recovery.
According to International Monetary Fund (IMF) predictions, Brazil contracted in 3.3% in
2016 and will grow 0.5% in 2017. In 2015 Brazil’s economy contracted by 3.8%.
Legal risks: Brazil is a democratic state but is marked by deep economic and social
inequalities. Brazil was governed by a military dictatorship between 1964 and 1985. Some
traces of the military regime still persist including Brazil’s partially militarized police forces.
The commitment from public and private companies to observe international human rights
standards and promote diversity in corporations is increasing. In the 2017 Freedom House
assessment of Political Rights and Civil Liberties, Brazil scored 80 (0=worst; 100=Best). It
ranked 103rd out of 180 countries in the 2017 World Press Freedom Index. The World
Economic Forum in 2014 ranked Brazil’s health system 69th and its primary education 86th
out of 144 countries.
Costs:
Economic costs: Brazil is the world’s fifth largest country. With an estimated population
of 194 million in 2012, it is also the world’s fifth most populous country after China, India,
the United States and Indonesia. The import of capital goods and computer and
telecommunications goods which are not available in the Brazilian market, might qualify for
an Import Duty reduction, subject to government approval, in order to stimulate the
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broadening, modernization and restructuring of the Brazilian industrial sector. Some of
these capital goods also benefit from a reduction in IPI.
Cost of starting a business, % of income per capita: For that indicator, The World Bank
provides data for Brazil from 2003 to 2019. The average value for Brazil during that period
was 0 percent of per capita GNI with a minimum of 0 percent of per capita GNI in 2003 and
a maximum of 0 percent of per capita GNI in 2003.
Political cost: While corruption is widely disapproved of, some corrupt politicians
continue to win elections. We tackle this paradox by examining the effects of malfeasance
scandals in politicians’ behavior. In particular, we focus on their campaign finance
strategies and career choices. We explore these issues empirically with an original dataset
that includes all lower-house members of Congress (MCs) in Brazil from 1995 to 2010.
Although tainted incumbents tend to be penalized electorally, we show that campaign
spending attenuates this effect. These results are robust, controlling for a host of potential
confounders and biases. Hence, we offer a first exploration of incumbents’ strategies to
avoid the electoral cost of their publicized wrongdoings. Above a certain threshold of
funding, Brazilian members of Congress become impervious to negative exposure,
regardless of the severity of their ethical and/or criminal violations. These results carry
important normative consequences in terms of regulating campaign financing as a means of
improving accountability
Legal costs: There are no special federal concessions to encourage the establishment in
Brazil of holding companies, investment vehicles, regional headquarters, administrative
offices, tax-haven activities or offshore operations. Some cities offer exemption from, or a
reduction of, Tax on Services (ISS) to companies that establish their headquarters or
administrative offices in the city’s territory.
As a general rule, Brazil offers no specific tax incentives to individuals and companies
wishing to invest abroad. However, various benefits are available for investments that result
in greater export revenue for Brazil, as described earlier under Export incentives.
Factors Determining International Trade & Capital flows and impact of
international institutions
Brazil is a part of MERCOSUR regional integration.
Current regional trade initiative of Brazil is the common market. It has no barriers to trade
between member countries, a common external trade policy, and the free movement of the
factors of production. Besides Brazil the other members are Argentina, Paraguay, and
Uruguay in this regional integration.
Economic Benefits: Brazil recorded positive economic growth during the period, with the
exception of 2009. After strong growth in 2007 (6.10%) and 2008 (5.17%), Brazil
experienced a severe economic contraction in 2009 due to the GFC; the economy recorded a
negative 0.33% annual growth. However, Brazil’s strong domestic and intra-regional
markets proved to be less vulnerable to external crises, which made it one of the first
emerging market economies to begin a recovery. In 2010, Brazil recorded the last decade’s
highest rate of economic growth at 7.53%. It is interesting to note that Brazil’s major trade
Page- 8
partners are distributed worldwide, led by the United States and China; none of the
MERCOSUR countries is among Brazil’s top five trading partners.
Political Benefits: These benefits do not occur automatically: Policies matter. Surveys of
investor intentions (cited by the OECD study quoted above) indicate that investors are
generally concerned with the quality of the so-called “enabling environment” for investment,
which covers a whole range of issues, from macroeconomic stability, to structural factors, to
public and corporate governance. Two qualities that particularly seem to improve an area’s
chances of attracting investment are market size and transparency. As for market size, it
almost goes without saying that a big economy is more attractive to the enterprise sector
than a small one. However, it should be noted that even a small area can make itself part of
a large economy through policies of openness to trade and by pursuing regional trade
integration initiatives. Transparency has many faces. In particular, investors have displayed
great sensitivity to the respect of law, the quality of public and private governance, the
pervasiveness of corrupt practices and the degree to which authorities adhere to the principle
of non-discrimination. While national governments are generally well advised to focus their
efforts at attracting FDI largely on improving the enabling environment, regional and local
authorities often support their development objectives on more targeted policies toward
investment attraction.
Allies
Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Suriname and
MERCOSUR countries.
KEY LOCAL COMPANIES
1. Agrale : Consumer goods (zz)
2 AmBev : Consumer Goods (Brewers)
3. Avibras : Industrial (Defense)
4. Banco do Brasil: Financial (Bank)
5. Banrisul : Financial (Investments Bank)
6. RecodTv : Consumer Service (Broadcasting)
7. Telefonica Vivo : Telecommunications.
8. Ultrapur: Oil & gas (Rxploration and production)
9. Web Jet Linhas Aeres : Consumer service (Airlines)
10. Bob’s : Restaurant and Bar.
11. Embraco : Industrial Machinery.
12. GPA : Food Retailer and wholesaler.
Page- 9
Five Important Local Companies
1. Previ ( Pension Fund) - $62.21 Billion
2 Casino Guichard (Retail) $14.42 Billion
3. Blessed holdings ( Food processing) - $26.33 Billion
4. Telemar Participacoes - $47.83 Billion
5. Stichting in Bev( Beer) - $11.56 Billion
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Five Interesting Facts about Brazil
1. Football is the most popular sports in
Brazil with the national team
consistently winning the World Cup a
record 5 times.
2. Samba Dance is the national
rhythmical dance with intricate footwork and
rapid hip movements
3. Christ The Redeemer is one of the seven
wonders of the world and the largest art
Decostyle sculpture in the world
.
4. The Amazon River is the second
longest river in the world and the world’s
largest river by volume.
5. More than 15 UNESCO recognized
World Heritage culture sites
Conclusion:
Although Brazil is a developing country, it has high scopes for foreign direct investments.
Above all it can be said that Brazil is a perfect country for foreign direct investment.
Page- 12
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Gupta.S (2018, May 20). What is Brazil Famous For? [Link]
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for/?fbclid=IwAR09LFTLqokMuLZHOtonQ0Fs9YJrA9uWshGRdjbYptsff586yQr
S QUmoo
Meyer.A (2010). Brazil Traditional Customs. Brazil.
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What About Brazil? (n.d.). Hofstede Insights.
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Page- 13
Anika Tabassum
ID: 1812919630
Durjoy Roy
ID: 1812929030
Md. Shafkatul Hassan Chy
ID: 1821354030
Progya Paromita Roy
ID: 1811691030
Mir Toufik Hasan
ID: 1722380030
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