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Doing Business in Brazil
7th Biennial International Business
Institute for Community College
Faculty
Dr. Alex Rodrigues, PhD
Assistant Professor
Eli Broad Graduate School of Management
Michigan State University
Saturday, June 2nd, 2007
 Michigan State University, 2007
Agenda – Doing Business in Brazil
• Country Facts
• Relevance
• Business
Overview –
Current Initiatives
• Cultural Issues
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 Michigan State University, 2007
Brazil - Country Facts
• Largest country in Latin
America. It spreads across
almost half (47.3%) of South
America, and occupies a total
area of 8,547,403.5 km2.
• Brazil’s east to west extension
(4,319.4 km) is almost
equivalent to its north to south
distance (4,394.7 km).
• Ecuador and Chile are the only
two countries on the South
American continent that do not
border Brazil.
• The Atlantic Ocean extends
along the country’s entire
eastern coast, providing 7,367
km of coastline.
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 Michigan State University, 2007
Brazil - Country Facts
OFFICIAL NAME: Federative Republic of Brazil
Capital City
Brasilia (-3 GMT)
Currency
Real (1 R$ = 0.49 US$)
Major Languages
Portuguese
Calling Code
55
Voltage
110/220V
People
Nationality: Brazilian.
Population (2006 est.): 188 million.
Annual growth rate: 1.1%.
Ethnic groups: Portuguese, Italian, German, Spanish,
Japanese, Arab, African, and indigenous people.
Religion: Roman Catholic (74%).
Language: Portuguese.
Education: Literacy--86% of adult population.
Health: Infant mortality rate--27.5/1,000. Life
expectancy--71.3 yrs.
Work force: 96.3 million.
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 Michigan State University, 2007
Brazil - Country Facts
Geography
Area: 8,511,965 sq. km. (3,290,000 sq.
mi.); slightly smaller than the U.S.
Cities: Capital--Brasilia (pop. 2.3
million). Other cities--Sao Paulo (10.8
million), Rio de Janeiro (6.1 million),
Belo Horizonte (2.4 million), Salvador
(2.6 million), Fortaleza (2.3 million),
Recife (1.5 million), Porto Alegre (1.4
million), Curitiba (1.7 million).
Terrain: Dense forests in northern
regions including Amazon Basin;
semiarid along northeast coast;
mountains, hills, and rolling plains in
the southwest, including Mato Grosso;
and coastal lowland.
Climate: Mostly tropical or semitropical
with temperate zone in the south.
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 Michigan State University, 2007
Brazil - Country Facts
Government
Type: Federative republic.
Independence: September 7, 1822.
Constitution: Promulgated October 5, 1988.
Branches: Executive--president (chief of state and
head of government popularly elected to no more
than two 4-year terms). Legislative--Senate (81
members popularly elected to 8-year terms),
Chamber of Deputies (513 members popularly
elected to 4-year terms). Judicial--Supreme
Federal Tribunal (11 lifetime positions appointed
by the president).
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 Michigan State University, 2007
Brazil - Country Facts
Economy (2006)
GDP: $943 billion (official exchange rate).
GDP: $1.616 trillion (purchasing power parity).
Annual real growth: 2.8%.
Per capita GDP: $8,600 (purchasing power parity).
Natural resources: Iron ore, manganese, bauxite, nickel,
uranium, gemstones, oil, wood, and aluminum. Brazil has 14%
of the world's renewable fresh water.
Agriculture (8% of GDP): Products--coffee, soybeans,
sugarcane, cocoa, rice, livestock, corn, oranges, cotton, wheat,
and tobacco.
Industry (38% of GDP): Types--steel, commercial aircraft,
chemicals, petrochemicals, footwear, machinery, motors,
vehicles, auto parts, consumer durables, cement, and lumber.
Services (54% of GDP): Types--mail, telecommunications,
banking, energy, commerce, and computing.
Trade: Trade balance 2006--$46 billion surplus. Exports--$137.4
billion. Major markets--European Union 25.0%, United States
19.2%, and Mercosur 20.4%. Imports--$91.4 billion. Major
suppliers--European Union 25.4%, United States 17.2%,
Argentina 8.5%, and China 7.3%.
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 Michigan State University, 2007
Relevance – GDP and Population
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25
Country
United States
China
Japan
India
Germany
United Kingdom
France
Italy
Brazil
Russian Federation
Spain
Mexico
Canada
Korea, Rep.
Indonesia
Australia
Turkey
Thailand
Argentina
Iran, Islamic Rep.
Netherlands
Poland
South Africa
Philippines
Pakistan
GDP, PPP (current
international $) 2005
12,416,505,085,952
8,814,859,838,459
3,995,077,060,997
3,779,043,713,662
2,429,644,208,862
2,001,821,455,870
1,849,666,307,792
1,672,005,807,282
1,566,252,631,904
1,552,007,929,284
1,179,092,442,686
1,108,281,249,134
1,077,995,094,444
1,063,865,666,130
847,608,726,005
646,342,903,873
605,876,098,930
557,378,179,588
553,292,065,769
543,814,555,150
533,404,135,430
528,470,646,467
520,947,971,556
426,688,612,474
369,230,168,333
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Country
China
India
United States
Indonesia
Brazil
Pakistan
Russian Federation
Bangladesh
Nigeria
Japan
Mexico
Vietnam
Philippines
Germany
Egypt, Arab Rep.
Turkey
Ethiopia
Iran, Islamic Rep.
Thailand
France
United Kingdom
Italy
Congo, Dem. Rep.
Myanmar
Korea, Rep.
Source: World Development Indicators, The World Bank 2006
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 Michigan State University, 2007
Population,
total 2005
1,304,500,000
1,094,583,000
296,410,404
220,558,000
186,404,913
155,772,000
143,113,650
141,822,276
131,529,669
127,774,000
103,089,133
83,119,000
83,054,478
82,469,400
74,032,884
72,065,000
71,256,000
68,251,085
64,232,758
60,873,000
60,226,500
58,607,050
57,548,744
50,519,492
48,294,143
Relevance – Mercosur (Mercosul)
• Mercosur
– Trading zone between Brazil, Argentina,
Uruguay and Paraguay, founded in 1991 by the
Treaty of Asunción, which was later amended
and updated by the 1995 Treaty of Ouro Preto
– Its purpose is to promote free trade and the
fluid movement of goods, peoples, and
currency
– In December 2004, it merged with the Andean
Community trade bloc (CAN Comunidad
Andina de Naciones) to form the South
American Community of Nations
• There are more than 220 million consumers in
this region (South America) and the combined
Gross Domestic Product of the member
nations is more than one trillion dollars a year.
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 Michigan State University, 2007
Relevance - BRICs
•
In 2001, investment bank Goldman Sachs coined the term BRICs for Brazil,
Russia, India and China. It did so to call attention to the four countries’ potential
for fast and sustained growth.
By 2041, Goldman predicted, the four economies would be worth more than those
of the US, Japan, Germany, the United Kingdom, France and Italy put together.
•
Item
Last 3
Years
Next 3
Years
Now
% Revenues generated outside country of origin
27%
35%
42%
% Suppliers located outside country of origin
22%
31%
38%
Item
Most important emerging
markets
Europe
Eastern Europe 66%
China 61%
India 32%
Russia 24%
Brazil 19%
Other 6%
United States
China 82%
India 56%
Eastern Europe 38%
Brazil 25%
Russia 19%
Other 11%
Total
China 75%
India 48%
Eastern Europe 47%
Brazil 23%
Russia 21%
Other 9%
Source: Accenture – World Views: Achieving High Performance through Effective Global Operations
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 Michigan State University, 2007
Relevance - Competitiveness
Source: The World Competitiveness Scoreboard 2006, IMD World Competitiveness Yearbook
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 Michigan State University, 2007
Relevance - Competitiveness
The “Brazil
Cost” factor
Source: The World Competitiveness Scoreboard 2006, IMD World Competitiveness Yearbook
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 Michigan State University, 2007
Current Initiatives – Regions
Region
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 Michigan State University, 2007
GDP (%)
GDP (Billion
US$)
Southeast
55.1%
857
South
18.6%
289
Northeast
13.8%
215
Central-West
7.5%
117
North
5.0%
78
Industrial Activities – Regions
(Food)
(Textile)
(Beverage)
(Wood and Paper)
(Tobacco)
(Metal)
(Chemical)
(Plastics)
(Electrical)
(Transportation)
(Industrial Machinery)
(Mining)
(Clothing and Shoes)
(Rubber)
(Other)
(Primary Industrial Region)
(Secondary Industrial Regions)
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 Michigan State University, 2007
Current Initiatives – Southeast Region
1.
2.
3.
4.
5.
4
3
1
5
2
10
11
6
9
8
7
Wood Furniture
Textile
Auto (Fiat)
Steel (Usiminas)
Naval, Ports, Oil Refinery,
Oil Industry
6. Oil Industry, Nuclear
Energy
7. Naval, Ports
8. Beverages (AmBev,
Schincariol, Cintra, Local,
Itaipava)
9. Air (Embraer)
10. Sugar Cane (Sertaozinho)
11. Shoe (Franca)
Source: Estadão Negócios – Edição Especial: Novo Mapa do Brasil, 2006
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 Michigan State University, 2007
Current Initiatives – South Region
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1. Steel (Jaguaraiva)
2. Auto (Renault, Bosch),
Oil Refinery
3. Steel (SF do Sul), Port
(Itapoa)
4. Machinery (John Deere)
5. Paper (Stora Enso)
6. Chemical Industry
(Copesul), Agriculture
Machinery, Auto (GM),
Paper (Aracruz
Celulose), Tobacco
(Souza Cruz)
7. Port, Paper
Source: Estadão Negócios – Edição Especial: Novo Mapa do Brasil, 2006
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 Michigan State University, 2007
Current Initiatives – Northeast Region
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1.
2.
5
6
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7
3
4
8
9
10
11
12
Wood Furniture
Aluminum (Alcoa, Alcan, BHPBiliton, Abalco)
3. Soy (Uruçuí)
4. Mining
5. Auto (Troller)
6. Oil industry, Fish
7. Textiles
8. Medical, Oil Refinery,
Technology
9. Fruits (Petrolina)
10. Chemical
11. Oil industry, Citrycal Fruits
12. Oil industry, Auto (Ford)
Source: Estadão Negócios – Edição Especial: Novo Mapa do Brasil, 2006
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 Michigan State University, 2007
Current Initiatives – Central-West Region
1.
2.
3.
4.
5.
2
4
1
5
3
7
8
9
6
6.
7.
8.
9.
Aluminum Can
(Rexam)
Food (Carroll’s Food
- Pork, Sadia)
Textiles, Packaging
Mining (Gold,
Auto (Hyundai,
Mitsubishi),
Pharmaceuticals
Fertilizers, Sugar
Cane
Food (Perdigao)
Chemical Industry,
Steel Industry
Food (Cattle)
Source: Estadão Negócios – Edição Especial: Novo Mapa do Brasil, 2006
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 Michigan State University, 2007
Current Initiatives – North Region
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1.
5
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2
7
9
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10
Free Trade Zone
(Zona Franca)
2. Mining (Diamonds)
3. Natural Gas (UrucuManaus)
4. Agriculture
5. Mining (Fe, Au), Oil
6. Rice and Soy
7. Mining – Carajas (Fe)
8. Hydroelectricity
9. Latex
10. Agriculture
Source: Estadão Negócios – Edição Especial: Novo Mapa do Brasil, 2006
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 Michigan State University, 2007
Current Initiatives – Best Cities to do Business
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 Michigan State University, 2007
Source: “Doing Business in Brazil”, The World Bank (2006)
Hot Topic: Bioenergy / Biodiesel
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 Michigan State University, 2007
Cultural Issues
• The language is Portuguese! Avoid
comparisons with Hispanic countries.
• Time and Meals
– Brazilians are extremely casual about
time. Being ten to fifteen minutes late in
business is normal, and twenty to thirty
minutes late is not unusual. Be on time
for a formal meeting, but prepare to wait
for your Brazilian colleagues.
– Be prepared for lengthy meals (two
hours or more for lunch). Do not discuss
business during meals unless your host
brings it up. Business may occasionally
be discussed at dinner in São Paulo or
Rio.
– When inviting Brazilians to dinner or a
party, do not suggest that your guests
bring food or drink. Do not expect them
to arrive on time, and never indicate a
time that the party will "end."
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 Michigan State University, 2007
Cultural Issues
• Meeting and Greeting: Take time
to greet and say good-bye to
each person present. Shaking
Hands, Kissing.
• Body Language
– Physical contact is part of simple
communication. Touching arms,
elbows and backs is very common
and acceptable. Brazilians also
stand extremely close to one
another. Do not back away.
– The "O.K." sign is considered very
rude and vulgar; the "thumbs up"
gesture is used for approval.
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 Michigan State University, 2007
Cultural Issues
• Corporate Culture
– Meetings are conducted at a
casual, unhurried pace. Don’t get
right down to business. Engage in
conversation first.
– Doing business with Brazilians
requires face to face
communication. You will be able to
do only limited business by phone,
fax or e-mail.
– Do not plan to make a business
visit or schedule any appointments
during holidays or festivals.
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 Michigan State University, 2007