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Country Profile - Brazil

Country with about 1.2 billion population is the worlds second largest populated and the largest democracy in the world, it the fastest growing economy in the world in this century, it is worlds eleventh largest economy with nominal GDP and is third largest in purchasing parity power, after the succession of the British rule in India in 1947 it has developed swiftly, India has always been a peace loving nation since the past and its leaders have always been the ideals for the rest of the world who have spread the word of peace and happiness in the world such as Lord Buddha and Mahatma Gandhi,etc. A nation with about 1,600 spoken languages among which 400 are spoken by 20 million people thought the country makes it a much diverse country. India has proven its potential in last few decades but still it faces some challenges like poverty, corruption, illiteracy, public healthcare, etc. These are some of the barrier for the country which stop the nation from being the share in the superpowers of the world, the people of India are spreads worldwide and are enjoying the high positions in multinational companies and the government agencies through the world. India is also a licensed nuclear power having treaty with Russia and USA. It is one of the strongest nation in the military services and going to be the permanent member in the united nations organisation in the security council in the next session of the UN. India still lacks the social, economic and environmental problems, as the people of are India are very sensitive about their caste, creed and the classification between the classes on the basis of religion which is benefit to the corruptions who use these entities for their own good. A recent example to this is the Ajodhya verdict which was about the demolition and the authority of the tomb to the particular community that is the Hindus and the Muslims. The fight arose from the demolition of the Babri masjid in 1992, which resulted in riots in the country. Geographically India is the seventh largest country in the world and it has 29 states within, amongst which most of the states are large enough than most of the countries in the world. In all India is the pluralistic, multiethnic, and multilingual society. It is also the inhabitant to a variety of wildlife, including flora and fauna species. It has been found that India is the second largest home of the forests types and species after the Africas. Some of the key facts about the country are: It has the population of about 1.2 billion and counting. The capital of the country is New Delhi,. It has the geographical area of about 3.1 million sq. Km. The major languages spoken in the county are Hindi, English along with 16 other official languages. The major religions of the country are Hindu (80%), Muslim, Christian, Sikh, Jainism and Buddhism. The monetary unit in the country is rupees 1Rupee = 100 Paise. The main exports from the country are agricultural, textile, gems, jewellery, and services are engineering, nursing, computing, construction, chemicals and leather products. The GNI per capita in the country are US $620 (World Bank, 2005) //(BBC news 15 November 2011).

The international telephony dialling code for the country is +91 The internet top level domain extension is .in

Risks and benefits of investing in the country


RISKS Brazil currently has problems having enough electricity for the people and industries. There is no real plan to provide enough power plants to take care of the problem. So may argue that they have an advantage with a large supply of ethanol. This however is unlikely to help industries trying to have available and reliable power. There are other areas of infrastructure that have been ignored as well. The government promises to improve on these problems. Fortunately with budget surpluses it is possible under pressure the government will give and deal with this problem. Brazil is the economic leader in South America. This gives it power in dealing with other countries in the region since it is the perceived leader. It also will naturally attract businesses and investment. Brazil has large quantities of natural resources and cheap labor. This can be useful to companies looking for low skilled manufacturing. The basically have 2 of the major inputs they need to succeed in their industry. The country currently has surplus international reserves and current account surpluses. This has helped to create a stronger stable currency and low inflation. Both of these factors encourage investment and business expansion. Unlike some other South America, Brazil has not pursued nationalism or done much with socialist ideas. This shows up in the huge difference in income between the rich and poor. This says a lot for investors afraid of other countries such as Venezuela that have done so. The Current Leader is encouraging public private partnerships. This is in effect a government trying to influence business and economics. This proves to be very unattractive to investors who feel full privatization would be much better for investors overall. Brazil is currently trying to keep and maintain a growth rate of 5%. This is good and bad. It may also prove to be an excuse. The moderate growth may stop a crash and burn cycle. Many people feel countries such as china may be come overheated. The government claims moderate growth will keep inflation and interest rates low creating a healthy business economy. References: http://uk.reuters.com/article/oilRpt/idUKN1021908720071010 https://www.cia.gov/library/publications/the-world-factbook/geos/br.html http://www.edc.ca/english/docs/gbrazil_e.pdf

Benefits
It is the fifth largest country in the world It has very nice weather (Over 300 sunny days a year with temperatures between 25 30 celsius and a regular sea breeze) It has predictable natural phenomena (absence of acts of nature including earthquakes, hurricanes or tsunamis) and is considered a low risk in respect of War and Terrorism It is the eighth biggest economy in the world in terms of GDP, and last year seen a GDP of over 5% It is seen by the world as a country with great potential just as Russia, India, and China The exchange system will not create pressure on industry or inflation. It is among the 20 biggest exporters in the world with US$ 142 billion sold in products and services to other countries. (April/2007 data) It is a democratic country. It has a stable Political system & the present government has brought huge hope and improvement to Brazil, Inflation is at an all time low It is a peaceful and multi-race country which respects the immigrants and their beliefs It has a stable currency Foreign investment is encouraged, you own 100% of land and property & some areas in the North East of Brazil have seen capital appreciation of over 20% per year Cost of living can be as low as 30% of the cost in the UK/Europe It has the greatest biodiversity in the planet. The main example of such is the Amazon Rainforest, which spreads over 3.6 million km It is responsible for 60% (three fifths) of South America's industrial products, and it is part of several economic blocks. Its scientific and technological development along with its diversified and dynamic industry attracts foreign enterprises It has regular trade with more than one hundred countries It is a country that develops submarines and aircraft & takes part in aerospace research. It is the fourth biggest commercial aircraft producer in the world. It is a pioneer in deep-water oil research & reached self-sufficiency in oil. Exports are now bigger than imports. First capitalist economy to have plants of the 10 biggest automakers in the world It is a tourism destination for more than 6 million foreigners each year with excellent infra-structure including road, train, air and port networks It is one of the world's biggest food & electric power producers It is a great producer of consumer goods It is a beautiful Country with fantastic scenery and beaches. Brazilian people are always friendly and cheerful. Smiles go a long way. Cities in Brazil are vibrant and exciting with carnivals and music.

http://brazildirect.org/advantages-of-investing-in-brazil

Financial pundits often refer to the BRIC countries as new world economic growth drivers replacing the U.S. The BRIC countries - Brazil, Russia, India and China - are the fastest economic horses in the world's stable of large developing countries. If an investor understands currency options and trend forecasting, then Brazil offers princely profits over the long term.

Brazils Agricultural Advantage


Agricultural exports of corn, soy, sugar, and beef help give Brazil a trade surplus of $4.62 billion in June. The previous years June surplus was $2.73 billion, showing the trend for increasing trading profits. Advantages for farming in Brazil include: 1. Abundant available land at lower prices than the U.S. 2. Lower cost labor averaging approximately $450/month versus $1000/month+ in the U.S. 3. Well developed agricultural technology from EMBRAPA, the government/university partnership for distributing farming knowledge. 4. Ideal weather in the middle and Northern regions with year round sunshine, and large rainfalls feeding aquifers. 5. Developing infrastructure and ports for transporting farm products, such as the new North to South railroad development.

Brazils Population Advantage


Not only are farms productive, but the people are even more productive. Brazils population of 180 million people reproduce with a positive growth rate of 1.23% compared to Russias 0.5% rate. China has a one child policy resulting in a near halving of the population over time.

With the healthy population growth rate, the younger generation adds energy, a consuming population, and good source of labor for new industries. Much of the population lives near the famous beaches and cities of Rio de Janeiro, Sao Paolo, Salvador, and Fortaleza. Farming operations have begun attracting the coastal population into Brazils vast interior because they need the workers and offer opportunity. After former president Juscelino Kubitschek lead the creation of the capital Brasilia in 1955 by scraping away a forest in the middle of Brazil, the interior has grown in importance economically.

World-wide demand for food will help maintain the rapid growth of the population and the utilization of this countries abundant interior lands.

Brazil Trading Partners


Unlike the U.S., Brazil has open trade with all countries despite the punitive import taxes. China, Europe, and even the U.S. need food imports so they all put up with the 50-150% import duties imposed when they export to Brazil. Having no real enemies because the army operates only within the country's borders means all countries can expect fair treatment. Almost every country buys some products in the agricultural sector. Sugar is one of the main exports, but corn, soybeans, and cotton are fast becoming primary exports, and even some finished products from companies such as firearms manufacturer Taurus International, and aircraft producer Embraer.

Warm Weather Means High Profits


The middle and Northern region of Brazil generally stay between 65-95 F year around. Tourism flourishes under sunny warm skies. Plants of all varieties- other than wheat- can produce year round instead of having seasons slow them down. People can also enjoy themselves more maintaining a healthier lifestyle outdoors, and an energized attitude because of sunlight exposure. Few people can stay unhappy while enjoying a sunny day at the beach. Beaches define the Brazilian attitude of Tudo Bem meaning It is all good.

Brazil Welcomes Investment


An investors visa requires approximately $85,000 deposit in a Brazilian bank plus a minority natural Brazilian citizen as partner. Then an investor can form a business and operate as a native Brazilian would. This is much easier than some countries where a foreigner cannot own land or open businesses without as much as a 50% partner from the host country. Brazil will lead the world by feeding it and becoming a growing influence in tourism and culture.

http://www.openforum.com/idea-hub/topics/the-world/article/4-reasons-to-expand-yourbusiness-to-brazil-matthew-davies-managing-director-sales-latin-america-and

Feasible options Franchising


Brazilian Franchise Law and Disclosure Requirements Article 2 of the Brazilian Franchise Law defines a commercial franchise as a system whereby a franchisor licenses to the franchisee the right to use a trademark or patent, along with the right to distribute products or services on an exclusive or semi-exclusive basis and, possibly, also the right to use technology related to the establishment and management of a business or operating system developed or used by the franchisor, in exchange for direct or indirect compensation, without, however, being characterized as an employment relationship. The franchise law requires the delivery of a franchise offering circular to prospective franchisees containing several aspects of the business, at least 10 days prior to the execution of any binding document related to the franchise and receipt of any payment. Failure by the franchisor to supply such a disclosure document at least 10 days prior to the execution of the agreement or payment by a franchisee of any amount renders the agreement voidable by a franchisee and penalizes the franchisor with the refund of all amounts paid by a franchisee in connection with the franchise, plus recovery of damages. For this reason, franchisors tend to be conservative in relation to this requirement as the local law provides for a severe penalty in the event of default of this legal obligation. Even when international franchise agreements are governed by foreign law and elect foreign jurisdiction, the delivery of an offering circular to a franchisee, in accordance with the Brazilian Franchise Law, is extremely advisable, to comply with the local law, since the franchise will be operated in Brazil. In fact, the disclosure requirement of Brazilian law is valid and enforceable for any franchise granted for operation in Brazil, as Article 8 expressly establishes the following: The franchise law does not distinguish between Brazilian and foreign franchisors and the requirement of delivery of the document, as established in Article 3, is mandatory for all franchisors, provided that the franchise is intended to be installed and operated in Brazil. Indeed, the National Institute of Industrial Property, the government office responsible for registering property and agreements involving technology, has taken a strong view that the local law applies to franchises granted to be operated in Brazil and requires the submission of the executed document or at least acknowledgement of receipt of it by the franchisee. A Statement of Delivery of an offering circular is one of the indispensable documents to file the agreement for recordal or registration with legal approval at the INPI. Parties in international franchising may decide to adopt the English language for the document, as long as the Brazilian party knows English fluently and expressly acknowledges that fact, to avoid translation of the entire circular for delivery to the prospective franchisee. The agreement can be entered into in the English language, but a translation into Portuguese is indispensable for presentation of the agreement at the institute.

http://www.franchise.org/franchise-news-detail.aspx?id=38426

Ventures in brazil
Brazil, unlike China, has no Joint Venture law. Thus, foreign investors must adapt their plans to the local regulations. On the plus side, Joint Ventures have been, for a long time, a common vehicle for business and investments in Brazil. This has provided good court precedents, in the sense that the enforcement of obligations contained in formal joint venture agreement is usually granted. The best way to engage in a joint venture with a Brazilian Company, I would say, is to adopt a two-fold strategy: First, enter into a general Joint Venture Agreement, covering transference of technology, financial obligations, tax responsibilities, decision making, powers of each party and mutual duties. Plus, of course, the ubiquitous boilerplate clauses. This Agreement MUST provide for arbitration, preferably to be pursued outside of Brazil. Second, do the fine tuning, drafting the ancillary agreements that will give substance to the Joint venture. At this point, Id note that: -It is generally preferable to create a new company instead of purchasing shares of an existing one. This is because tax and labour responsibilities may spread from the Brazilian partner to the foreign investors. This is not a good thing to see. -The decision making process, the procedure to enforce stock-options and the quorum for board and management decisions in the general Joint Venture agreement will not necessarily match the provisions of Brazilian Law. This is because the Brazilian Law for Limited Liability companies and for Corporations has the innate defect of providing different quorum requirement for each kind of alteration in the Articles of Association. (for example: In the limited liability companies, three quarters of the quota holders must agree in order to raise the capital, while 51% is enough to appoint administrators). The way to circumvent that is to sign a very detailed shareholders agreement, which will eliminate the difficulties caused by our well-meaning but too detailed internal laws. This shareholders agreement is of essence because some provisions of the Brazilian company law may be considered of public interest. Therefore, even if the joint venture agreement selects arbitration, and even if it appoints another material law, some provisions of the Brazilian Civil Code must be taken in consideration as a precaution. Otherwise, there would be a risk of the foreign arbitration decision not being recognized in Brazil. http://brazilianlawblog.com/?p=179

ETHICAL CHALLENGES
Political corruption has been a historic issue for Brazil, and the country has experienced a number of scandals, including the 1992 impeachment of President Collor de Mello and the 2005 resignation of finance Minister alfonso Palocci. Playing to the widely-held belief that corruption is a root cause of Brazils income disparity, President luiz Incio lula da Silva was reelected in 2006 with a declared personal war on corruption. Since then, Brazil has ratified the oECd anti-Bribery Convention, the United nations Convention against Corruption, the OAS Inter-American Convention against Corruption and the United nations Convention against Transnational organized Crime. Federal agents have become increasingly effective at targeting crimes like tax evasion, but judicial processes and responses remain slow. These efforts have earned the country a Moderate rating in the 2006 Global Integrity Index. Important efforts are also underway in the private sectormore than 400 local companies have signed the Brazilian Pact for Integrity and against Corruption, affirming their own zero-tolerance approach to corruption. Excessive bureaucracy has been a factor in political corruption, and the government has begun to scrutinize taxation, employment and registration regulations. Brazilians have been known to complain about the Brazil Cost, a reference to the extra costs caused by an inefficient taxation system, poor infrastructure and red tape. In fact, the World Economic Forums 20072008 Global Competitiveness Report ranked tax regulations as the most problematic factor for doing business in Brazil. In recent years, rulings to streamline judicial and bureaucratic processes have been proposed, but a fragmented political system means delays and disputes over improvements. Intellectual property protection in Brazil is another concern. Most cases of IP infringement are related to piracy and violation of software copyrights, and the law protecting industrial property, patents and copyrights is inadequate. However, the government is making an effort to strengthen intellectual property protection and as a result Brazil was promoted from a Priority to a Special watch list by the International Intellectual Property alliance in 2006. These issues require multinationals operating in Brazil to be consistent and clear about implementing their policies while ensuring that all employees are aware of corporate expectations. While the following recommendations should be standard procedure for businesses no matter where they operate, they are of particular importance in Brazil.

FIVE COMPLIANCE AND ETHICS ISSUES TO CONSIDER


01 // CORRUPTION

According to a business survey conducted in 2005 by PriceWaterhouse Coopers, 70 percent of firms in Brazil report having spent at least 3 percent of revenues on bribes. Most of these bribes are to expedite procedures, special treatment or access to traditional transactions. DEAL WITH IT Given recent history, Brazilian business people have become sensitive to corruption and how it impacts Brazils future growth and investment opportunities. Federal agents are also increasingly effective in policing illegal business behavior. You will therefore likely encounter understanding when you make the case for compliance. Transparency in any business relationship or activity, however, such as accounting practices that allow for the review of resource use provides the best assurance. In dealing with any political contributions, be sure to follow the stipulations established by the Internal Revenue Service and be prepared for a potential audit at any time. 02 // DIRTY MONEY In 2000, a report by CPI accused more than 800 Brazilians, including politicians and influential business figures, of drug trafficking. Poor record keeping and accounting practices can cover illegal activities such as drug trafficking and money laundering. Imprecise records can also facilitate tax evasion and other misuse of resources. DEAL WITH IT Do not engage in business transactions with individuals that have roles in unidentified businesses, government or public offices. Keep all records as clear and organized as possible and keep an electronic or hard copy of any relevant monetary transactions. Also, keep updated records of employees and suppliers and request copies of official identification whenever you formalize any type of working relationship. There are certified credit check services, like those offered by Serasa, that allow financial and tax due diligence of business partners. 03 // INTELLECTUAL PROPERTY Overall, intellectual property rights are broadly respected, but impunity and lack of law enforcement mechanisms have encouraged piracy and the violation of software and music licenses. The government has a heightened interest in strengthening intellectual property protection as local R&d output grows. DEAL WITH IT Register all patents, trademarks, copyrights and any innovation that may be subject to intellectual property verification with Brazilian authorities. The National Industrial Property Institute (INPI) in Brazil, in addition to a number of local consultants, can assist in the prosecution of intellectual property violations. Make sure that software and copyrighted materials are fully licensed and compliant with international regulations. 04 // GRSONS LAW In the 1970s, Grson, a famous soccer player, appeared in a cigarette advertising campaign saying, Take advantage of every situation to get ahead. Sometimes called Grsons law, this mentality is used from time to time to justify unethical behavior. While in decline, the attitude persists in certain regions, especially outside of international business centers. DEAL WITH IT Ethics and compliance training will increase your employees understanding of what is appropriate behavior as well as the risks that unethical action poses for company. With agents outside your company, it is important to evaluate a potential partners commitment to ethical practice prior to formalizing a relationship.

05 // DISCRIMINATION AT WORK Despite progress in recent years, women and black workers still face instances of inequality in the work environment. Past lack of access to education and rural living are partially to blame; however, this is changing as Brazil urbanizes and access to education improves. DEAL WITH IT Potentially discriminatory decisions can be avoided by adequate controls and objective evaluations of individual qualifications. Having clear compliance rules as well as a zero-tolerance mandate will decrease the likelihood of discrimination at work.

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