Current Situation Cultural Factors in Brazil for Investing
Brazil is expected to invest the US $18.4bn for the 2014 FIFA World Cup in 12 Brazilian host cities funding 50 projects (Portal Brasil, 2010). By the end of the 1990s, Brazil was ranked tenth in global automotive producers as the nation was willing to experiment with a wide range of supply and production arrangements (Strategic Direction, 2005). Brazil is undoubtedly poised for growth ever since its foreign exchange policy is liberalized. It is moving towards becoming the fifth largest economy (Williams, 2011). However, all these pose a very glamorous image of the nation but businesses desirous of investing in Brazil need to get a complete picture of the benefits and pitfalls. Any disappointments could damage the credibility of the country that it is trying to build up. Economic situation There were more than 10 significant oil discoveries last year which has pushed the nation up in oil producer rankings (The Telegraph, 2011). Brazil is expecting a Tsunami of riches as Petrobras gets full production from the oilfields deep under the Brazilian Seas (O’Shaughnessy, 2009). This would help the nation overcome the repression and torture which impacted the living conditions. Flushed with excessive cash has its pitfalls. Its currency is the most overvalued and real-estate bubble is expected in Brazil as banks have extended risky loans (Lyons, 2011). Cost of doing business in Brazil has risen very fast. Brazil has an abundance of natural resources and could be the world power but poor management and leadership have led to large debts (Balsom, n.d.). Economic growth in Brazil has been built on a very fragile structure as 10% of its population is completely illiterate and 68% functionally illiterate (The Brazil Business, 2011). Millions of students emerge from secondary schools without being able to write in English. What is astonishing is that it is socially accepted and expected that they would not learn anything in school. Unemployment in Brazil was 9.9% as of 2009 (McGladrey, 2010). However, through targeted social programs, through subsidizing house loans and raising the minimum wage the government has been able to pull more than 20 million people out of poverty (The New York Times, 2011). President Lula paved the growth that solidified the country and made it a significant player in the world. However, the next President again has not been able to win the confidence of the people. Thus, on the one hand, while it has an abundance of natural resources, a large industrial base, a huge population base, making the market attractive to investors, economic uncertainties make it difficult to improve its competitiveness or build a modern infrastructure (Austrade, 2001). Labor The nation has a large labor force but the workers are either unskilled or semi-skilled. There is a shortage of technical personnel. Labor unions can be militant especially in the metallurgical, automobile, banking and transport sectors (PricewaterhouseCoopers, 2005). They make a significant force in the country. Fringe benefits and social security for the laborers are not very strong. However, foreign investors do not experience problems with labor because they follow local standards and practices. and the country has been the top producer/exporter of soybeans, cattle and beef products, and poultry.