michigan state university, 2007 7 th biennial international business institute for community college...

Michigan State University, 2007

7th Biennial International Business Institute for Community College Faculty

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

Doing Business in BrazilDoing Business in Brazil

Michigan State University, 2007- 2 -

Agenda – Doing Business in BrazilAgenda – Doing Business in Brazil

• Country Facts• Relevance• Business

Overview – Current Initiatives

• Cultural Issues


Brazil - Country FactsBrazil - 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.



Capital City Brasilia (-3 GMT)

Currency Real (1 R$ = 0.49 US$)

Major Languages Portuguese

Calling Code 55

Voltage 110/220V

PeopleNationality: 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.

OFFICIAL NAME: Federative Republic of Brazil



GeographyArea: 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.


GovernmentType: 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).




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%.


Relevance – GDP and PopulationRelevance – GDP and Population

CountryPopulation, total 2005

1 China 1,304,500,000 2 India 1,094,583,000 3 United States 296,410,404 4 Indonesia 220,558,000 5 Brazil 186,404,913 6 Pakistan 155,772,000 7 Russian Federation 143,113,650 8 Bangladesh 141,822,276 9 Nigeria 131,529,669

10 Japan 127,774,000 11 Mexico 103,089,133 12 Vietnam 83,119,000 13 Philippines 83,054,478 14 Germany 82,469,400 15 Egypt, Arab Rep. 74,032,884 16 Turkey 72,065,000 17 Ethiopia 71,256,000 18 Iran, Islamic Rep. 68,251,085 19 Thailand 64,232,758 20 France 60,873,000 21 United Kingdom 60,226,500 22 Italy 58,607,050 23 Congo, Dem. Rep. 57,548,744 24 Myanmar 50,519,492 25 Korea, Rep. 48,294,143

Source: World Development Indicators, The World Bank 2006

CountryGDP, PPP (current international $) 2005

1 United States 12,416,505,085,952 2 China 8,814,859,838,459 3 Japan 3,995,077,060,997 4 India 3,779,043,713,662 5 Germany 2,429,644,208,862 6 United Kingdom 2,001,821,455,870 7 France 1,849,666,307,792 8 Italy 1,672,005,807,282 9 Brazil 1,566,252,631,904

10 Russian Federation 1,552,007,929,284 11 Spain 1,179,092,442,686 12 Mexico 1,108,281,249,134 13 Canada 1,077,995,094,444 14 Korea, Rep. 1,063,865,666,130 15 Indonesia 847,608,726,005 16 Australia 646,342,903,873 17 Turkey 605,876,098,930 18 Thailand 557,378,179,588 19 Argentina 553,292,065,769 20 Iran, Islamic Rep. 543,814,555,150 21 Netherlands 533,404,135,430 22 Poland 528,470,646,467 23 South Africa 520,947,971,556 24 Philippines 426,688,612,474 25 Pakistan 369,230,168,333


Relevance – Mercosur (Mercosul)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.


Relevance - BRICsRelevance - 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 Europe United States Total

Most important emerging markets

Eastern Europe 66%

China 61%

India 32%

Russia 24%

Brazil 19%

Other 6%

China 82%

India 56%

Eastern Europe 38%

Brazil 25%

Russia 19%

Other 11%

China 75%

India 48%

Eastern Europe 47%

Brazil 23%

Russia 21%

Other 9%

Item Last 3 Years

NowNext 3 Years

% Revenues generated outside country of origin 27% 35% 42%

% Suppliers located outside country of origin 22% 31% 38%

Source: Accenture – World Views: Achieving High Performance through Effective Global Operations


Relevance - CompetitivenessRelevance - Competitiveness

Source: The World Competitiveness Scoreboard 2006, IMD World Competitiveness Yearbook


Relevance - CompetitivenessRelevance - Competitiveness

Source: The World Competitiveness Scoreboard 2006, IMD World Competitiveness Yearbook

The “Brazil Cost” factor


Current Initiatives – RegionsCurrent Initiatives – Regions

Region 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 – RegionsIndustrial Activities – Regions

(Food)(Textile)

(Beverage)(Wood and Paper)

(Tobacco)(Metal)

(Chemical)

(Plastics)(Electrical)

(Transportation)

(Industrial Machinery)(Mining)

(Rubber)

(Other)

(Clothing and Shoes)

(Primary Industrial Region)

(Secondary Industrial Regions)


Current Initiatives – Southeast RegionCurrent Initiatives – Southeast Region

1. Wood Furniture2. Textile3. Auto (Fiat)4. Steel (Usiminas)5. Naval, Ports, Oil Refinery,

Oil Industry6. Oil Industry, Nuclear

Energy7. Naval, Ports8. Beverages (AmBev,

Schincariol, Cintra, Local, Itaipava)

9. Air (Embraer)10. Sugar Cane (Sertaozinho)11. Shoe (Franca)

1

2

34

5

6

7

89

10 11

Source: Estadão Negócios – Edição Especial: Novo Mapa do Brasil, 2006


Current Initiatives – South RegionCurrent Initiatives – South Region

1. Steel (Jaguaraiva)2. Auto (Renault, Bosch),

Oil Refinery3. 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

1

2

3

4

5 6

7



Current Initiatives – Northeast RegionCurrent Initiatives – Northeast Region

1. Wood Furniture2. Aluminum (Alcoa, Alcan, BHP-

Biliton, Abalco)3. Soy (Uruçuí)4. Mining5. Auto (Troller)6. Oil industry, Fish7. Textiles8. Medical, Oil Refinery,

Technology9. Fruits (Petrolina)10. Chemical11. Oil industry, Citrycal Fruits12. Oil industry, Auto (Ford)

1

2

34

5

6

7

89

10

11

12



1

2

Current Initiatives – Central-West RegionCurrent Initiatives – Central-West Region

1. Aluminum Can (Rexam)

2. Food (Carroll’s Food - Pork, Sadia)

3. Textiles, Packaging4. Mining (Gold,5. Auto (Hyundai,

Mitsubishi), Pharmaceuticals

6. Fertilizers, Sugar Cane

7. Food (Perdigao)8. Chemical Industry,

Steel Industry9. Food (Cattle)

3

4

5

67

8

9



Current Initiatives – North RegionCurrent Initiatives – North Region

1. Free Trade Zone (Zona Franca)

2. Mining (Diamonds)

3. Natural Gas (Urucu-Manaus)

4. Agriculture

5. Mining (Fe, Au), Oil

6. Rice and Soy

7. Mining – Carajas (Fe)

8. Hydroelectricity

9. Latex

10. Agriculture

1

23

45

6

7

89

10



Current Initiatives – Best Cities to do BusinessCurrent Initiatives – Best Cities to do Business

Source: “Doing Business in Brazil”, The World Bank (2006)


Hot Topic: Bioenergy / BiodieselHot Topic: Bioenergy / Biodiesel


Cultural IssuesCultural 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."



• 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.



• 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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