BUAD 417-Country Analysis-Brazil

Country Analysis: Brazil -- Guangchen Zhang, Yun Zhou

Agenda 1.  General information 2. Economic conditions 3. Political climate 4. Foreign investor considerations Our recommendation: ●  DO NOT invest in Brazil

General Information

Economic Conditions

Growth Forecast for 2015 ●  0.5% per year

Why? ●  High inflation ●  Tax ●  Gov Spending ●  Confidence

Inflation Forecast for 2015 ●  ~6% ●  high ●  declining slowly

Interest Rate

●  SELIC Rate = Policy Rate For 2015 ●  Raised by 0.5%

Capital inflow ●  FDI

Trade Balance Deficit

●  Import > Export

●  Capital inflow

Exchange Rate •  Floating FX

regime

Political Climate

Political Climate (Basic Info) ●  Presidential Federal Republic state ●  Multi-party state

●  President is both the head of the state and the government.

Political Climate (03-10) ●  Lula Administration

●  Improved social inclusion

○  declined poverty rate (37.5% to 20.9%) ○  declined extreme poverty rate (13.2% to 6.1%) ○  decreased income inequality with decreased Gini

coefficient (0.64 to 0.56)

Political Climate (11-present) ●  2011- Present (Rousseff Administration) ●  Relatively stable politics ●  Challenges faced:

○  2013 Mass Demonstrations ○  2014 World Cup ○  2016 Olympics

Political Climate ( Ranking)

Foreign Investor Considerations

Foreign Investor Considerations 1.  Government and law supports foreign investments 2.  Foreign Ownership allowed in Brazil (Possibly 100%)

○  fields with limitations: Aviation, telecommunication, media.

3.  Dividend repatriation allowed 4.  No expropriation actions or expropriation plans. 5.  No tax limitations or benefits for foreign investors.

FIC-Global Opportunity Index

References Banco Central Do Brasil. (Dec, 2014). Inflation Report. Banco Central Do Brasil. Bernardes, O. (2013, January 01). Direct and Indirect Investment in Brazil: Remittance, Repatriation, and Reinvestment. Retrieved from Gomm&Smith: http://gommsmith.com/blog/123-direct-and-indirect-investment-in-brazil-remittance-repatriation-and-reinvestment.html Brazil Central Bank. (2014, January 01). General Information. Retrieved from Brazil Central Bank: http://www4.bcb.gov.br/pec/GCI/INGL/Brazil.asp Global Opportunity Index. (2013, December 31). global opportunity index-2013 Ranking. Retrieved from global opportunity index: http://www.globalopportunityindex.org/opportunity.taf?page=rankings JELMAYER, R. (2015, 2 27). Brazil’s Government Limits Spending Through April. Retrieved 2 28, 2015, from The Wall Street Jouranl: http://www.wsj.com/articles/brazils-government-limits-spending-through-april-1425036866?KEYWORDS=brazil Murray, M. (2015, 1 23). Brazil’s 2015 Economic Growth Will Be ‘Almost Flat,’ Says Finance Minister. Retrieved 2 28, 2015, from The Wall Street Journal: http://www.wsj.com/articles/brazils-2015-economic-growth-will-be-almost-flat-says-finance-minister-1422021342 Mello, J. (2014, May 29). Paying dividends from Brazil to abroad. Retrieved from The Brazil Business: http://thebrazilbusiness.com/article/paying-dividends-from-brazil-to-abroad Meyer, P. J. (2014, March 27). Brazil: Political and Economic Situation and U.S. Relations . Retrieved from Federation of American Scientists: http://fas.org/sgp/crs/row/RL33456.pdf TREVISANI, P., & JELMAYER, R. (2015, 1 29). Brazil Central Bank Signals Further Increase in Interest Rates. Retrieved 2 28, 2015, from The Wall Street Journal: http://www.wsj.com/articles/brazil-central-bank-signals-further-increase-in-interest-rates-1422549092 The Worldwide Governance Indicators . (2014, 01 01). The Worldwide Governance Indicators, 2014 Update. Retrieved from The Worldwide Governance Indicators: http://info.worldbank.org/governance/wgi/index.aspx#home U.S. Department of State. (2014, 6 01). Department of State: 2014 Investment Climate Statement. Retrieved from U.S. Department of State: http://www.state.gov/documents/organization/227130.pdf Wikinvest. (2009, December 30). The Brazilian government imposes certain restrictions on currency conversions. Retrieved from Wikinvest: http://www.wikinvest.com/stock/Cresud_S.A.C.I.F._y_A._(CRESY)/Brazilian_Government_Imposes_Certain_Restrictions_Currency_Conversions_Remittances

Thank you!