Brazil's economy, culture, and business opportunities for foreign investors

Brazil

The economy of Brazil is one of the most attractive and promising market in the world. In recent times, Brazil's strong currency, the Real, has hit higher against the U.S. dollar; the inflation rate is under control and the standard of millions of Brazilians is also improving rapidly. The largest stock exchange of Brazil which is located in Sao Paulo showed best performance last year and looking at these impressive achievements of Brazil, it was awarded with the "investment grade" status. The growing population and increasing consumer demand makes Brazil an ideal place for the foreign investors to enter, make investments, penetrate in the markets and take benefit from this opportunity.

Introduction

Brazil, the fifth largest country of the world, is also the largest country (PriceWaterHouseCoopers 13) of South America in terms of area as well as population. Having a wide area of 8.5 million square; it has borders with Argentina, Colombia, Bolivia, Guyana, French Guiana, Peru, Paraguay, Uruguay and Venezuela (KPMG Report 07). It is officially known as "Federal Republic of Brazil" and its capital is Brasilia.

The unique culture of Brazil is the result of various diverse populations living in the country. Brazil is a Portuguese colony since 16th century after getting discovered by the Europeans. It became independent in 1822 and after that its population has exponentially increased due to people from different parts of the world coming and settling here. By tradition, Brazil is an agricultural country and is famous for its agricultural products; soya beans, oil, oranges, sugar, coffee and beef. Its industry and service sectors are also doing well and have played an important role in fueling its economy in the last century. These include electricity, Iron, Foot wear and Ethanol industries.

The improving economy of Brazil also opened its doors for the foreign markets and investors during the last decade. This gave an opportunity to the international businesses to work with the fifth largest country of the world and the largest economy of Latin America (KPMG Report 01). However, due to diverse economy and very unique culture, it is not only exciting but also challenging to do business and make relations with Brazilian business industry. In order to do a successful business, it becomes very essential to understand the Brazilian culture and its etiquettes.

Population, Language and Religion

The recent statistics show that the population of the country is around 199 million which is composed of different ethnic groups[footnoteRef:1]. According to the Brazilian Institute of Geography and Statistics (2008), there are around 47% whites in the country, 43% mixed populations and 7% blacks & others like Asians, Arabs, Japanese and Amerindians[footnoteRef:2]. [1: Central Intelligence Agency, Fact Book, 2012, https://www.cia.gov/library/publications/the-world-factbook/geos/br.html] [2: IBGE's 2008 PNAD (National Research by Sample of Dwellings)]

Language is one of the strongest elements of Brazil's national unity. Portuguese language is spoken nearly by the whole population. The only exceptions are some members of Amerindian groups and pockets of immigrants, primarily from Japan and South Korea, who have not yet learned Portuguese.

Brazil is an official catholic country and therefore majority (74%) of Brazilians are Roman Catholics and 15% are Protestant (RLN 01)[footnoteRef:3]. The remaining minorities practice different religions as the constitution of Brazil allow practicing any religion of the world. [3: RLN Regional Language Network East Midlands]

Around 80% of the Brazilian population live in the urban areas and very few live in the other territories. Sao Paulo and Rio de Janeiro are the most populated places of the urban area having populations of 18 and 10 million. More than 50% of the Brazilians have come from the other regions of the world and have settled here as first, second or third generations. This is the reason that the culture of Brazil is so much diverse and unique.

Currency

The currency of Brazil is "Real" (R$, plural = Reais). 1 Real is divided into 100 units called centavos. The official exchange rate floats freely but the fore trading is limited only to the authorized dealers.

Living Standards

There is a significant income gap between the rich and poor people of Brazil. The living standard of majority of the population of Brazil is low and the minority lives a very high standard life. There is very little percentage of people who have home ownership while the remaining working class suffers from the problem of shortage of housing.

Government

Brazil is a federal republic having the Federal District and twenty six states (OSEC 04). Each of the Brazilian state has a separate governor, state legislature and constitution. These twenty six states are further divided into municipal communities which have different districts. The Federal Government is leaded by the president which is elected through voting after every four years. Legislative powers belong to the National Congress, which consists of a Chamber of Deputies and the Federal Senate.

Trade and Industry

The South and Southeast regions of Brazil are the developed regions; therefore most of the industrial as well as commercial activities take place there. The North and Northeast on the other side are the underdeveloped regions and low in industrial and commercial activity.

The government has taken several measures to minimize the social tensions that arise due to this inequality in the economic development of the regions. One from which is the allocation of a considerable number of resources to these underdeveloped northern and northeastern regions. However, unfortunately these measures have not brought any fruitful results than expected and the inequality between the regions remains there.

Economy and Fiscal policy

Brazil is considered as the leader in producing minerals and foods. It is also high developed in other sector and industries; that include wood pulp, aerospace, aluminum, steel, textiles and chemicals. The government of Brazil is emphasizing on the business operations of both government as well as private sectors towards the economic growth and industrialization. For achieving this goal, government has designed protective measures for the domestic industries and also monetary policies in order to keep a check on the inflation and balance the foreign exchange.

Government Attitude to Foreign Investment

The government of Brazil looks forward to develop a market oriented economy and therefore it has considerable taken steps to improve the climate of the foreign investment. For instance, it has reduced the import barriers and has also privatized many companies. Tax reforms have also been suggested but the approval is still pending. Government is working with the aim of simplifying the current tax system, especially the VAT (Value added taxes) (Ernst and Terco 09).

Tax System

The tax system of Brazil is quite complex and enforces several taxes that are charged at the federal, state and municipal levels. Therefore, foreign investors should consult the advisors before planning the investments in Brazil. As stated above, the government of Brazil is working hard to reduce the taxes that are associated with the bureaucracy, in order to facilitate foreign investors. These efforts have improved the public administration in recent years but bureaucratic procedures still remain a hindrance for making the international business efficient in Brazil (Ernst and Terco 08).

Foreign Ownership of Real Estate

Foreigners have permission to own property in Brazil. However, there are some restrictions in case of rural real estate. The resident foreigners or the companies that are owned by the resident foreigners are not allowed acquisition of rural real estate which is located to border of the country (Ernst and Terco 07).

Foreign Ownership of Business

There are few restrictions and limitations that are imposed on the foreign ownership of Brazilian enterprises in certain sectors; that include news media, communication and transportation. However, the government of recent years has made some changes and allowed foreign investment in the electricity and telecommunication process, in order to privatize the business (Ernst and Terco 08).

Culture

Brazilian culture is very diverse due to its geography. It is the result of the melting pot of several races that have shaped Brazilian culture. Portuguese are not the only ones who have contributed towards Brazilian culture by components like religion and language. Other populations like native Indians, some Africans, Europeans, and people of Asia and Middle East who settled in this territory have also played a significant role in shaping rich and very distinct culture of Brazil.

Its culture is very famous throughout the world due to its kindness and hospitality. Moreover, the colorful Carnivals of Catholic style with musical activities are also very significant in the Brazilian culture. The diversity in the Brazilian society can also be recognized by its division into different classes; each having different attitudes and values. Understanding these values and norms of the Brazilian citizens of different classes; help in developing better relationships and doing a more successful business in Brazil.

Key Concepts of Brazilian Culture

Family

Brazilians keep family at the central part of their social culture. Brazilian families are very large and closely linked with each other, due to which they are socially interconnected and also provide security to each other. The family importance can also be seen in the Brazilian business culture as most of the people will either be doing a family business or will be doing jobs in the same company (Malinak 01).

Relationships

Building strong relationships with others is also very important in Brazil as Brazilians heavily depend upon their relationship with others. Therefore it is essential to spent time and make personal and professional relationships in order to do successful business in Brazil. This also helps in knowing the right people and minimizes any possible confusions and frustrations (Malinak 01).

Understanding Brazilian Business Culture

It is very important to understand the Brazilian business culture, in order to do a successful business in this growing economy.

Brazilian Business Etiquette

Shaking hands is common way of greeting between the business colleagues. Men shake hands when greeting one another, while maintaining steady eye contact. Women generally kiss each other, starting with the left and alternating cheeks. In more informal situations, men and women also kiss or briefly embrace another. If a woman wishes to shake hands with a man, she should extend her hand first (Malinak 03).

Relationships & Communication

It is very important for the Brazilians to know with whom they are doing business. They are more concerned about the individuals with which they meet rather than the organization to which they belong. Foreigners should also be careful that Brazilian in a group meeting or discussion should not be embraced by anything.

Face-to-face communication is given preference over written communication in Brazilian business culture. However, when it is time to make agreements or deals; Brazilian emphasizes a lot on making detailed contracts. This is done to make everything clear and avoid any confusions and misunderstandings in future.

Dress Etiquette

Brazilians who seem to be very informal in nature are very conscious about the fashion. They dress well in the business gatherings and meetings. Men wear dark colored two piece suits and three piece suits in case of executive positions. Business women wear good quality, decent and elegant dresses along with some stylish accessories.

Business Hours

The working days in Brazil are from Monday to Friday, starting from 8:30 AM to 5:30 PM or 9:00 AM to 6:00 PM. Some factories also work on Saturdays while retail outlets remain open on weekends. Bank timings are 9:00 AM to 4:00 PM and government offices work from 9:00 AM to 5:00 PM except on Saturdays.

Time and Punctuality

Punctuality is not common in Brazil and strict timings are not followed. Time is considered as flexible and therefore the overall life moves ahead with a very slower pace and business negotiations also take more time than normal (Malinak 02).

Growth opportunities, foreign investment demand, government flexibilities, growing population and increasing consumer demand make Brazil an ideal place for the foreign investors to invest in this fifth largest country of the world.