Essay: Competitive landscape in Brazil

Competitive Landscape
Even with national backlashes in the form of Brexit and Donald Trump’s anti-trade policies, globalization continues and countries will always have to compete with each other – whether by co-opt trade agreements or in isolation. Considered an emerging market, Brazil is competing with other new kids on the block – perhaps even threatening Southeast Asian countries like Korea and outperforming India. However, their economy has seen a downturn recently.
State Competitors
Judging by GDP-PPP, the form of GDP comparison that accounts for exchange rates, Brazil’s closest competitors are Russia, Germany, Indonesia, and the United Kingdom:
5. Germany – $3,979 (billions)
6. Russia – $3,745
7. Brazil – $3,134
8. Indonesia – $3,027
9. United Kingdom – $2,787
Competitively speaking, Brazil’s economy is in major trouble, though, and is expected to drop in ranking by 2020. In 2016, Brazil saw two quarters of GDP shrinkage despite the Rio Olympics. Some say the Olympics may have distracted the government from focusing on internal economic development.
However, there are economists who believe Brazil may have bottomed out; that there’s no place to go but up. Summer 2016 imports were up 18% YOY and the unemployment rate is starting to slow. The Brazilian Real, their currency, now makes their exports more attractive.
Business Competitiveness
Brazil has some structural advantages that allow it to compete against Indonesia, Russia, Germany, and the UK for business investment. They have a diverse source of energy supply, including oil and natural gas. The country is entirely energy self-sufficient and even has a surplus to export. Brazil’s farmland and climate also make it competitive in biofuels, wind, and solar energy. Brazil also has the largest supply of fresh water compared to any other nation. Valuable to both consumers and businesses, fresh water is an ever-scarce resource given climate change and pollution.
There are also some structural disadvantages that make it harder to attract businesses. Brazil has an exceptionally high murder rate, 5 times that of the United States at 25 per 100,000 citizens. Illegal drug trade is the biggest contributor to this crime. Brazil has a physical infrastructure problem with unpaved roads and towns cut off by rivers and lakes.
Intellectual Property
Brazil has a history of being “off the books”. Much of their real estate is difficult to determine ownership. This has developed into a culture that doesn’t value intellectual property (IP) However, in 1995 when Brazil joined the World Trade Organization, it had to accept their IP rules. In 2003, Brazil adopted an anti-piracy law that punishes criminals with up to four years in prison, plus monetary compensation.
“Protecting their intellectual property is still one of the first worries our foreign clients raise,” according to André Giacchetta who works at Pinheiro Neto, a Brazilian law firm.
Now, Brazil’s IP laws and regulations are in line with foreign leaders like the US and Europe. Local judges and law enforcement take the laws seriously, reflecting the cultural shift within the government when it comes to digital theft. US tech companies have made fewer complaints about piracy in Brazil. This has given clearance to tech, creative, and research companies to start doing business in Brazil.
Major Problem – Political Situation
This year, Brazilian President Rousseff was charged with violating budget laws by withholding government payments to the country’s central bank which made country’s fiscal condition seem better than what it actually was.
The legislative branch of Brazil suspended her until trial in their Senate. Tens of thousands of people protested and called for her ouster. Eventually convicted and removed from office, Rousseff caused immeasurable damage to Brazil’s political reputation.
Of course, businesses do not like unpredictability and instability. The political turmoil in Brazil – from uncertain leadership to mass rallying in streets and unclear policy intentions – caused many businesses to halt planned investment.
Her VP, Michel Temer, has taken over as president and is promising strong economic development for the nation. Written in a Wall Street Journal article: “the change in government when Ms. Rousseff was suspended in May was ‘fundamental’ to changing attitudes, said Cristiano Oliveira, chief economist at Banco Fibria in São Paulo. ‘We could see a positive surprise’ in growth in the second half of this year, he added.”
To fix the issue, President Temer should accelerate steps to improve Brazil’s business climate. Given the austerity situation of the country’s government, Temer should focus on streamlining business taxes and regulations to allow for improved foreign direct investment. Much of this investment can be in building infrastructure to further connect the country and build public transit. When the government’s budget is back to balanced, then it can spend on incentive programs for rising industries in tech and innovation, then start to slowly increase taxes on the big industries to increase government revenue. The revenue can be used for education and other citizen needs.