Question

By analyzing the following country risk profile of Brazil, provide a self explanatory of at least 200 words of your personal opinion of whether a company should business with or in Brazil. Justify your answer and also include your personal thoughts about the below country risk profile.

"Economic Risk : Brazil is the world's eighth largest economy. The nation is trying its best at remaking itself after the downturn that happened five years prior, when the economy shrunk by nearly 7%. From that point forward, Brazil hasn't had the option to develop at a similar movement it was accustomed to, during the decade prior to the downturn. Nonetheless, things appear to be gazing upward monetarily in Brazil, yet the current recuperation is a moderate one. In 2019, the nation's GDP became 1.1%, against 1.3% in 2018, and it is relied upon to tumble to - 5.3% in 2020 because of the episode of the COVID-19 and get to 2.9% in 2021, as indicated by the refreshed IMF conjectures from fourteenth April 2020. In 2019, expansion rate was equivalent to 3.7% - same pattern in 2018 and is required to remain moderately steady, at 3.6% in 2020 and 3.3% in 2021 in spite of the COVID-19 pandemic. All things considered, costs have gone up by 25% since the downturn - and compensations haven't followed. Government obligation is at present 91.6%, and should increment in the following two years, to 93.9% in 2020 and 94.5% in 2021. The nation is as yet buried owing debtors, and the Brazilian president says the principal offender is the annuity framework, as he accepts individuals to resign soon with such a large number of advantages. Monetary solidification is the administration's fundamental goal, yet the Brazillian president's guarantee to diminish the irregularity to zero this year isn't achievable. The administration spending balance enlisted in 2019 a deficiency of 6.3% which is required to diminish in 2020 and 2021, coming to 6%. The joblessness rate in Brazil is still high, arriving at 11.9% in 2019, a little improvement contrasted with 12.3% of 2018.

Political Risk: President Jair Bolsonaro has been in power since the start of 2019. At first, him and his team's supportive business plans were very popular and he had the option to supervise the section of a pension reform bill. This bill was to spare the nation an expected USD 195 billion, as it raised the retirement age and contained other income sparing measures. Nonetheless, the pandemic has expanded focuses of contradiction between the president and the congress, bringing about an increased political conflict and diminishing the probability that Brazil will have the option to proceed on a more positive note. The administration had been focused on fiscal consolidation but, considering the pandemic, extra financial changes are far-fetched. The administration's monetary reaction to the pandemic is to expand the monetary shortage to over 9% of GDP. Corruption scandals and investigations is an on-going issue for the nation. Brazil is positioned to be 106 out of 180 nations in the latest Corruption Perceptions Index.

Geographical/ Environmental: Despite the fact that Brazilian courts are yet to issue decisions in activities identified with environmental change, Brazil has been progressively giving critical indications that climate change is a pattern that can't be overlooked. In 2010, the So Paulo State Public Prosecutor's Office recorded activities against the excess of 30 organizations looking for pay for GHG outflows. After ten years, none of the organizations were viewed as a risk, however one of those organizations, documented against KLM Royal Dutch Airlines, which lead to a forthcoming examination by the Superior Court of Justice. In 2019, IBAMA, which is what could be compared to the United States Environmental Protection Agency ("EPA"), filed a lawsuit against a steel organization and its investors looking for pay for climate damages brought about by the consuming of unlawful coal in the production of steel. In June 2020, opposition political groups documented claims against the Brazilian government because of its absence of activity regarding the Climate Fund and Amazon Fund, which has been prompting the suspension of the assets tasks, affecting ventures, exploration and exercises that try to moderate environmental change and that in any case could be profited by the funds reserve. Formal proceedings are required to be held soon by the Brazilian Supreme Court to examine these activities. The Brazilian Association of Environmental Public Prosecutors joined forces with the Institute for Climate and Society to advance an atmosphere suit capacitation course for investigators, for which will motivate the examining and adjusting techniques for battling environmental change in Brazil."

Answer 1

According to given risk profile of Brazil in all the three domains i.e. environment risk, political risk and economic risk any company should measure pros and cons before doing business in Brazil depending on the current scenario.

In my opinion current position of Brazil is not at that stage in which company should do business in or with Brazil.

Taking into consideration Economic risk profile of Brazil the most important aspect for any business to start is cost.With respect to given data cost has increased by 25% since 5 years which is huge.According to the IMF forecasts current GDP growth is expected to fall at -5.3% any company which is or are planning to start business in Brazil will have to take huge risk considering the facts stated because it will increase the production cost as compared to doing business in other countries.Next aspect which any Company should think about is inflation which is currently seems stable in Brazil at around 3.3%-3.6%.Government spends is likely to increase in coming years to 94.5% which can possible lead to increase in taxation which is not in favour of any company planning to start business in Brazil. The unemployment rate is also quite high in the country which makes shortages of qualified labour. So, there is high economic risk of doing business with Brazil.

In political domain the country is unstable due to increasing political conflict.Not to forget Brazil ranks at 106 out of 180 in Corruption perception index which makes more difficult for any company to start business in Brazil. There is decreasing likelihood that Brazil will be able to continue to grow with the widespread corruption. Therefore there is high political risk in Brazil.

With changing environmental in Brazil it is difficult for business as in the future government can levy various taxes to protect its environment and there will always be a watchdog to look after company activities.

Hence there is high Economic, political and environment risk in Brazil.Any company should look into all the factors before starting the business in Brazil also it should compare the risk profile with other countries to effectively & efficiently plan in which country it should do its business with.