I.

INTRODUCTION

Brazil is South America's most persuasive nation, a monetary monster and one of the
world's greatest popular governments. It is one of the climbing investment powers -
generally known as BRIC countries - together with Russia, India, China and South Africa.
Over the past few years it has endeavored real strides in its endeavors to raise millions out
of neediness. The finding of real seaward oil stores could drive the nation into the top
association of oil-sending out countries.

This report aims to evaluate Brazil as an investment destination by studying the countrys progress
in every sphere. The evaluation is done by going through economic, political & legal environment.

I. HISTORY

Brazil was first discovered by Portugal in 1500. The Portuguese left Brazil in 1821, making it
an independent country in 1822. From 1964-1974, the military took over and ran Brazil as a
dictatorship. Then in 1974, General Ernesto Geisel began the liberalization process. By 1985,
the military had surrendered all power. In 1990, Fernando Collor de Mello became the first
popularly elected president since 1960. However, he was impeached for corruption in 1992.
Brazilian citizens have elected their presidents ever since 1990. In 1995, Fernando Cardoso
was elected president thanks to his success with decreasing the inflation rate. He was also
responsible for the privatization of much of the economy, including the telecommunications
industry. Brazils problems that are more recent involve money troubles. They received a
loan in 1998 from the International Monetary Fund to help with the economy and the
stabilization of the Brazilian Real. Luiz Incio Lula da Silva became president in the year
2002, he was the president for two consecutive terms till 2010. He managed to bring down
unemployment rate and there was rise in the per capita income of the country. The current
president is Dilma Roussef, first women president of the country started her term in 2011.

I. GEOGRAPHY
Brazil is the fifth largest country in the world and the largest country in Latin America. It
shares a border with every country in South America with the exceptions of Chile and
Ecuador. Brazil has many natural resources and minerals such as iron ore, copper, and gold.
The combination of natural resources and agricultural development make the country a
world leader for exporting raw materials. Brazil also has a long Atlantic Coast, making
trade with the United States and Europe convenient. Brazil is a large country, but 90% of its
population lives on only 10% of the land, illustrating the importance of focusing on the
urban areas for selling products.

Brazil is divided into two main regions: the Amazon Basin in the North and the Brazilian
Highlands in the South. The Amazon Basin includes the worlds second longest river, the
Amazon River, and typically experiences hot and humid weather. The South consists of
various mountains and river valleys that typically experience less humid weather. The
majority of Brazil experiences a good amount of rain.

I. ECONOMIC ENVIRONMENT

Brazil has developed agricultural, service industry, mining and manufacturing sectors.
Brazil's economy is the strongest among the other South American countries, and over the
time has outgrown its presence in world markets. In the past decade the country has slowly
improved upon macroeconomic stability, has built up foreign reserves, shifted debt burden
on real denominated local held instruments and hence reduced its debt profile. It had shown
strong growth in 2008, where it became a net external creditor and was awarded the
investment grade status to its debt by two credit ratings companies. In 2008, when the global
recession hit the world economy, Brazil suffered for two quarters because global demand of
Brazil's exported commodity dwindled and their external credit dried up. Brazil showed the
world by being one of the first emerging market country to begin a recovery. In the year
2010, investor and consumer confidence was regained, it had GDP growth of 7.5% which
was the highest growth rate in the past 25 years. The rising inflation was an alarming issue
which led the governments to take steps to control the economy; due to inflation and the
downgraded worldwide economic situation degraded the growth of the country to 2.7% and
1.3% in 2011 and 2012 respectively. Unemployment rate in recent past touched low levels.
Income inequality in the country also reduced. Brazil's has had high interest rates which
made foreign investors attracted to the country hence huge capital inflows has happened in
the past few years which has contributed in appreciation of the currency, this has hurt the
Brazilian manufacturers in losing their competitive advantage and then government had to
intervene in foreign exchange markets by raising taxes on few of foreign capital inflows.
President Rousseff followed inflation targeting by the central bank, a floating exchange rate,
and fiscal restraint. With an effort to boost growth, her administration implemented a
somewhat more expansionary monetary policy which has failed to bring much growth in
the country.

I. ECONOMIC STATISTICS

Key Indicators

Population: 201.03 million

Brazils GDP (in US Dollars)
2013 2012 2011 2010 $5721.29 $5721.23 $5618.32 $5271.14

*Source trading economics|world bank
GDP Per Capita: $12528

Gini Coefficient: 51.9%

Human Development Index: 0.730












The government has a large debt of 65.09% of the GDP but has reduced by 1 % when
compared to 66.9% in 2012. Meanwhile, Brazil also has high external debt.

I. CULTURAL ENVIRONMENT

Brazils culture can be analyzed by looking at the following:
Role of Social Institutions- Although family and education are important things within
Brazilian life, business on the other hand, is looked upon as something that one just does. In
Brazil, work is a means of income, and family always comes first.

Philosophy and Beliefs- Having so many people from different ethnicities and religion, the
Brazilian philosophy and life cannot help but to be influenced by different kinds of people.
The Brazilian belief system is affected by religion, the government, the arts, and even just
some preconceived notions about machismo.

Living Conditions- Brazilians are typically considered very healthy in their diet, which
consists of rice, beans, salad & greens, and generally all forms of meat. In terms of
healthcare, Brazil system ranks as one of the highest within Latin America, but still could
use room for improvement with unequal spread of healthcare between incomes.
Language- Being founded by Portugal, Brazil is the only country in Latin America that
speaks Portuguese as its main language. Brazilians also speak German, Italian, Japanese,
Korean, or one of the 195 indigenous languages.

Cultural Responsiveness- Brazil is quite like the United States in that it embraces both social
and technological change.

I. POLITICAL & LEGAL ENVIRONMENT

The political and legal environment in Brazil has many different significant aspects.
Political System- Brazil is a democracy, run by an elected president. The national legislature
consists of a Senate and Chamber of Deputies. There are a total of 12 main political parties.

Political Risk/Stability- Brazils government is overrun by corruption. The majority of the
PT party is being tried for various crimes. This is causing political risk which in turn causes
political instability.

Nature of Judicial System -The Brazilian Judicial system is much like that of the United
States. Not only do they have a Supreme Court, but also regional courts at the state level.
They also practice both common and code law.

Home/Host Country Relations- France is the 4th leading supplier in Brazil with 3.7% of the
market share and the 4th leading investor in Brazil. The two countries have partnered to
share scientific research, cultures, and technology.

Legal Restrictions- A foreign company conducting business in Brazil must register with the
Ministry of Development, Industry, and Foreign Commerce. The income tax on profits is
27.5%. Brazil has strict labor laws with many benefits.

I. INTERNATIONAL AGREEMENTS

Brazil is a party to many different international agreements. Brazil is a signatory to the Free
Trade Area of the Americas (FTAA), The Rio Group, Mercosur, the Organization of the
American States (OAS), the Amazon Co-Operation Treaty (ACT), the WTO, GATT, as well
as many other treaties involving the environment and human rights.

FTAA- The Free Trade of the Americas is designed to eliminate barriers to both trade and
investment in the 34 countries participating. The goals of this agreement include promoting
economic growth and eliminating poverty. Some of the issues include market access,
intellectual property rights, agriculture, and civil societies. This agreement is the newest to
Brazil, with Brazil serving as the president of the Negotiating Group on Agriculture.

The Rio Group- This group is designed to help find solutions to political problems in Central
America. Brazil, along with Argentina, Chile, Colombia, Mexico and many others,
participate in many international topics such as terrorism, trade, drug problems, poverty,
and corruption. In 1999, these countries agreed to the Veracruz Act that stated the agreed
principles and stances on the issues above as well as many others.

Mercosur- Mercosur is an economic union between Brazil, Argentina, Uruguay and
Paraguay. The bloc of countries has a Common Foreign Tariff and is recognized
internationally as having the ability to negotiate. It is one of the four biggest economies of
the world. It has a very large industrial sector with a strong position in global trading. The
organization also focuses on issues such as culture, education, justice, and energy.

OAS- This organization has 35 member states and has the goal of promoting democracy,
fighting drug problems, saving the environment, eliminating terrorism, promoting peace,
and stimulating trade. This organization is extremely important to Brazil since it involves
many states that are connected to Brazilian foreign policy. The agreement stresses the use of
non-forceful methods for resolving controversies.

WTO- Brazil is part of the World Trade Organization which sets rules for international trade
and deals with the trade disputes. Brazil has been a member since 1995 and has overall
gotten positive feedback as a member of the organization. Brazil does however cause some
concerns regarding anti-dumping laws and investigations to promote its domestic
businesses. There are also some issues regarding their economy and the need to increase its
economic growth.

GATT and Patents- Brazil is a signatory to GATT and must obey the intellectual property
laws involving patents, copyrights, and trademarks. However, Brazil has not followed these
laws recently. Brazil has taken advantage of developing country provisions in TRIPS to
prevent claims involving patents. Although the country is a signatory to this agreement,
Brazil has not necessarily followed all the law accordingly. Brazil is also a signatory to the
World Intellectual Property Organization of the both the Paris Convention and the Bern
Convention. Brazil has had some issues regarding trademarks and copyrights; however, the
government is taking steps to enforce these rules with things such as registering with the
National Institute of Industrial Property.

Brazil is a member of many other international organizations and treaties, such as the United
Nations, the Climate Change-Kyoto Protocol, and the International Monetary Fund. These
treaties, free trade areas, and organizations are intended to help Brazil with global trade and
to help fight global problems. Brazil has a responsibility to abide by the rules and
regulations in these agreements in order to have a respected standing amongst other
nations.

I. FINANCIAL ENVIRONMENT

Advanced and robust keeping money framework is the base of Brazil's fiscal business sector,
it has productive installment framework, and tried and true market foundation. The Central
Bank of Brazil propelled new Payment System in the year 2002, to permit online move in the
constant.

The money related emergency of 2008 had moderately little impact on the Brazilian
managing an account framework when contrasted with other Latin American nations. In the
first a large portion of 2009 the value of Brazilian banks developed 4%, in spite of a 1%
diminishment in stakes.

The impacts of the emergency were least as large volumes of value was held by the money
related establishments in 2008, the elevated amount of mandatory stores with the Central
Bank of Brazil, the institutional progressions actualized over the past few years (illustration
production of the Credit Guarantee Fund), effective prudential regulation, the abnormal
amount of universal stores, and the development of an arrangement of supervision by the
National Monetary Council and the Central Bank of Brazil.

Brazil's fiscal organizations are in better circumstance. Due not many influences, it makes
them a great deal less powerless against an increment in instability and a sudden change in
circumstances, though as stated by the high Basel Index they have a sufficient capital base to
retain any misfortunes determining from the dangers to which they are uncovered.


Capital Markets

Brazil has highly expanding prospective in capital market which offers numerous
investment opportunities, products and services.

BM&FBOVESPA

The New Exchange: The securities, items and fates trade was made in 2008 taking after the
merger between the Brazilian Mercantile and Futures Exchange (BM &FBOVESPA and the
So Paulo Stock Exchange (BOVESPA). Bm & fbovespa is one of the biggest trades on the
planet and an engaging financing alternative with expense proficient exchanging charges. It
exchanges stocks, open and private area securities, prospects contracts dependent upon
monetary holdings, records, premium rates, remote trade rates and things, notwithstanding
spot US Dollar and gold. Exchanging is done solely electronically where moguls can
perform transactions including stock buys and deals, fence, value discretion between
businesses or holdings, portfolio broadening and position power.

Being a reference in danger and insurance administration, Bm & fbovespa goes about as a
focal counterparty over its businesses through its four clearing houses value, subsidiaries,
remote trade, and securities and additionally offers a full securities guardianship
framework. All transactions, including OTC transactions did at Bm & fbovespa must be
enlisted at a brought together enrollment framework approved by the Central Bank of
Brazil.
Internationalization

Bm & fbovespa built its first vital collusion with the CME bunch that controls the Chicago
Exchanges. CME Group customers in excess of 80 nations can exchange the Bm & fbovespa
budgetary subsidiaries and products straightforwardly.

Working at Bm & fbovespa

The primary venture to work in the Brazilian Financial and Capital Markets is to open a 2689
Account. It is a compulsory necessity and permits non-occupant gurus to exchange and put
resources into the same portfolio items accessible for inhabitant moguls in Brazil.
Taxation

Non-resident investors trading equities, derivatives and corporate bonds are exempted on
capital gains;
Distributed profits and dividends are also exempted;
However, non-resident investors from countries or jurisdictions that do not tax income or
tax income lower than 20% are treated as a Brazilian investor for taxation purposes;
In 2010, a new 6% IOF on FX inflows for fixed income investments and margin deposits
for derivatives trading was introduced.

I. CORPORATE GOVERNANCE

In the most recent decade there have been changes in the hierarchical environment in Brazil.
These progressions incorporate the recovery of capital market, the development of
organizations with scattered and diffuse capital, mergers and acquisitions of extensive
organizations, business setbacks of veterans and newcomers and the worldwide monetary
emergency. These set of variables have brought to light a few shortcomings of the
associations and their frameworks of legislation, highlighting the need for real selection of
great corporate influence rehearses. Luckily for moguls and the organizations the Brazilian
government has responded expeditiously to authorize corporate influence standards to
verify that organizations soak up a society of transparency and exposure. There are three
key figures that assume a noteworthy part in the advancement of corporate influence
polishes in Brazil- IBGC, stocks controller CVM and the stock trade Bovespa.

Role of IBGC

The Brazilian Institute of Corporate Governance (IBGC) was established on November 27,
1995, has been since its origin issuing Code of Best Practices. The principal form basically
kept tabs on the Board of Directors like other code in US and UK. The subjects included in
the first code were missions, capacities of directorate, number of chiefs in the board,
capabilities, term of office, age breaking point, and compensation of executives,
transparency and exposures regarding Shares held by executives, CEO assessment and
minutes of gathering of all the board meets. The second form notwithstanding the first form
specified new parts on Ownership -shareholders or accomplices, administration Chief
Executing Officers, Independent Auditors, supervisory Board, conflicts of investment, the
Fiscal Council. In the third form Corporate Responsibility turned into a fourth essential rule,
alongside transparency, honesty, and responsibility. New things were incorporated to depict
the Family Council, free-glide, length of command of inspectors, and non-review
administrations.

I. INSURANCE SECTOR

Brazil is unquestionably the biggest Insurance showcase in Latin America, speaking to more
than 40% of the terrible composed premiums in the district. Brazil additionally has the
biggest populace in South America, the tenth biggest economy on the planet by GDP and a
low protection infiltration rate. These components show that, in spite of the generally great
size of the Brazilian insurance market, it still has enormous development potential, assessed
by some to be the third best on the planet behind China and India.

Access to front line innovation gets to be progressively vital for firms and nations in
supporting their aggressiveness as they advancement to the effectiveness driven phase of
improvement and can't keep on depending only on modest variables of generation as
fundamental preferences. At this stage, what truly matters is the accessibility of engineering
inside the nation, paying little heed to its starting point: the ability to produce information
locally turns into a key driver of aggressiveness just for economies close to the mechanical
outskirts, in the third and most progressive phase of advancement. As nations climb the
advancement way and achieve the most developed phase of improvement, the ability to
transform remarkable and creative items and administrations and to consolidate complex
generation courses of action gets to be progressively discriminating for manage national
aggressiveness. Brazil has not arrived at yet the enhancement driven stage, and the
development and advancement figures as of now record for a generally minor a piece of its
aggressiveness.

I. TECHNOLOGY
Brazilian science and innovation have attained a huge position in the worldwide stadium in
the most recent decades. Brazil has today a generally created association of science and
engineering. Essential examination is generally done in broad daylight colleges and
exploration focuses and organizations, and some in private foundations, especially in non-
benefit non-administrative associations. On account of legislative regulations and
motivators, in any case, since the 1990s it has been developing in the private colleges and
organizations, too. Appropriately, more than 90% of financing for essential examination
hails from administrative sources. Connected research, engineering and building is
additionally to a great extent did in the college and examination focuses framework,
opposite shrewd to additional created nations, for example, the United States, South Korea,
Germany, Japan, and so on.

The purposes behind these are a lot of people, yet the principle ones are:

Few Brazilian privately owned businesses are aggressive or rich enough to have their own
particular R&D&I, they typically create items by outsourcing from different organizations,
normally outside ones;

The high-engineering private part in Brazil is ruled by extensive multinational
organizations, which generally have their R&D&I focuses abroad, and, with a couple of
special cases, don't put resources into their Brazilian limbs.

I. CONCLUSION & RECOMMENDATIONS

Brazil as a financing end of the line for the fleeting is a "not great" alternative while if one is
searching for long haul allure of Brazil as a financing goal, then the response might be "yes".
The choice favoring Brazil as a finer financing objective later on is dependent upon the
presumption that the administration might stay aware of the present rate of changes in
every segment. To be reasonable, Brazil has the possibility to turn into a standout amongst
the most dynamic BRIC economies. The most recent two decades have been a time of critical
advancement for the nation in uniting macroeconomic strength, changing and opening the
economy, and lessening salary favoritism, in addition to different sizes. This has put the
economy on a sounder establishment regarding manageable, long haul development. By
and by, various weaknesses keep on undermining national aggressiveness. These
incorporate abnormal amounts of government obligation, an excessively inflexible work
business sector, and poor instructive models coupled with a persisting discriminatory salary
conveyance. It is an intense call for Brazil's establishments to handle these inadequacies in
the present setting of real outer stuns on fare request and financing accessibility, alongside
falling ware costs. The nation might be in a superior state in the event that it were to work
out to tackle all these issues. It is additionally vital for the administration to create more
instruments to improve the financial environment of the country.