MACROECONOMIC DATA

RUSSIA
Russia also known as Russian Federation is a federal, semi-presidential republic. Russia has land
area spread across 6,592,800 sq mi. one-eighth of the Earth's inhabited land area , Russia is one
of the largest nation in the world. As of data from 2014, Russia has a population of 144 million
Russias recession has worsened over the period of time till current day. Its dependence on oil
and gas exports has increased indication an increasing gap between Russia and other economies.

The growth dropped in the initial quarter of the year 2015 from initially low 0.4 % to minus 2.2
%, followed by an economic contraction of 4.6% in the second quarter. Impacts of Russian
economic condition are also felt by countries that are in financial and trade relations with the
country. Today, even on improvement of global economy by emerging high income countries,
Russia still tries to see its economic improvement. The consistent recovery in the US and meager
rate of growth in European region enhanced the global economic condition in the second quarter
of 2015, in spite of very uneven growth among emerging and developing countries. Low
commodity prices caused high divergence in growth aspects for commodity exporters and
importers. After a poor initial first quarter, oil prices increased meagerly to an average of just

over US$62 per barrel in May, effects of which appear to be short term since supply and demand
factors continue to imply downward trend on oil prices globally.

The sudden contraction in wages and income seen in the initial quarter of 2015 show the
intensity of the recession and its gloomy impact on household consumption. The downfall in real
wages was the medium for adjustment of labor market to lower demand. The result was a slight
increase in unemployment in the year before. The dip in income significantly heightened poverty
and worsened the vulnerability of households in the lower 40 % of the income distribution.

Consumer price index (CP I) inflation gradually decreased from 16.9% mark during March as the
ruble started seeing stability and the rise in food-price inflation subsided. The central bank
discontinued its monetary tightening policy in December 2014 and began a monetary easing
cycle in January. In any case, in light of the range of impact of the ruble's debilitating and

Russia's prohibition on sustenance imports, both backing cost and center augmentation
uninterruptedly outpaced highlight swelling, while non-sustenance advancement kept
resuscitating (Figure 24). Sustenance cost swelling is hitting poor family units especially hard;
by February nourishment costs had ascended by 23.3 percent, year-on-year, taking after an
improvement of 15.4 percent in 2014. General augmentation composed in the second quarter
because of debilitating buyer request, while typical reductions in aftereffects of the earth costs
and liberal agrarian change checked nourishment regard swelling. By August, CPI improvement
had resuscitated to 15.8 percent in light of an expansion in utility appraisals and a weaker ruble,
while support regard swelling stayed high at more than 18 percent.

The Recession leveled out during second quarter of 2015 and started to show signs of stability the
third quarter. GDP further drove down to 4.1% in third quarter after a 4.6% dive in second quarter.
This was observed as highly terrible withdrawal in 6 years. The principle components behind the
third quarter which showed relative change were an acceptable execution in the rural part and an
adjustment in the mechanical segment. Going ahead signs of change in the mechanical division were
observed during the fourth quarter. Stepping towards 2016, business movement in the Russian
fabricating and benefits segments was disappointing as these both segments saw a dive down in
December.

The Economic growth trend for Russia is as shown below [ till 2014] and it appears to have gone
down over the years since 2010.

Also the inflation seems to have reduced, but as mentioned in the above
report, it has not done much towards the stabilization of Russian economy.

BRAZIL
Brazil is the largest of the Latin American countries and is the second largest one in the western
hemisphere. By nominal GDP, the economy of Brazil is ranked at ninth in the world and seventh largest
by Purchasing power parity. Its economy is known for being moderately free and inward oriented
economy.
The decade from 2003 -2013 was a period of economic and social progress as indicated by World Bank
data. During this period over 26 million people were lifted out of poverty and inequality was significantly
reduced as indicated by the fall of the Gini Coefficient by 6% to 0.54 in 2013.
However this period of progress has started stagnating since 2013. GDP growth has significantly sowed
from 4.5% in 2006-2010 to 2.1% in 2011- 2014. With a GDP growth of 0.1% in 2014, economist
expected GDP contraction for Brazil in 2015. In fact, in the third quarter of 2015, Brazil experienced the
largest contraction of the economy exceeding the expectation of analysts and economists.
Various factors such as low commodity prices, high inflation, depressed investor confidence and mainly
large political crisis has driven the Brazilian economy into a downward spiral of a depression with no
apparent relief in sight. The experts expect that in 2016 the economy will remain in this depression while
falling a further 1.8%.

The GDP of Brazil economy had entered a slump since 2013, the growth in 2014 was at just 0.1% and is
expected to enter a phase of contraction in 2015.

Economic Growth (GDP, annual variation in %)

8
6
4
2
0
2010

2011

2012

2013

2014

Inflation rate in Brazil has been increasing in Brazil in the period of study. The inflation really started to
hike as the government introduced new taxes in response to the fall of the Real against the USD in mid2014.

Inflation Rate (CPI, annual variation in %, eop)

10
9
8
7
6
5
2010

2011

2012

2013

2014

2015

Exports and imports have also suffered in this period of downward slump. The exports and import
downwards trend is a cause for worry for the Brazilian economy and needs to be revived. Even on ease of
doing business ranking Brazil has slipped 6 places to 111 th in the latest ranking. Decline in sales was
observed for: coffee (-27.8 percent), orange juice (-55.8 percent), aluminium (-31.1 percent), pork (-22.2
percent), beef (-15.4 percent), chicken (-6.9 percent), leather (-23.1 percent), iron ore (-36 percent),
gasoline (-36.5 percent) and oil (-39.4 percent). In contrast, exports increased for ethanol (66.1 percent),
maize (67 percent), cotton (24.5 percent), cellulose (15.1 percent), refined sugar (17.2 percent) and
soybeans (282.9 percent). Considering full 2015, exports fell 14 percent to USD 191.13 billion.

DEMOGRAPHY

10

BRAZIL
Brazil a federal Republic, divided into 26 states and home to almost 203.6 million people with
their national language being Portuguese with English and Spanish being the less popular
languages, The country has a rich ethnic culture 92 million (48%) Brazilians were white, 83
million (44%) were brown, 13 million (7%) were black, 1.1 million (0.50%) were yellow and
536,000 (0.25%) were indigenous composition of people, of a variety of religions such as Roman
Catholic 64.6%, other Catholic 0.4%, Protestant 22.2% (includes Adventist 6.5%, Assembly of
God 2.0%, Christian Congregation of Brazil 1.2%, Universal Kingdom of God 1.0%, other
Protestant 11.5%), other Christian 0.7%, Spiritist 2.2%, other 1.4%, none 8%, unspecified 0.4%
Brazils decline in its fertility rate has caused a huge threat to the future of the country with a
growth rate of about 0.8%. As there is a majority of aging population, as we know more the
number of youth more the brighter the economy. the country is also prey to fast paced
demographic transition, studies have also shown that Brasilia hasnt taken any steps to leverage
on its large working age population as the studies show that more than 43% of its countrys
population consists of people aging from 25-55 years and still the country doesnt stand out as an
outstanding economy. This will cause a further crunch in the economy around the year 2025, as
most of the population will be of the age of retirement by then.
The social status of the country consists of majority middle class people, but still poverty
prevails high in number and there is a vast gap in income equality, this prevails mostly in the
North eastern, and centre west region as there exists a variety of people in these regions,
consisting of black and other mixed races of people, due to this disparities and un uniform
composition of people living in the same reason, studies show that there is a huge crime rate in
such regions, causing a boom in Brazils crime rate.
Brazil has also opened its doors to a vast people of different races mainly concentrated in the
south east region, soon after the ban on the apartheid was enforced, Brazil opened its doors to
mostly Italians, Portugal, Spaniards and Germans and later also Asians to help them out with the
coffee cultivation, Recent immigrants come mostly from Argentina, Chile, and Andean countries,
most of these are illegal immigrants.

11

Digging more deep into Brazils Demographics, especially of the most recent year 2014
The country has a population of a total of 202,656,788, with the age structures being as follows :
0-14 years: 23.8% (male 24,534,129/female 23,606,332)
15-24 years: 16.5% (male 16,993,708/female 16,521,057)
25-54 years: 43.7% (male 43,910,790/female 44,674,915)
55-64 years: 8.4% (male 8,067,022/female 9,036,519)
65 years and over: 7.6% (male 6,507,069/female 8,805,247)

As we can notice in the above figures that the aging population and the work aged population in
the highest in the composition of the population of this whole country, if this man power can be
used productively then the country can do wonders in terms of economy and growth.

DEPENDANCY RATIOS
total dependency ratio: 45.8 %
youth dependency ratio: 34.4 %
elderly dependency ratio: 11.3 %
potential support ratio: 8.8 %
here we can notice that the potential support ratio is of 8.8% where as the ideal potential support
ratio for any country is 21.5%, this has lowered the productivity rate of the working aged people
12

as the total dependency ratio is of 45.5% which is almost half of the population and the
maximum dependency ratio is of the youth with the majority of the percentage being 34.4%.

LITERACY RATE
Definition: age 15 and over can read and write
Total population: 90.4%
Male: 90.1%
Female: 90.7%

Literacy in Brazil is a forth coming aspect, as 90% of the total population are literates and equal
ratios of both male and female can read and write

LIFE EXPECTANCY AT BIRTH

Total population: 73.28 years
Male: 69.73 years
Female: 77 years

13

Other than all these parameters Brazil also has a healthy rate of drinking water sources of 97.5 %
and healthy sanitation of 81.3% of the total population.
Thus the challenges faced by the Brazilian demography is its aging population and a lot of
measures have been taken up by the Brazilian government to overcome these challenges, by
funding abroad studies to bring back the skill back into the country, the country has taken certain
well paid pension schemes that are helping to wipe out the poverty problems also other programs
like Bolsa Familia to lift people out from poverty.

14

RUSSIA
Russia is a very large country located in North Asia which extends from the Arctic Ocean south
to the Black Sea and from the Baltic Sea east to the Pacific Ocean. The total area of Russia is 17
million sq km which makes the worlds largest country. Moscow is the capital city, the largest
city of Russia and also the centre for political and finance of the country. St. Petersburg, is
Russia's main seaport where maximum import and export happens. Russia has a diverse
topography having semi-arid deserts and forests and grasslands. The same applies for the
climate. The greater part of the country has a continental climate, but there are also arctic and
sub-arctic zones in the North and subtropical areas in the South resulting in a large variation in
the climate within the country.
Population of Russia -146,500,000

AGE STRUCTURE
AGE

PERCENT

AGE
0-14
16.4%
15-24
10.7%
25-54
45.8%
55-64
13.8%
65>
13.3%
Population distribution: 74% urban, 26% rural
Religions: Russian Orthodox 15-20%, Muslim 10-15%, other Christian 2%
Natural resources: vast deposits of petroleum, natural gas, coal, and iron ore. Many of these
reserves are located far from inhabited areas and Russia's harsh, cold climate makes it difficult to
take advantage of many of the countries valuable resources.

DEMOGRAPHIC CRISIS

Low fertility rate: It's about 1.7 births per woman, where as Russia needs 2.1 per women
for population balance. During 1990s the rate was 1.2 per women, but in 2015 it has
increased to 1.7.

Men dying super young: Life span of a boy born in Russia is expected to be 64yrs.
That's 15 years less than in Germany, Sweden, or Italy.

15

A lot of HIV/AIDS: 700,000 Russians were living with HIV/AIDS in 2013, which has
increased by 5% (2012). The Irish Times reports that in five years, three million people of
the population are expected to be the victims. To add-on to this issues, the Russian
government has announced that it will be banning the import of foreign condoms.

A skyrocketing number of drug addicts: Russia's Federal Drug Control Service

estimates that the country had 2.5 million drug addicts in 2010. In 2013, it has increased
to 8.5 million. The government spending on health sector is ranked near the bottom
among OECD (Organization for Economic Co-Operation and development) spending
only $1474 in 2012 when the average was $3484.

During the 1990s Russians were able to prove that, when they used to feel threatened by the
economic environment, they would think to postpone their family formation. Present situation in
2015 is not as serious as the 1990s crisis, but it clearly is a come-down from the economic
performance of recent years. January 2015 data clearly indicates with rising inflation, slowing
growth, and increasing unemployment which makes us to predict deterioration in the
demographic fundamentals. Unless the Russian government can have a hold on all the present
economic situation, experts suggest that the hard gains of recent years will slowly melt away.

Seeing all these demographic factors, there aren't enough people in the country to earn money
and support for the growth the country. In Russia, the percentage of working age population i.e.,

16

age group between 15 to 60 is collapsing. UN Population Division data clearly says that when
other countries in the world is growing its working age population, Russia isn't. It is also
predicted that the working age population will shrink by 15% by 2060.

17

ENVIRONMENTAL ANALYSIS

18

RUSSIA
ENVIRONMENTAL ANALYSIS.
Russia is a multi-ethnic state with more than 100 nationalities and complex
federal structure inherited from the soviet period. The country is considered
border between two continents. It is the biggest country in the world with
17075400 square kilometre area. Russia is a developing country with rich
history and tradition. Russia also has an strategic location advantage, with its
linkage with both Europe and Asia. Now let us have an environmental
analysis, as this is the primary basis on which we can further expand our
research on any market or country.

POLITICAL ENVIRONMENT
On 12th December, 1993 Russia officially the Federation of Russia with semipresidential republic. They have the same regime today and it is important to
have stability as investors are keen on this factor. The current president is Mr
Dimtitry mededev and Prime minister is Mr Vladimir Putin. One of the key
advantage of Russia is that it is still considered as a country which will
represent the former soviet union at all the international platforms. Despite
being a federation, it is involved between the main government and the local
or region government.
Despite a strong judiciary, the rate of prisoners is high, which is 628 out of
100,000 sometimes resulting in over-crowding of prison. Studies also state
that Russian citizen enjoy limited freedom. Russia has an open foreign
relationship strategy with

144 embassies in different counries and

connection with more thsn 191 countries. Biggest store of nuclear arsenal
with air, sea and land military. Well home grown arms industry. Development
of Military technology maintains its position in the world.

Maintenance of

foreign policy plays a key role in its stability and economic growth. Good
relationship with other countries iis a push factor for investment, resulting in

19

prosperity of the nation. Thus political side plays a major role in attracting
investors.

LEGAL
The transformation of Russia from communist to capitalist also has brought
aa change in its legal system to match the regime. The law is more western,
systematic and market oriented. The law is more based on legislation, thus
still there exists gaps in the system. The corruption rate in the country is
staying at the rate 2.1 , which is high portraying a negative picture to the
investors.
In order to attract more customers, the government has passed a law which
makes no difference between foreign investors and national investors.
Chapter 1 of the Russian civil code covers business organisations and their
organisational founding. The labour code in Russia heavily regulates the
employee labour relationship. The law provides obligatory benefits to the
labour. There are some areas where government has to ease up its policies.
The ownership and the payment process and its mechanism is also a
hindrance currently. There is also need to bring down the corruption levels.
These are some of the data

Business freedomAverage
-

Investment freedom- 25
Average
- 50.2

Trade freedom
Average

Financial freedom- 40
Average
- 48.5

50.7
64.3

- 68.2
-74.8

20

ECONOMIC
The GDP of Russia is mainly driven by natural resources. The two major
natural resources are oil and gas. Russias gdp is 10 th largest in the world.
Russia has the 4th largest agricultural land and its unique geographical
position means it has a distinct advantage of lying between Europe and Asia.
Despite all the advantages, it is not growing at the pace of European
countries as its growth depends on the prices of oil in the international
market.
One of the major problem that Russia faces is over dependency on crude oil.
The government needs to have conventional budget to improve its
productivity of the labour along with suitable monetary policy that makes the
rubble competitive but must ensure the price is not too low.
In order to have strong economy, they must ensure proper education of the
new generation. The change of political regime and economic system has led
to people with open mined thinking. Earlier this was the hindrance which left
Russia behind in progress. Another challenge of Russian economy is
transformation from communism to free market economy. It started the
process late, thus still playing catch to the developed countries in the world,
Russia is a country with abundant resources, high technology and labour,
thus in order to bridge the gap, in terms of development, they must come
out of soviet shadow and must choose the right market for the product.

SOCIAL
From the early 1990s the society underwent a transformation from
autocratic structure to democratic structure, in sync with the regime change.
This change has enlarged the gap between rich and the poor. There is no
classification structure in the society, but there exists stratification based on
wealth. The most common changes in society after transforming into a
capitalistic model is their lavish spending pattern on expensive cars, clothes
etc. there as also been change in mind set and mentality. From 1990, the

21

birth rate is decreasing while the death rate is increasing. In, Europe
continent, Russia has the highest number of HIV and Alcohol poisoning.
The development of social activities and entertainment mark major
improvement in its living standard. Russia is well known with its literature,
music, ballet dance with all the famous artists, musicians, composers and
philosophers such as Leo Tolstoy, Pushkin, Lenin etc. the life in some of the
big cities such as Moscow and St Petersburg is as lively as some of the most
decorated cities in the world. They are also the most sought out destination
for international, seminars, conferences, exhibitions, etc. Russia is a folklore
country which is mystery for everyone e to discover.
While Russians make up more than 80% of population and the orthodox
Christianity is the main religion, there are many ethnic and religious groups,
Muslims are concentrated among the Volga tartars and the Bashikars and in
North Caucasus.

22

INFRASTRUCTURE, NATURAL
RESOURCES, INDUSTRY SCENARIO

23

RUSSIA
INFRASTRUCTUREIn the last decade, Russia has been able to attract more Foreign Direct
investment, beating the likes of India and Brazil, but still lag behind china
reiterating the point, Russia has 3.3%, in the GDP share just behind china
(3.7).
The lack of investment on infrastructure over the last 2 decades has cost
Russia dearly as it is languishing down in 93 rd position globally.in quality of
global infrastructure in the Global competitiveness report 2013-2014
prepared by the world economic forum..
Only saving grace is the quality of infrastructure at highest level,31 all the
other areas Quality of road and highways , quality of port infrastructure,
quality of air transport infrastructure and quality of air supply needs drastic
improvement.
There are many strategies and programs dedicated to infrastructure
development in Russia. One of the agencies conducted an analysys and
came up with a map of forthcoming projects, classifying them according to
number of aspects. Overall they came up with 325 projects in the last five
years. The majority 51% are planned to realized in the period from 20152020 with some ma extend to 2030.

SECTORS

24

The largest sum of money is planned for railway transport infrastructure

development, which mainly includes the projects set out in the programme
of high speed railway development through 2030.
The second biggest being planned infrastructure of roads and bridge
construction. This mainly encompasses projects under jurisdiction of state
corporation avtodar and those in Russian transport strategy through 2030..
The greatest quantity of projects is expected to be realized in power and
utilities segment, which includes power supply, water supply and gas supply
infrastructure
Projects location.
Most investment projects are located in western Russia, which has higher
population density and features more economic activity than eastern part of
the country.
Positive impacts of infrastructure development
Meanwhile the positive impact of infrastructure development in Russia could
be

Lower cost of production

Increased net output for the national economy.
Widening labour areas.

The overall effect of infrastructure investment improves productivity, key

goal for companies operating in Russia.

NATURAL RESOURCES
Russia is a large country spanning across two continents with a rich and diverse geographical
diversity. Thus Russia has a wide variety of natural resources. The traditional centers of
economic activity are almost exclusively located in the more hospitable European part of Russia.
Though its hard to access, Siberian heartlands has a vast store of natural resources like coal and
natural gas.

25

Russia is one of the world's richest countries in raw materials, majority of which are important
inputs for an industry driven economy. Russia is responsible for around 20 percent of the world's
production of oil and natural gas and owns large reserves of both fuels. This abundance has made
Russia practically self-sufficient in energy and a major exporter of fuels. In fact, Russia was said
to contain nearly 30% of the entire worlds natural resources.

26

Russia owns rich reserves of iron ore, manganese, chromium, nickel, platinum, titanium, copper,
tin, lead, tungsten, diamonds, phosphates, and gold, and the forests of Siberia contain an
approximate one-fifth of the world's timber, mainly conifers. The iron ore deposits of the Kursk
Magnetic Anomaly, near the Ukrainian border in the southwest, are believed to contain one-sixth
of the world's total reserves. Other large iron ore deposits are located in the Kola Peninsula,
Karelia, south-central Siberia, and the Far East. The largest copper deposits are located in the
Kola Peninsula and the Urals, and lead and zinc are found in North Ossetia.
The vast oil, gas,coal, and timber reserves of Siberia and the Russian Far East make Russia rich
in natural resources, which dominates the Russian exports.In specific, oil and gas exports
continue to be the main source of national income.
Russia is also one of the leading producers of gold and minerals. Majority of Russias export to
US consists of mineral raw materials. Russia is the largest diamond-producing country in the
world, estimated to produce over 33 million carats annually.

27

One of the main issues associated with the abundance of natural resource Russia has is the there
is a decrease in manufacturing activity as it tries to focus more on effective resource exploitation
to drive exports. Its manufacturing and service sectors arent particularly competitive by world
standards (very few people in the world are buying Russian cars) but they do exist. In fact, even
though Russia relies heavily on its oil and energy export, the reliance is still not as heavy as in
many other major producers of oil and fuel products.

INDUSTRIAL SCENARIO
According to the data obtained in 2015, total industrial production grown by 0.9% in comparison
to January 2014. Considering the pressure and crisis that Russia is under at the moment its
actually a decent increment in the figure. Looking below the total level of industrial production
to the sector-by-sector breakdown, we can start to recognize few problems. The first is that
manufacturing actually shrank by 1% on a year-over-year basis. Whereas the extraction of
natural resources increased by 1.5% and the output of gas, water, and electric utilities increased
by 1.2%.
Looking in product to product data we can say that Russias emergence as a cheese superpower
35.5% year-over-year growth and also as the worlds new leader in canned vegetables which
increased by 47% since January 2014. Many other food processing industries in Russia also had
a strong year. Russians have a taste for canned meat, because the sales has increased by about

28

15% more there was last January 2014. Due to huge drop in the currency and constrained supply
from Europe, food prices increased by almost 20%.
The sanctions and a contraction have multiple advantages for Russia, as they encourage
companies to turn to domestically produced goods and increase the economy. The sanctions
include restrictions on lending to major Russian state-owned banks, defence and oil companies.
Mr.Putin says that no matter what, as long as sanctions prevails, the possible destabilization in
the Russian economy and severe collateral damage in Europe will steadily increase.
In pre-sanctions stage Russia, due to steady oil demand in 2015-2015 growth was expected to be
weak, whereas institutional weaknesses reflected a poor investment climate. In early 2014,
markets projected growth was 1.7 percent and 2.3 percent in 2015, with an inflation rate of 5%
and a policy rate of 5%. After sanctions, the Russian economy recovered contracting by 3.5% in
2014.
To intensify structural economic reforms President Putin needs a Ukraine deal not because of any
external pressure but because to safe guard its future. As the price of oil is increasing, the
immediate step to be taken would be jubilation in the markets which are already waiting for
discounted Russian equity relative to other emerging markets. In future, the sanctions approach
can only deepen the stagnation in Europe, nullify the effectiveness of the European Central
Bank's quantitative easing, impair the lingering recovery in the U.S.

29

BRAZIL
INFRASTRUCTURE
Infrastructure refers to transport, communication systems, water, power, and public institutions
(like schools, hospitals and prisons).

ROADS
Roads remain the primary means of transport in and around Brazil both for passengers and for
freight purposes. The Brazilian highway system is one of the largest in the world. Part of the
motivation behind this expansion and development has also been to link the industrial sector with
the less development has also been to link the industrial sector with the less developed parts of
the country by road. It is estimated that there are 1.2 billion people travelling the highways of
Brazil every year.
RAIL
Using railways as a means of transport began in the 1800s in Brazil. There are four rail gauges
in the country.
These are
1.
2.
3.
4.

Broad gauge
Narrow gauge
Dual gauge
Standard gauge

AIR
30

Brazils air transport infrastructure is relatively well developed. In fact, there are about 300
airports in the country, of which around 50 are major commercial ports. In turn, 21 of these are
international airports. There are more than 115 million passengers flying into, out of and around
Brazil every year.
TELECOMMUNICATIONS
Telecommunications services in Brazil are well developed and efficient. This industry includes
landlines as well as mobile services, television broadcasting, radio broadcasting, and
computer/internet access. More than 45% of the Brazilian population has access to the internet.
The telecommunications infrastructure is fairly modern, particularly in central-south Brazil.
However, the north and north-west are drastically less developed.
WATERWAYS
With all of the rivers in Brazil, there are approximately 50000 km of navigable waterways in this
country. There are about 15 seaports or harbours along the coast, and there are two on the
mammoth Amazon River.

NATURAL RESOURCES
Natural Resources have helped Brazil to drive it financial status in improving trend. Eradicate
rural poverty, Brazil government is taking care of its natural resources and improve the economic
status of Brazil by preserving them. This should also increase the per capita income and GDP of
Brazil.
Bauxite, gold, iron ore, manganese, nickel, phosphates, platinum, tin, rare earth elements,
uranium, petroleum, hydropower and timber. Brazil having an ideal agricultural climate, has a
healthy export trade in coffee, sugar, soya beans, textiles and electrical equipment. The country is
rich in ethanol, ore, iron, gemstones, steel and oil. Recent discoveries of oil sources that could
potentially hold more than 9 billion barrels of oil is helping to confirm Brazil as a major new oil
exploration frontier.
The natural resources coal, natural gas and crude petroleum, energies are drawn using which
major business activities are been made possible. The agricultural products been produced here
should also be included under Brazil Natural Resources. Some of the major agricultural products

31

are Sugarcane, Corn, Potatoes, Cocoa, Peanuts, Cassava, Rice, Beef, Cattle, Pork, Soybeans,
Oranges, Wheat, Dry Beans, Coffee, Cotton, Tomatoes.
Green fuels, such as bio-diesel and ethanol made from sugar cane, is a growing industry where
Brazil is expected to become a major leader in world markets.
Brazil Income from natural resources, percent of GDP, The World Bank provides data for Brazil

from 1987 to 2013 is as shown below

Brazils land based natural resources and industries are well depicted in the map below. What
you dont see here is a significant amount of land based oil exploration. It appears at this reading
that the most significant oil reserves are off shore.

32

INDUTRIAL AND AGRICULTURAL ACTIVITIES IN

BRAZIL

33

INDUSTRIAL SCENARIO
Brazil is highly dependent upon commodity exports, coffee, automobiles, steel, cement and
crops. In 2014, it exported US$243bn of goods and imported US$242bn. By the service sector
(71%) employed 111 million, while agriculture employed 15.7% and industry employed the
remaining 13.3%. But the unemployment rate fell from 5.4% in 2013 to 4.8% in 2014. 21.4% of
the Brazilians remained below the poverty line.
According to the media, corruption is playing the crucial role in Brazilian economy which is
widespread. Brazilian economy had the corruption cost ofUS$41bn/yr. It is also said that a
person can possibly run a business without giving bribes. Though 69.9% of Brazil-based
companies have reported that corruption is a large business constraint, efforts are ongoing to
reduce its influence.
Industrial production dropped 0.9% mom/sa in February, slightly better than the estimate (-1.6%)
and the median of market expectations (-1.5%). Output is now at its lowest level since 2009. The
statistical carryover into 1Q15 is -1.8%. Production retreated in all four large economic
categories. Capital goods posted the sharpest decline (- 4.1%). Intermediary goods fell slightly (0.1%), while durable consumer goods (-0.4%) and semi-durable and non-durable goods (-0.5%)
dropped for a fifth consecutive month. The production increases in 12 out of 24 activities (50%
diffusion). Production fell in the auto (-1.7%) and tobacco (-24.0%) industries. Production
expanded in mining (0.9%), metals (2.9%) and textiles (4.6%). Production of construction
material advanced 1.6% (according to our seasonal adjustment), marking a second consecutive
increase. However, the output level is still low, and the statistical carryover into 1Q15 is - 0.9%.
Confidence in the services sector dropped 12.1% m/m in March. The decline was determined
both by the current situation (-14.1%) and expectations (-10.7%) components. This is the
third consecutive decline of the index, which fell to a new historical low. The series started in
2008.
The trade surplus reached $458 million in March, exports totaled to $17 billion, advancing
10.3% mom/sa, while imports sum $16.5 billion falling 5.3% mom/sa. Year-over-year and
adjusting for the number of working days, exports declined 16.8%, while imports dropped
18.5%. Over 12 months, the trade deficit receded from of $3.8 billion to $3.4 billion. The

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annualized seasonally adjusted three-month moving average improved to a surplus of $487

million from a deficit of $5.8 billion.

SWOT ANALYSIS
AND RECOMMENDATIONS

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RUSSIA SWOT ANALYSIS

STRENGTHS

A large domestic market available internally

Easy Availability of high quality labor.
Government does not do any radical reforms, it continues the on-going projects, policies

and reforms providing political stability

Extremely rich in natural resources like coal, oil and minerals
Vast geographical diversity and land resources
Low sovereign debt levels and sound external liquidity situation

WEAKNESS

High amount of corruption with heavy presence of organized crime

Too complex tax system and lethargy in government bureaucracy
Lots of Russian business are offshoring driving away wealth to foreign countries
Development concentrated near capitals of Regions
Dependence on the global energy landscape as its oil exports drive its economy
State interventionism Weak institutions

OPPORTUNITIES

Large consumer market with rising middle class

Improvement of transparency and corporate governance
Unexplored assets in Russian Far East that need better infrastructure
Improving investment climate to attract FDI
Opportunities to develop strong relations with EU

THREATS

Positive economic developments are mostly attributable to high energy prices and fall in

energy prices could undermine any growth

Political tensions such as the Ukraine crisis has undermined relations with EU
Shrinking population due to emigration of population is another major threat

BRAZIL SWOT ANALYSIS

STRENGTH
1. Vast natural resources and rich bio diversity which can be leveraged for economic
growth.
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2.
3.
4.
5.
6.

High tourist potential with exotic locations beaches and tropical rain forest.
Relatively diversified economy and large domestic market.
Large stock of foreign reserves.
Good human resource and cultural diversity that translates to large labor pool.
Good environment for entrepreneurship.

WEAKNESS
1.
2.
3.
4.
5.
6.
7.

High crime rate and organized crime based violence and drug abuse.
Pollution and environmental problems from rapid industrialization.
Racial segregation
Ineffective government policies that has resulted in economic down spiral.
Large public debt.
Development still restricted to urban centers like Sao Paulo and Rio De Janerio.
Current account deficit

OPPORTUNITIES
1. Trade links with India and other BRIC countries
2. Increase in oil pools discovered in Brazil is making it as an emerging and potential oil
producer.
3. Large capacity to produce and export coffee can be leveraged.
4. Institutional support for IT service industry
5. Can become the leader of the south American economies.
THREATS
1.
2.
3.
4.
5.

Social inequalities can alienate large segment of the populace.

Lack of structured labor laws.
Intellectual property protection, privacy and data security issues
Organized crime can destabilize the government
Political instability has caused the current sluggish economic growth

RECOMMENDATIONS FOR RUSSIA

We propose the following options for investors entering the Russian Market:
1) Indian investors in our opinion has three option of entering the Russian market: Exporter,
Joint venture and wholly owned subsidiaries. Since Russian is desperate to increase its foreign
direct investment and jump start the economic growth, Indian investors can consider investing
in joint firm, joint ventures models.
As per the SWOT analysis of Russia, it is ideally suited for Indian investors to invest in certain
industries such as:

Agriculture

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Petroleum Processing

Electric and Hydro-Electric Power Generation

Mining (coal, some metal ores, minerals used, for example, in electronics and the
production of pigments, as well as in other applications.

2) There is a great opportunity in manufacturing industries such as automotive industries and

technology based industries from India to penetrate in to the Russian market, considering that
the Russian relations with US and EU has become cold.
There is pressing need in the Russian market for fodder production technologies, fertilizers,
soils, humic acid and anything having to do with land development and improvement. In
addition, recent generation machines and new technologies are also interesting. Here leasing
and commodity credit is possible.

RECOMMENDATIONS FOR BRAZIL

We propose the following options for investors entering the Brazilian Market.
1) Indian investors Hero Motor Corp are planning to enter Brazil market for 2 wheelers.
According to them Brazilian market is an attractive market place for automotive sector and
considering setting up a plant to manufacture 2 heelers. This is also feasible due to presence of
large and latent human resource.
2) There is a great opportunity for venture and wholly owned subsidiaries due to presence of
large domestic market and environment stimulating entrepreneurship.
3) Indian hotel industries can consider setting up franchisee models, considering Brazil has
international tourist locations.

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REFERENCES
http://www.livemint.com/Companies/TOzovd3SSK88tIxA3JS4EJ/Hero-MotoCorp-to-enterBrazil-twowheeler-market-by-2016.html

http://thebrazilbusiness.com/article/6-tips-for-indian-businesses-in-brazil

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