INDIAN INSTITUTE OF MANAGEMENT SIRMAUR

International Business Environment

Prof. Bibek Ray Chaudhuri

Assignment 2
Group no. 1

Submitted By:

Anirban Das- MBA07009

Arya Noughriya- MBA07019
Mihir Balsara- MBA07022
Gayatrri M.D- MBA07040
Ajit P Chaudary- MBA07185
 MPI
With the increasing tendency of globalisation, global marketing has become increasingly crucial.
Marketers face the issue of deciding which overseas markets to penetrate and the proper marketing
techniques for those countries when faced with too many options.

The purpose of this research is to rank the top economies’ market potential and provide advice
to businesses looking to grow worldwide.

The International Business Centre at Michigan State University is conducting this indexing study to
assist corporations in comparing potential markets across multiple dimensions. On a scale of 1 to 100,
eight dimensions are chosen to indicate a country’s market potential. The dimensions are measured
using various indicators and are weighted in determining their contribution to the overall Market
Potential Index (MPI).

2021 2020 2019 2018 2017 2016

Chile 27 46 47 37 43 45
Argentina 88 83 83 69 67 53
Brazil 41 56 51 43 35 20
Table 1: MPI rankings year on year

Inference: We can see that the MPI ranking of Argentina has been drastically falling over the years
given the economic uncertainty, interventionist policies, high inflation, and persistent economic
stagnation. Does suggesting a poor destination according to the overall MPI ranking. While looking at
Chile and Brazil, both countries have done fairly well with Chile showing remarkable improvement in
2021 with a ranking of 27.

Medical Device MPI

The Industry Specific Market Potential Index (MPI) compares 89 nations with the highest
worldwide Gross Domestic Product (GDP) on multiple characteristics in order to rank them
based on their market potential for various industries.

These countries are compared on six dimensions: size, growth rate, capacity, market openness,
existing logistics infrastructure, and national risk (political, economic, and business). For each
industry, a new set of indicators is identified to measure each dimension.
 Chile Brazil Argentina
Market Size Index 3 23 4
Market growth rate 53 42 25
index
Market Capacity Index 35 42 30
Market Openness 66 49 36
Index
Logistics 47 30 32
Infrastructure Index
Country Risk Index 76 39 32
Overall Index 44 44 28
Overall Rank 28 34 81
Table 2: Medical device rankings MPI

Inference: Looking at the overall rank given to the three countries, Chile is at 28 doing fairly better
than the other two. While Argentina is the lowest at 81. Though the index suggests mostly an export
study rather than an investment study. But, it gives us a idea of the market in terms of selling products
which also is a crucial part when investing in a country so the parameter is also considered

Doing Business Indicator Rankings

Doing Business is based on the idea that economic activity is aided by clear laws: norms that allow for
voluntary exchanges between economic players, establish solid property rights, make commercial
disputes easier to resolve, and protect contractual partners from arbitrariness and exploitation. When
such rules are efficient, transparent, and accessible to people for whom they are meant, they are far
more effective in supporting growth and development. Rules create an atmosphere in which new
entrants with ambition and inventive ideas can start a business, as well as an environment in which
established businesses can invest, develop, and generate new jobs.

This is a very important parameter and gives us an overall idea of the country for doing business. It is
not sector specific. But, the parameter is very important as to the fact that it judges the openness of
a country for doing business. And, while we pour FDI, as in our case which is pharmaceuticals- which
involves manufacturing as well as selling in the host country. Doing business parameters are extremely
crucial.

Doing Business covers 12 areas of business regulation. Ten of these areas—starting a business, dealing
with construction permits, getting electricity, registering property, getting credit, protecting minority
investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency—are
included in the ease of doing business score and ease of doing business ranking.
 Chile Brazil Argentina
Ease of doing business 59 124 126
Starting a business 57 138 141
Dealing with construction permits 41 170 155
Getting electricity 40 98 111
Registering property 63 133 123
Getting credit 92 104 104
Protecting minority investors 51 61 61
Paying taxes 86 184 170
Trading across borders 74 108 119
Enforcing contracts 54 58 97
Resolving insolvency 53 77 111
Table 3: Doing business indicators for the three countries

Inference: Looking at the table, we can see in all the parameters Chile is far better than Argentina and
Brazil. The country becomes a great investment destination for the firm, especially in regards to
manufacturing.

Country Commercial Guide

The Nation Commercial Guides (CCG) are reports issued by US Commercial Service offices around the
world that give extensive commercial information for US enterprises interested in doing business in a
particular country. They cover approximately 150 nations, describing market circumstances,
possibilities, rules, and business customs. As a result, they're a great place to start learning everything
you need to know about doing international business.

Given the Pharmaceutical Sector as the choice of research we focus on key criteria which are most
relevant to the sector. Looking at the inferences for all the three countries we make an informed
decision as to our FDI country selection.

Investment Climate Statement

Since we are planning on FDI in one of the three countries. Investing climate is an important factor as
this will determine the return or the value which can created out of the investment. And maximizing
it will be the goal of any firm.

Argentina

Argentina offers investment and trade opportunities in agriculture, energy, health, infrastructure,
information technology, and mining, among other sectors. However, the country's potential has been
hampered by economic instability, interventionist policies, rising inflation, and continuous economic
stagnation. Argentina entered a recession in 2018, the same year that then-President Mauricio Macri
agreed to a three-year $57 billion Stand-By Arrangement (SBA) with the International Monetary Fund
(IMF).
A high and unpredictable tax burden, as well as inflexible labour rules that make responding to shifting
macroeconomic conditions more difficult, are regularly cited as barriers to additional investment in
Argentina by both domestic and foreign enterprises.

Indicator: Negative
Brazil

According to the World Bank, Brazil is the second-largest economy in the Western Hemisphere, after
the United States, and the ninth-largest economy in the world (in nominal terms). Brazil was ranked
the sixth-largest destination for worldwide Foreign Direct Investment (FDI) flows in 2019, according
to the United Nations Conference on Trade and Development (UNCTAD), with inflows of $72 billion,
up 26 percent since Brazil revealed its privatisation plan the same year. Brazil has received more than
half of South America's total FDI in recent years, and the United States is a major foreign investor in
the country.

However, analysts claim that high transportation and labour expenses, as well as limited domestic
production and persistent political uncertainty, are deterring foreign investment in Brazil. Foreign
investors also cite concerns over poor existing infrastructure, relatively rigid labor laws, and complex
tax, local content, and regulatory requirements; all part of the extra costs of doing business in Brazil.

Indicator: Neutral
Chile

Despite Chile's attractiveness as a foreign investment destination, there are still hurdles. Concerns
have been raised regarding the potential impact of legislative and constitutional amendments
proposed in reaction to social unrest and the epidemic on investments in the mining, energy,
healthcare, insurance, and pension industries.

Despite a broad regard for intellectual property rights, Chile has not completely met its IP
commitments under the US-Chile Free Trade Agreement. Large project approvals have become
increasingly time-consuming and unpredictable, especially in cases involving political sensitivities, due
to environmental permitting processes, indigenous consultation obligations, and lengthy judicial
proceedings. The present administration has made courting foreign investment a priority and has
taken steps to simplify the procedure.

Indicator: Neutral

Selling Products and Services

As we are doing our research mostly for Pharma sector. The factors important for such product and
service from a selling perspective are:

1. Protecting Intellectual Property- In this sector, there is a lot of importance given to the
Intellectual property rights. And, if investing in a foreign country, the firm should have
assurance for its safety in the field.
2. Selling to the Public Sector- As and when it comes to pharmaceutical products, government is
one of the largest buyer of it. As a firm who is planning to setup its base elsewhere, it needs
to have the governments as one of their key bulk buyers.
Protecting Intellectual Property

Argentina

The National Institute of Industrial Property of Argentina ("INPI") accepts patent applications and
trademark registrations. Local attorneys or IP consultants who are experts in Argentine law should be
consulted.

Argentina has been on the United States Trade Representative's Special 301 priority watch list since
1996 for inadequate intellectual property protection and enforcement.

Indicator: Negative
Brazil

Since 2007, Brazil has been on the Special 301 Watch List of the United States Trade Representative.
This designation indicates serious worries about high levels of counterfeiting and piracy in Brazil,
particularly internet piracy, as well as concerns about extended delays in patent examination, with a
reported average pendency of 7.9 years for patents.

Indicator: Negative
Chile

The implementation of some intellectual property (IP) duties under the US-Chile Free Trade
Agreement continues to cause major concern in the United States (Chile FTA). In 2018, Chile made a
step forward by approving laws that established criminal penalties for the importation, marketing,
and distribution of decoding devices designed to steal encrypted satellite signals. The US has
requested Chile to define the entire scope of activities that are illegal under the law's implementation.
The US also wants Chile to offer remedies or penalties for knowingly receiving or further disseminating
illegally decoded encrypted program-carrying satellite signals, as well as the possibility for parties with
a stake in stolen satellite signals to file a civil action.

Indicator: Negative

Selling to the Public Sector

Argentina

All federal public entities (including autonomous or decentralised organisations) are subject to
procurement requirements, with the exception of federal banks. Direct purchases of less than
AR$1,300,000 can be made by the government. Acquisitions of AR$1,300,000 to AR$6,000,000 usually
necessitate competition, whereas purchases of AR$7,000,000 or more usually necessitate an open
public tender.

Domestic items are given preference. The provenance of the commodities is defined by the
nature/composition of the items themselves, not by the manufacturing company's country or
ownership.

Indicator: Negative
Brazil

According to GOB procurement law (8,666), which was approved in 1993, pricing has traditionally
been the most important element in selecting suppliers, and the GOB is prohibited from distinguishing
between domestic and foreign-owned enterprises during the tendering process.

However, a recent reform has made it simpler for foreign corporations to bid on government
contracts. Foreign corporations will be able to bid without first establishing a local presence as of
October 2020. A foreign corporation will only require a local partner at the time of contract signing.

An international corporation must grasp the requirements and procedures of Brazilian legislation in
order to compete successfully in public procurement, bidding, concessions, or auctions in Brazil.

Indicator: Positive
Chile

When it comes to getting a government contract, price, payment terms, and financing can all play a
role. Many governments borrow money from the Multilateral Development Banks to fund public
works projects (MDB). The International Trade Administration (ITA) of the United States Department
of Commerce (USDOC) has a Foreign Commercial Service Officer assigned to each of the five
Multilateral Development Banks (MDBs): the African Development Bank, the Asian Development
Bank, the European Bank for Reconstruction and Development, the Inter-American Development
Bank, and the World Bank.

Indicator: Neutral

Leading Sectors for US Exports & Investments

Argentine

Medical Technology is a best prospect industry sector for this country.

Most investments have been concentrated on strengthening hospital infrastructure, including the
development of modular hospitals and lab facilities, as well as increasing supply of medical equipment,
consumables, and diagnostic tests, since the pandemic began in 2020. In 2021, demand for COVID-19-
related products will remain concentrated, with vaccination purchases dominating. Personal
protective equipment, ventilators and oxygen respiratory equipment, consumables, and clinical
laboratory products including PCR diagnostic reagents and equipment are also in high demand.

E-health technologies and middle-to-high-end technology items, such as electro-diagnostic equipment

and other specialist medical equipment and gadgets that do not compete with locally created ones,
remain additional potential.

The Argentine government and some international loans from multilateral development banks will
continue to provide funding to support government programs particularly concentrated on primary
care, maternal care, and healthcare infrastructure under a national universal healthcare coverage
plan.

However, due to scarcer budgets for both public and private sectors and the local market
macroeconomic scenario, product export potential will be determined on a case-by-case basis.
Indicator: Neutral
Brazil

Healthcare is the best prospect industry sector for this country.

Brazil is Latin America's largest healthcare market, spending 9.1% of its GDP on healthcare. A total of
63 percent of the approximately 6,642 hospitals are private. There will be roughly 532,645 hospital
beds (21,000 for COVID-19 patients only) in 2021, as well as 88,000 healthcare auxiliary services,
502,000 physicians, 331,000 dentists, and 89,000 drugstores.

Brazil's Unified Healthcare System (SUS) is the primary health-care provider for at least 70% of the
population. Aside from medical diagnosis and treatment, the public system offers free medication for
various chronic conditions and promotes national vaccination programmes, which are mostly targeted
at the elderly and children. Moreover, the Ministry of Health has been regulating and promoting the
spread of complementary and integrative practises in the public sector, mostly at the local level.

Indicator: Positive
Chile

Healthcare is the best prospect industry sector for this country.

Chile's annual healthcare expenditures amount to about 5% of GDP. By the end of 2021, public
healthcare spending is estimated to reach $13.5 billion, up 8.9% from 2020. In 2021, spending on
secondary and tertiary health care is expected to be $8.7 million.

In the last ten years, the number of public and private healthcare centres in the country has increased
to 3,814 with investments in hospitals and outpatient centres. Private healthcare facilities account for
40% of crucial bed availability. Clinica Alemana and Clinica Las Condes are two private healthcare
clinics in Chile that have received Joint Commission accreditation.

Indicator: Positive

Chile Argentina Brazil

Investment Climate Neutral Negative Neutral
Statement
Selling Products & Neutral Negative Neutral
Services
Leading Sectors for Positive Neutral Positive
Exports &
Investments

Table 4: Summary for country commercial guide

Inference:

In terms of the investment climate, both Brazil and Chile have their problems but aren’t as concerning
as that of Argentina. Economic uncertainty, interventionist policies, high inflation, and persistent
economic stagnation has been preventing the country from maximizing its potential. Also the
complaint of high tax burden which is an aftermath of the bond restructuring makes the investment
climate not so suitable for business houses.
 In terms of Selling Products and Services, two parameters were taken into consideration namely-
Protecting Intellectual Property and Selling to the Public Sector. While we see all the three countries
have their problems with Protecting Intellectual property rights and is a concerning factor with
Argentina and Brazil under special 301 priority watch list. In terms of selling to the public sector, Brazil
is an attractive destination and new reform has made it easier for foreign companies to compete in
public sector bids. The country has worked on improving the accepting of foreign company tenders.
Chile has a lot more to work, and as far as Argentina is concerned it has more domestic preference
mentality and prefers domestic firms over international ones. This kind of ideology might impact our
pharmaceutical firm in gaining government tenders as compared to the other two destinations.

In terms of leading sectors for export and investments for Argentina it is of medical equipment, while
for the other two it is healthcare. We can see from the transcript above that, for both Brazil and Chile
government is facilitating the investment in healthcare sector which eventually becomes an
opportunity for our pharmaceutical firm. Though Brazil is doing better, but Chile provides more
opportunity in the long run.

From the parameters of country commercial guide, which provides better insight into the sector of
our choice, we see Chile and Brazil are both an attractive destination for the investment. Brazil being
better amongst the three. But, Chile no further down in the parameters as well.

Country comparator tools

Health

Chile has the lowest mortality rate while the highest life expectancy rate, even the fertility rate is the
highest- It shows a better focus on overall health of the country.

Economy

Chile has the highest current account balance. The lowest inflation rate is for Chile while that of
Argentina is quite alarming. GDP per capita PPP is highest for Chile. This shows that Chile is a more
stable economy amongst the three.

Infrastructure
Brazil is the best amongst the three, which can also be attributed to the overall geographical area of
the country.

Trade and Investment

Chile has the highest FDI currently.

Inference: In terms of health, Economy, and trade investment (specifically FDI) we see Chile is doing
better than the rest of the two. For infrastructure Brazil is showing higher numbers. But, we cannot
also discount the fact that Argentina and Brazil has geographical area of 2,780,400 km2 and 8,514,215
km2 while for Chile it of only 756,102 km2. Thus suggesting that the higher no. of Brazil might not
suggest the complete picture as the density for Chile is much higher compared to the other two.

Trade Statistics
Chile Brazil Argentina
Exporter Rank 42 26 44
Importer Rank 44 27 49
Trade Balance Rank 40 9 22
Table 5: Trade Statistics overall ranks

Inference: In the Trade statistics department Brazil is far better than the other two countries.
 CONCLUSION
We have used various Global Edge and external tools to come to a conclusion for our FDI destinations.
The countries have different strengths and weaknesses. But looking at the overall data we can see,
Chile is a better location as it has better rankings in some of the crucial factors, namely- MPI rankings,
Medical MPI rankings, Doing Business indicator, and Country comparator tools. Also, in commercial
guide factors focused to pharmaceuticals it is ranked second and has fared better in most of the
parameters. Brazil is the next destination where we can go ahead for investment after Chile. It did well
in most of the parameters with a great rank in Trade statistics and Commercial guide factors
(Pharmaceutical specific). Argentina is the least preferred destination as we can see there are many
problems which the country is going through. Be it in terms of higher tax burden of the various
rankings, the country needs to work on a lot of factors to be an attractive destination for our FDI.

With the level of uncertainty prevailing due to the current Covid Pandemic. Chile will be the best
investment destination, it is supportive to the foreign firms and has better economic health than the
other two.

References:

1. https://www.worldbank.org/en/programs/business-enabling-environment
2. https://www.export.gov/article?series=a0pt0000000PAtOAAW&type=Country_Commerci
al__kav
3. https://globaledge.msu.edu
4. https://globaledge.msu.edu/comparator
5. https://globaledge.msu.edu/countries/rankings#BN-CAB-XOKA-CD