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1、 Country Analysis Report: Brazil Published 07/2011 Datamonitor. This brief is a licensed product and is not to be photocopied Page 1 OVERVIEW Catalyst This profile analyzes the political, economic, social, technological, legal, and environmental (PESTLE) structure in Brazil. Each of the PESTLE facto
2、rs is explored on four parameters: current strengths, current challenges, future prospects, and future risks. Summary Key findings Brazil has taken a lead in improving South American trade relations, but corruption continues to be a problem Brazil is at the forefront of the international stage, and
3、has made considerable progress in raising the profile of South America and encouraging trade within the region. The country has played an important role in establishing the Southern Common Market (Mercado Comum do Sul, shortened to Mercosul), along with Argentina, Paraguay, and Uruguay. Mercosul has
4、 been successful in promoting increased trade among its members as well as with the rest of the world. The country was also at the forefront of the formation of the Union of South American Nations (Unio de Naes Sul- Americanas, shortened to Unasul) to promote regional integration. The country also p
5、lays an active role under the BRIC grouping (Brazil, Russia, India, and China). The incumbent government is expected to continue with former President Lulas foreign policies, including a permanent seat on the UN Security Council, and to strengthen the role of emerging economies in the global economy
6、 and politics. However, the country still suffers from high levels of crime and corruption, which can act as a deterrent to trade. Many governors and ministers in the Lula administration were charged with corruption. According to Transparency Internationals Corruption Perceptions Index for 2010, Bra
7、zil is ranked 69th out of 178 countries. Corruption is perceived to be widespread in Brazil, and businesses are expected to encounter corruption while bidding for government contracts. COUNTRY ANALYSIS REPORT Brazil In-depth PESTLE Insights Publication Date: July 2011 Overview Country Analysis Repor
8、t: Brazil Published 07/2011 Datamonitor. This brief is a licensed product and is not to be photocopied Page 2 The Brazilian economy is growing, but faces the challenge of rising inflation and economic disparity The countrys economy grew by 7.5% in 2010, buoyed by growth in gross fixed capital format
9、ion, higher domestic consumption, and stable inflation. The industrial sector grew by 10.1% in 2010, agriculture grew by 6.5%, and services grew by 5.4%. Gross fixed capital formation grew by 21.8%, while household and government consumption grew by 7% and 3.3%, respectively. According to Datamonito
10、rs forecasts, the Brazilian economy is expected to slow down in 2011, with a gross domestic product (GDP) growth of 4.3%. The country has also planned massive investments in infrastructure. However, rising inflation and economic disparity could negatively affect Brazils growth. The countrys economy
11、is very susceptible to price rises on food and fuel. With increasing domestic consumption and high oil prices, inflation is likely to remain a challenge. According to the United Nations Development Programmes (UNDP) Human Development Report 2010, the countrys income Gini coefficient for 200010 was 5
12、5, which shows high levels of inequality in the country. There is a huge disparity between the rich and poor. Millions of people in the country are still living in poverty in the ever- expanding favelas (slums) with very little access to healthcare and electricity. These slums are also fertile groun
13、ds for drug trafficking and other criminal activities. The country needs to concentrate on all-round development. Increases in social spending put pressure on the social security deficit The government has announced the second phase of its My House, My Life program, and aims to invest BRL71.7bn ($44
14、.2bn) in building 2 million homes by 2014. The government has also announced a BRL5bn ($3.1bn) investment under the Sanitation Growth Acceleration Program covering 4,855 municipalities with less than 50,000 inhabitants. The government also announced a new definition under which citizens earning BRL7
15、0 ($45) or less a month were qualified as living in extreme poverty. The definition means that 16.2 million citizens will be covered under the Brazil without Poverty program, which aims to eradicate extreme poverty by 2014. However, this increase in social spending is expected to place further stres
16、s on Brazils already significant social security deficit. The government has initiatives to improve R Programa Brasil Alfabetizado) aims to eradicate illiteracy by 2017. The country needs to provide better training and education for its workforce to meet the increasing demand for qualified workers i
17、n the industrial sector. Overview Country Analysis Report: Brazil Published 07/2011 Datamonitor. This brief is a licensed product and is not to be photocopied Page 3 VAT is efficiently implemented, but the complicated tax system in the country needs to be reformed Brazil was one of the first countri
18、es in the world to implement value added tax (VAT). The federal VAT (IPI; Imposto sobre Produtos Industrializados), is imposed on the manufacture and import of goods. Exports are exempted from paying IPI. The state VAT (ICMS; Imposto sobre Circulao de Mercadorias e Servios) is a tax levied by respec
19、tive states on the circulation of goods and the provision of inter-state and inter-municipal transportation and communication services. While IPI is charged at an average rate of 20%, ICMS is charged at rates between 7% and 25%. However, the countrys complicated tax system increases compliance costs
20、 for the tax payers, while increasing the scope for tax evasion. In 2010, the senate suggested the elimination of various taxes like IPI, COFINS (Contribuio para o Financiamento da Seguridade Social), PIS (Programa de Integrao Social), CIDE (Contribuio de Intervnio no Dominio Econmico), FUST (Fundo
21、de Universalizao dos Servios de Telecomunicaes), FUNTTEL (Fundo Para O Desenvolvimento Tecnolgico Das Telecomunicaes), and ICMS, and merge all internal taxes on goods and services into a single national VAT. However, the tax reform is yet to be implemented. In the 2010 Latin Tax Index from the Latin
22、 Business Chronicle, the countrys bad tax regime was ranked the worst in Latin America Brazils focus on conservation has been undermined by environmentally damaging developments Conservation of the worlds largest rainforests, which stretch across the Amazon basin, is a key goal for the country. The
23、Brazilian government has undertaken multi-billion-dollar projects to address deforestation, reforestation, and conservation of the forests. The Norwegian government has pledged around $1.03bn for the Amazon Fund during 200915, while Germany has pledged around $28m for the fund. According to the Nati
24、onal Institute for Space Research (INPE; Instituto Nacional de Pesquisas Espaciais), the countrys Real Time Deforestation Detection System (DETER; Deteco de Desmatamento em Tempo Real) showed that deforestation in the country fell nearly 24% in 2010 compared to 2009. However, projects like the 11,00
25、0MW Belo Monte Dam act negatively affect the countrys conservation efforts. The project is expected to displace thousands of families and submerge large tracts of land. Although the government has promised extensive studies to reduce adverse impact from the dam, the environmental impact may still be
26、 far reaching. Additionally, the planned changes to the Forest Code could lead to more deforestation. The international conservation group, the World Wide Fund for Nature (WWF) has forecast that Brazil will lose 55% of its rainforests by 2030 if rapid deforestation is not checked. Although the defor
27、estation rate came down during 200407, the Brazilian government needs to do more for the conservation of rainforests. PESTLE highlights Political landscape Incumbent president Dilma Rousseff is continuing with the pragmatic macroeconomic policies of her predecessor, President Lula, to support a stro
28、ng GDP growth, stable inflation, and an increase in incomes. The country is challenged by a high crime rate in the cities and widespread corruption in politics and business, with people in power enjoying alleged impunity. Overview Country Analysis Report: Brazil Published 07/2011 Datamonitor. This b
29、rief is a licensed product and is not to be photocopied Page 4 Economic landscape The government plans to spend $500bn on airports and sea ports, highways, energy, housing and sanitation, public transport, sports infrastructure, telecommunications, security, professional education, and health. The c
30、redit boom in the country has led to increase in personal debt. According to the central bank 28 million Brazilians have more than $3,000 debt currently, an increase of 250% in the last six years. Growing personal debt could erode the buying power in the future that could lead to recession. Social l
31、andscape The government has announced plans to invest BRL71.7bn ($44.2bn) in building 2 million homes by 2014, and BRL5bn ($3.1bn) under the Sanitation Growth Acceleration Program covering 4,855 municipalities, which is expected to improve housing and sanitation in the country. The health status of
32、people in the impoverished northern regions of the country is significantly low, despite the governments attempts to improve health standards in those areas. Nearly 90% of the cities in the north east of the country also have high illiteracy rates. Technological landscape The country is encouraging
33、R to the west, Paraguay, Bolivia, and Peru; and to the north, Colombia, Venezuela, Guyana, Suriname, and French Guyana. Ecuador and Chile are the only two Latin American countries that do not share common borders with Brazil. Figure 1: Map of Brazil Source: CIA, The World Factbook D A T A M O N I T
34、O R PESTLE Analysis Country Analysis Report: Brazil Published 07/2011 Datamonitor. This brief is a licensed product and is not to be photocopied Page 12 PESTLE ANALYSIS Summary Brazil attained democracy in 1985, after a prolonged period of political instability caused by internal strife between the
35、military and democratic forces. Since then, democracy has been largely maintained. However, the first popularly elected president, Fernando Collor de Mello, was impeached on charges of corruption in 1992. President Fernando Cordoso assumed power in 1994 and implemented economic reforms. During his r
36、eign, Brazil witnessed the worlds largest instance of privatization, when $100bn of state-owned assets were privatized. The infrastructure sector was bolstered considerably due to burgeoning private sector participation in public infrastructure development. Under former president Lula, the governmen
37、t continued with its program of privatization and maintained prudent fiscal discipline. The governments expenditure on the construction of public infrastructure was significantly reduced in order to leave enough space for private sector participation. Although some of his associates were mired in co
38、rruption, President Lula went ahead with the Zero Hunger campaign to provide basic food for millions of families. He also went on to unify all social programs under the Bolsa Famlia (Family Grant), which focused on reaching a wider population and avoiding waste. The Ministry of Social Development wa
39、s created after the ministerial reshuffle in 2003 to supervise all social programs in the country. The incumbent president Dilma Rousseff is continuing the macroeconomic policies of her predecessor. The countrys economy grew by 7.5% in 2010, buoyed by growth in gross fixed capital formation, higher
40、domestic consumption, and lower and stable inflation. The country expects GDP to grow by 4.55.0% in 2011. The industrial sector grew by 10.1% in 2010, agriculture grew by 6.5%, and services grew by 5.4%. Gross fixed capital formation grew by 21.8%, while household and government consumption grew by
41、7% and 3.3%, respectively. The government also announced that it will invest BRL18bn ($10.8bn) on large city mobility under the Growth Acceleration Program (PAC; Programa de Acelerao do Crescimento). The program is expected to improve the public transport infrastructure in 24 cities, and may cover r
42、oad transport, commuter trains, and subways. The government is expected to spend BRL47bn ($29.4bn) on infrastructure renovation for the 2014 FIFA World Cup. Investments will cover airport and port modernization, sports infrastructure, telecommunications, security, professional qualification, energy,
43、 urban mobility, and health. Despite Brazils economic growth in recent years, the nation continues to lag in important indicators such as patent filings and R Programa Nacional de Acesso ao Ensino Tcnico e Emprego) to expand professional education in the country. The program plans to provide 8 milli
44、on opportunities in vocational training PESTLE Analysis Country Analysis Report: Brazil Published 07/2011 Datamonitor. This brief is a licensed product and is not to be photocopied Page 13 by 2014 to workers and high school students aiming for professional qualifications. By the end of 2014, the gov
45、ernment plans to offer 75,000 scholarships to Brazilian students to study abroad. Brazil has a comprehensive legal structure comprising institutions at the federal, state, and municipal levels. The business registration process, however, is cumbersome, and often dissuades prospective investors. The
46、government has occasionally revamped its legal set up as per the requirements of investors. However, rigid regulation processes still impedes foreign investments in the country. Brazils rich biodiversity is one of its most valuable assets. The Amazon basin has been called “the earths lungs“ and its
47、preservation is not just in the interests of the country but the world. Brazil has signed several pacts with developed countries, including the G8 countries, for financial support to fund the various preservation programs across the river basin. In December 2010, the country announced the Low Carbon
48、 Agriculture (LCA) program with an investment of $1bn to recover 150 km2 of degraded pastureland over the next 10 years. The country expects to reduce CO2 emissions by 104 million tons by December 2020 through the LCA program. In March 2011, the country announced the first round of projects under th
49、e National Climate Change Fund to focus on reduction of greenhouse gas (GHG) emissions in the agricultural, energy, and steel sectors. The fund also supports projects under the National Policy on Climate Change that has set targets to reduce GHG emissions by 36.1% to 38.9% by 2020 compared to the 1990 levels. PESTLE Analysis Country Analysis Report: Brazil Published 07/2011 Datamonitor. This brief is a licensed product and is not to be photocopied Page 14 Political analysis Overview A prolong