Miranda Spurgin

Brazil Spotlight
10/6/2015

Strengths and Weaknesses of the current economic, political, legal and technological
environments
According to the Global Competitiveness Index, Brazil is a country in transition. Brazil is
the largest country in South America. The economic operates market style and prices are set by
a free price system. The government is a federal republic and the head of the government is the
president (Global Insights, Global Edge). The past few years have been a test for both the
political and economic environments of the country.
The main strengths of the nation are the market size, the efficiency of health and primary
education and higher education and training. Compared to other Latin American nations, the
market size of Brazil is double. This contributes to the countrys GDP per capita for $11,
311(USD) (Global Competitiveness Index). Brazil ranks 37th of 144 countries in secondary
education enrollment and 18th in primary education enrollment. Brazil is also considered
technologically ready.
The main weaknesses of the Brazilian economic, political, legal and technological
environments are inefficient government bureaucracy, corruption, restrictive labor and tax
regulations, and inadequate infrastructure and tax rates. According to the Index of Economic
Freedom, there is a lengthy process for starting a business and procuring permits. Also, labor is
expensive to employ in Brazil. Employers are responsible for health care, meals, transportation,
social security payments, and other tax payments that are made to the government (The Brazil
Business; Brazilian Employment in a Nutshell). Regulations in Brazil also limit working hours to
44 per week, employees are also entitled to 30 days of vacation for every 12 months worked
and an additional month of pay that would be equivalent to a Christmas bonus. Brazil also has

Miranda Spurgin
Brazil Spotlight
10/6/2015
inadequate infrastructure. Before the country played host for the World Cup, they were
attempting to complete 56 infrastructure projects. Only 10 were completed.
The government is also inefficient. The current president was challenged in the previous
election by a more socialist candidate but managed to hold on to her seat. Amid allegations of
corruption, the political leader is trying to salvage a sinking ship. Rousseff needs to gain the
trust of her constituents again by balancing a budget and restoring order. According to a July
2015 article in the Economist, Brazil is considered more a pro-business as opposed to a promarket, even though it remains difficult to start a business in the country.
Impact of the Reals devaluation and government reaction
In September of 2015, the credit rating agency of Standard and Poor downgraded
Brazils credit rating to junk status. Following this downgrade, the Brazilian Real suffered a
depreciation rate of 1.89% versus the US dollar. This credit demotion came after the countrys
central bank announced that it would sell $3 billion of foreign exchange monies in an effort to
halt the declining rate of the national currency (Market Realist; Brazilian Real Nears All-Time
Lows in 2015).
In 2008, Brazil had a growing economy and their credit rating was up graded to
investment grade. In recent times however, with a political leader facing impeachment,
investments have dried up and manufacturing firms have faltered.
The Chinese devaluation of the yuan seems to have triggered a chain reaction that the
country cannot quickly recover from. The prices of commodities have plummeted and exports
have slowed down considerably. In addition to these recent currency problems, there have been
what seems to be a never ending string of economic problems plaguing the nation.

Miranda Spurgin
Brazil Spotlight
10/6/2015
As the Chinese economy has slowed down, the demand for South American raw
materials has also tapered off, causing the export business to take a major hit. Also, continued
social and political unrest is making it difficult for the government to stimulate the economy
through fiscal policy. By selling their foreign currencies, the government has done all they really
can at this time to limit the backlash from their falling currency values.
World Cup Issues: Olympic Impact
In an article on Mic.com, Sarah Kaufman identified seven big problems left behind by the
Brazilian World Cup. In the 2014 release, Kaufman gives the following problems; hundreds of
thousands evicted, debt, distrust of law enforcement, impact on children, increased violence
against sex workers, major infrastructure issues, and social unrest. Kaufman goes on to
describe these issues in detail, describing the violence against women and children, the social
unrest caused by spending funds on the games when 16 million of the nations population live in
poverty (http://mic.com/articles/93814/7-big-problems-the-world-cup-left-behind-in-brazil) . While
there is no doubt that the World Cup temporary increased employment and wealth, the effects
are not long lasting.
The country is already in debt from the World Cup, and the city of Rio must invest many
more dollars in order to meet requirements for hosting the Olympics. Many are predicting that a
huge economic surge may be the result of the Olympic Games while others are more vary
following the world cup disaster. The country has already spent over 12 billion dollars building
stadiums, many which will sit unused for many years.
In terms of infrastructure, Brazil had slated 56 projects for completion before the world
cup, only 10 of these projects were completed. Rio is expected to pay host to over 1 million
people during the Olympic Games. Currently, the city only has facilities to host approximately
50,000 people. (Seven Pillars Institute) The effects of poor planning on the part of the

Miranda Spurgin
Brazil Spotlight
10/6/2015
government may once again be disastrous and plunge an already faltering economy further into
debt.
The political environment is also suffering, with the elected leader facing impeachment.
The nation is full of corruption and is a major hub of drug trafficking. Crime and security would
also be a concern to the nation during the Olympic Games. The country already has a distrust of
both law enforcement and political advisors following the World Cup.
Ethics and Social Responsibility
According to Transparency Internationals Corruption Perceptions Index, Brazil is ranked
69 out of 175 countries. According to this report, a number of public leaders have been charged
with requesting bribes in an effort to speed up bureaucratic processes. The public strongly
distrusts its political leaders based on their unethical behaviors. The Brazilian government has
made some positive changes such as the Clean Company Act, which makes companies-as well
as individuals-liable for corruption.
In an article from Americas Quarterly, Brazil is named as a leader in social responsibility.
While the country is evolving, it still engages in activities such as child labor. This is an example
of where we see that the developing country is still aligning itself with old standards. The
companies are leaders but there is still much work to do.
While Brazil has innovative labor laws to protect workers, it also is realizing that the state
cannot not meet the needs of its citizens on its own. Many companies are rising to the occasion
and supporting social causes. Brazilian companies are focused on the social causes of; justice
and inequality, ending child labor, stopping corruption and bribery, environmental education and
diversity in the workplace. According to the latest Gender Gap Index report, the labor

Miranda Spurgin
Brazil Spotlight
10/6/2015
participation rate is 76%, the male to female ratio being 7:3. The country is taking strides to be
more diverse.
Works Cited
Brazil Global Insights. Global Edge. Retrieved September 30, 2015
Market Potential Index. Global Edge. Retrieved September 30, 2015
Global Competitiveness Index. Retrieved September 30, 2015
Index of Economic Freedom. Retrieved September 30, 2015
Brazil. Freedomhouse.org. Retrieved September 30, 2015
Corruptions Perception Index. Retrieved September 30, 2015
Human Development Index. Retrieved September 30, 2015
Gender Gap Index. Retrieved September 30, 2015
Meyer, David. (2015, September 14) Brazilian Real Falls After Credit Downgrade. Retrieved
from http://marketrealist.com/2015/09/brazilian-real-falls-sharply-credit-rating-downgrade/
Kaufman, Sarah. (2014, July 17) 7 Big Problems the World Cup Left Behind in Brazil. Retrieved
from http://mic.com/articles/93814/7-big-problems-the-world-cup-left-behind-in-brazil
Flannery, Nathaniel Parish. (2014, June 23) World Cup Economics: Why Brazils Bashers Have
Got it Wrong. Retrieved from
http://www.forbes.com/sites/nathanielparishflannery/2014/06/23/world-cup-economics-whybrazils-bashers-have-got-it-wrong/
Seven Pillars Institute. Financing, Ethics, and the Brazilian Olympics. Retrieved from
http://sevenpillarsinstitute.org/case-studies/financing-ethics-and-the-brazilian-olympics
Bloomberg.com. (2015, January 15) Rio Olympics No Help to Brazil Economy Based on World
Cup. Retrieved from http://www.bloomberg.com/news/articles/2015-01-16/rio-olympics-no-helpto-brazil-economy-based-on-world-cup-result
Novais, Andrea. (2012, May 15) Brazilian Employment Law in a Nutshell. Retrieved from
http://thebrazilbusiness.com/article/brazilian-employment-law-in-a-nutshell
The Economist. (2015, July 25) The Power behind the Throne. Retrieved from
http://www.economist.com/news/americas/21659731-junior-partner-government-runningcountry-power-behind-throne
Sambo, Paula. (2015, March 19) Brazil Real Leads Global Declines as Rousseff Faces New
Dissent. Retrieved from http://www.bloomberg.com/news/articles/2015-03-19/brazil-s-realdeclines-to-12-year-low-as-rousseff-faces-dissent
Scharf, Regina. (2008) Why Brazil Leads the Region in CSR. Retrieved from
http://www.americasquarterly.org/node/288
De Arruda Campos, Rodrigo Ramos. (2014, January 21) Brazil: Social Corporate Responsibility
in Brazil: Making a Difference. Retrieved from

Miranda Spurgin
Brazil Spotlight
10/6/2015
http://www.mondaq.com/brazil/x/287412/Corporate+Governance/Social+Corporate+Responsibili
ty+In+Brazil+Making+A+Difference