Brazil Risk Analysis

2988 words - 12 pages

Executive Summary
Investing in Brazil, as with any country, entails exposure to a variety of political, social, economic, and other risks, but also entails potential benefits for multinationals corporations.

Political Risk- Brazil has been a stable democracy for 25 years. Despite some unique risk as corruption, Brazil has been rating overall medium risk for dynamic risks, governance framework, political violence and business and macroeconomic environment.

Financial Markets in the country & Sources of Capital for the multinational corporation
Brazil is now the eighth-largest economy in the world and will continue to seek a growing international role. The country has also been ...view middle of the document...

Currency Discussion and Forecast

The Central Bank of Brazil allowed its currency, the Real, to float freely on January 15th 1999. Since then, the Real has being through currency devaluation early in 2000. But it has gain value over the last 3 years.
Based on the Relative purchasing power parity and the international fisher affect the Real is forecast to depreciate against the dollar in 2010 and 2011 Due to a larger Current account deficits.

Political Risk
Brazil has been considered a stable democracy for the past 25 years. The president is elected for a once-renewable four-year term and enjoys extensive powers. The current President Luiz Inácio Lula da Silva. As Brazil enters the 2010s and a new president, Dilma Rousseff, is set to take office in 2011.The new administration will face a myriad of policy challenges over the coming decade. The impressive economic performance under President Luiz Inácio Lula da Silva has significantly raised the bar for any future administration, leaving a delicate combination of policy objectives from continuing to improve living standards and addressing a widening fiscal shortfall to meeting the security and infrastructural challenges ahead of the FIFA World Cup in 2014 and the Rio de Janeiro Olympic Games in 2016. 1
According to Political Risk Report 2009 -Maplecroft, Brazil scores an overall medium risk for dynamic risks, governance framework, political violence and business and macroeconomic environment. It also has a medium risk profile for structural risks such as supply chain risks, poverty, development, energy security vulnerability to climate change.
Political risk has been tamed at this time in Brazil. According to Paulo Sotero Marques, director of the Brazil Institute of the Woodrow Wilson International Center for Scholars, a congressionally chartered think tank in Washington, DC, Brazil today is a very stable country with a strong and improving institutional framework. Elections take place as scheduled. Delivery of services through e-government, where available, is efficient. (Some of the most notable internet services include income tax declaration, tax payment certificate, distance learning programs, enrollment for primary and secondary school, and information on retirement funds as well as other social security benefits.)1
Sotero’s bottom line: “Brazil is as stable as any country in Europe” with nothing on the horizon that could threaten the central government. Even Brazil’s infamous social inequality has not been politically destabilizing thus far. It would have been, if the country not begun to tackle the problem years ago.
Brazil is ranked Free by Freedom in the World 2006, Freedom House’s annual survey of political rights and civil liberties. The constitution guarantees freedom of expression and there are dozens of daily newspapers throughout the country. The rights of freedom of association and assembly are generally respected, as is the right to strike.
Brazil received a...

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