Analysis

Business Structure in Brazil

Brazilian overview: how businesses have been structured, the search for international credibility and institutional improvement.

Brazilian overview

Brazil is the fifth largest country in the world geographically with a predominantly tropical climate. It is the only Portuguese-speaking country in the Americas and the largest Portuguese-speaking country in the world, in addition to being one of the most multicultural and ethnically diverse nation on the planet.

Market forecasts for 2015 shows that India will outperform Brazil in terms of US$ Nominal GDP, making the country to reach the 8th position in terms of global economy, especially due to the current situation in the country after the downgrading. However, both the EIU and the IMF expect that Brazil recover from this slowdown in its economy in the long term and reaches the 5th overall global position as the main economy in 2050. 

Brazil’s Institutional

With the Atlantic Ocean to the east, Brazil has a 7,491 kilometer coastline. The country borders all the South American countries except for Ecuador and Chile.

Brazil is currently politically and administratively divided into 27 federative units, with 26 states and one federal district. The federative units are independent subnational entities (independent governing, legislative and tax entities) with own governments and constitutions that together form the Federative Republic of Brazil. The executive power is exercised by a governor elected every four years. The judiciary power is exercised by trial and appellate courts that handle general legal matters.

The Federal District has characteristics common to the states and municipalities. Unlike the states, it cannot be divided into municipalities. On the other hand, it can collect taxes as if it was a state as well as a municipality.

The municipalities are territorial units with legal identity and a certain level of administrative autonomy. They are the smallest independent units in the country. Each municipality has its own organic law that defines its political organization, which is however limited by the Federal Constitution. There are 5,565 municipalities throughout the national territory. The population in some municipalities  is greater than that of several countries in the world (the city of São Paulo has close to 11 million inhabitants). Others have less than 1,000 inhabitants.

Demographics and main Brazilian states’ GDP

Brazil’s population is comprised of 206,081.432 inhabitants (IBGE - 2016). The country has been considerably urbanized (an increase of 23 million people living in urban centers). 51% of the population is female and 49% male. The administrative capital is Brasilia, and the official language is the Portuguese. The government system is the Presidentialism and the official currency is the Real (BRL).

The Brazilian ISO Code is BRA, and the country calling code is 55. The web country code is:.br; and the official website is www.brasil.gov.br. Brazil’s main financial center is the State of São Paulo. In 2015 the Brazilian Nominal GDP was US$1.8 trillion owing to the economic crisis, shrinking -3.8% compared to 2014. 

Below are the 10 largest Brazilian states in terms of GDP and population.  

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Source: Population: IBGE, 2016. GDP: IBGE 2013, US$ dollar 2013.

Brazilian economy in the world

Market forecasts for 2015 shows that India will outperform Brazil in terms of US$ Nominal GDP, making the country to reach the 8th position in terms of global economy, especially due to the current situation in the country after the downgrading. However, both the EIU and the IMF expect that Brazil recover from this slowdown in its economy in the long term and reaches the 5th overall global position as main economy in 2050. 

 

This forecast is focused specifically on the Brazilian growth prospect, since the country appears as one of the main agricultural producers in the world and one of the main iron ore exporters (especially to China), and on the incentives generated in the domestic industry and R&D in terms of new alternative fuels, as the current low oil prices have been affecting the main consumers and producers of this commodity.
Bearing that in mind, the country can recover the organic growth shown in recent years over the next three decades, together with the structural development that Brazil needs to identify and measures to correct them.
Source: IMF, CIA World Factbook, US Geological Survey, ONU, FAO, IBGE, Bacen and EIU. Last available data.

The Search for International Credibility

The success of the economic reform and the beginning of the social reform have been attributed to the following three-pronged economic policy: inflationary targets, primary surplus and floating exchange rate. After the unorthodox economic plan adopted in the last few years, Brazil has reached a consensus that the return of the economic tripod (shown in the picture below) will be the best scenario to restore the business credibility once gained at the beginning of the decade.

Institutional Improvement

Brazil has been concentrating its efforts on improving the level of transparency and responsibility of government actions and the efficiency of regulations in order to make them clearer and more coherent. Such actions are considered essential for maintaining a healthy business environment, in addition to being part of the foundations of the Brazilian democratic regime. To expand the control over government spending, detailed and updated information on bids, signed contracts, budget spending and fund transfers made by federative units is available for consultation through Web portals, such as the Transparency Portal (“Portal da Transparência”) (www.portaltransparencia.gov.br), whose efficiency was recognized by the United Nations (UN) in 2008. Today, it provides more than one billion pieces of information involving federal funding of more than R$7.3 trillion.
The www.comprasnet.gov.br portal is another example of online control offered to the society. It allows direct consultation of bid notices, auctions held, electronic quotations and management reports on the progress of purchases and savings obtained through eBidding. The system, created in 2002, is also a management tool: it is designed to reduce government-purchasing costs and combat fraud and over-invoicing.
 

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