After three centuries under the rule of Portugal, Brazil became an independent nation in 1822. By far the largest and most populous country in South America, with a population of more than 205 million, Brazil has surpassed more than half century of military intervention in the governance of the country to pursue industrial and agricultural growth and the development of the interior. After drawing up a fiscal adjustment program and promising progress on structural reform, Brazil received a $41.5 billion international support program led by the IMF in November 1998. In January 1999, the Central Bank of Brazil announced that the real was no longer it would not be pegged to the US dollar. dollar. The ensuing devaluation helped moderate the slowdown in economic growth in 1999, and the country recorded moderate GDP growth in 2000. Economic growth slowed considerably between 2001 and 2003, to less than 2 percent, due to a slowdown in major markets and interest rate hikes by the Central Bank to combat inflationary pressures. President Luiz Inácio Lula da Silva, who took office on January 1, 2003, has given high priority to reforming the complex tax code, cutting the overblown civil service pension system and continuing to fight inflation. By exploiting vast natural resources and a large amount of labor, Brazil is today the main economic power in South America and a regional benchmark in its move towards a free market society. After winning a landslide victory in 2002 in a campaign to revive the economy and fight for the poor, President Lula da Silva reassured worried investors by continuing his predecessor's plan of strict financial austerity. Rather than jitter as predicted, the country's stock and bond markets enjoyed stellar returns in 2003 and are still going strong. But after a year, the pressure was mounting on Lula da Silva to stay true to his populist roots. After enjoying a wave of popular support during his first year, Lula da Silva faced some criticism from within his own Workers' Party and the ruling coalition, as well as from ordinary voters. Lula has also earned a reputation for being sensitive to criticism; expelled a foreign journalist critical of his policies. Although Lula's popularity waned during this period, da Silva was re-elected in 2006, receiving more votes than any other elected Brazilian president. During his second term, Brazil continued its progress in modernization and da Silva's support gained strength again. In 2010, da Silva entered the final year of his second four-year term as one of the most popular Brazilian politicians of all time. But in Latin America, any change in leadership always makes financial markets nervous because it creates uncertainty and reminds companies of past transitions that have been detrimental. Brazil's economy recovered considerably from the global economic recession in 2009, with GDP growth of 2. 7% and unemployment of 6% in 2011. With a GDP of 2.5 trillion dollars, Brazil ranks ninth in the world in GDP in terms of purchasing power parity. According to The Economist, Brazil is likely to become the fifth largest economy in the world, surpassing Britain and France by 2025. Brazil's progress in fighting poverty has been one of the most impressive of any country in development. Brazil is home to a number of world-class companies, including Embraer, the world leader in short- and medium-range jet aircraft. In addition, Brazil will host the World Cup soccer match in 2014 and Rio will host the Summer Olympic Games in 2016. Substantial investment in infrastructure is expected ahead of these two events. Brazil announced in early 2007 the discovery of the Tupi and Carioca oil fields off the coast of Rio de Janeiro. Oil reserves in these fields are conservatively estimated at between 30 billion and 80 billion barrels, which would place Brazil among the top ten countries in the world by reserves. In May 2010, Brazil announced another big discovery in the Santos Basin. In 2012, oil exports exceeded 800,000 bbl/day, making Brazil the 24th largest oil exporter in the world. Production from the existing Campos Basin and the discovery of the new fields could make Brazil an even more important oil exporter by 2015. Brazil's national oil company, Petrobras, is one of the largest in the world. The government has created a new state company called Petrosal to manage the licenses in the new fields. This new company will grant some exploration and production rights directly to Petrobras with no options for foreign firms. In addition, by mandate, it will award more than half of the shallow water contracts to locally owned oilfield service companies (LOSCs). In deeper and more challenging waters beyond the capacity of local companies, foreign companies will be invited to bid. Those who commit to incorporating Brazilian “content” would be more likely to succeed. Higher taxes and fees are also expected. However, this sector is likely to create substantial new opportunities for foreign companies in Brazil. More recently, The government of President Delma Rousseff, who succeeded da Silva, faced street protests over corruption, taxes and poor public services. While Brazil has made great strides, challenges remain.

1. In your opinion, is there still political uncertainty in Brazil?

2. Which strategy would be the most useful for companies interested in Brazilian investment?

Answer rating: 100% (QA)

1 Yes there is still political uncertainty in Brazil The political situation in ... View the full answer