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An Evaluation of the Situation in Brazil for Investing

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Generally, major issues in doing business in Brazil require an understanding of the cultural differences, currency exchange control, the business environment and the labor laws.   The President is taking a political risk in challenging and fighting corruption in the electricity companies (O'Shaughnessy, 2009).   Cracking down on corruption has begun but it is yet limited to identification and investigation of criminals (People Daily, 2011). Corruption has been a perennial problem in Brazilian politics but the President is now reacting to allegations of corruption against his ministers which have forced some of them to resign (CNN Wire Staff, 2011).

The government in Brazil supports a public-private partnership which enables them to attract private capital (EDC, 2011). Foreign exchange control has been liberalized but the government has not given up total control. Bureaucracy is another major issue in Brazil that can hold up projects. Thus, starting a new project in Brazil can take up to 120 days against the regional average of 56.7 days as the judicial system is slow and complex. However, Brazil has been attracting DFI and it has also been investing abroad (Islam, 2010).

Cultural factors also influence how businesses operate and how people interact with each other. Silveira and Crubelatte (2007) define culture in Hofstede’ s words as “ the collective program of the mind that distinguishes the members of groups or categories of people” . In Brazil, people establish relationships of dependency in relation to power bases. Brazil is a collectivist society with high power distance and characteristics of uncertainty avoidance. These are the dimensions according to Hofstede which help to measure culture. Power in Brazil is concentrated at the overlap between the leader and the institutional subsystem.

Loyalty to people is a dominant attitude and people also try to avoid conflicts. Thus, the opinions and desires of senior people carry weight while participative and open-discussions do not take place between the managers and their bosses (O’ Keefe & O’ Keefe, 2004).        

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