Country Analysis

Country Analysis

Country analysis involves the examination and interpretation of a nation’s economic, social and political environment. The analysis offers a comprehensive overview of a country.

Objectives

To identify the common factors used by MNCs to measure a country’s political risk and financial risk;

To explain the techniques used to measure country risk; and

To explain how MNCs use the assessment of country risk when making financial decisions.

Why Country Risk Analysis Is Important

Country analysis is useful for: Investors in the financial market Companies intending to set up a subsidiary Companies wishing to enter a new market People wishing to reside in the country

Why Country Risk Analysis Is Important? Country risk analysis can be used:

To monitor countries where the MNC is currently doing business.

As a screening device to avoid conducting business in countries with excessive risk.

To revise its investment or financing decisions in light of recent events.

Factors Considered in a Country Analysis

Economic Indicators Government Policy Industry Association Support Financial Markets Trading Conditions Human Capital Infrastructure Political Scenario

Types of Country Risk Assessment

A macro-assessment of country risk is an overall risk assessment of a country without considering the MNC’s business.

A micro-assessment of country risk is the risk assessment of a country with respect to the MNC’s type of business.

Techniques of Assessing Country Risk The Checklist approach involves rating

and weighting all the macro and micro political and financial factors to derive an overall assessment of country risk.

The Delphi technique involves collecting various independent opinions and then averaging and measuring the dispersion of those opinions.

Techniques of Assessing Country Risk Quantitative analysis techniques like

regression analysis can be applied to historical data to assess the sensitivity of the business to various risk factors.

Inspection visits involve traveling to a country and meeting with government officials, firm executives, and consumers to clarify uncertainties.

Country Analysisof BRAZIL

Federative Republic of Brazil Geography

Area: 8,511,965 sq. km. (3,290,000 sq. mi.); slightly smaller than the U.S.

Population (2008 est.): 196 million.

Language: Portuguese.

Education: Literacy--88%

Work force: 99.23 million.

Currency: Real (R$) 1 Brazil real = 0.574053 U.S. dollars

BRAZIL

It is a country of extremes with extraordinary social, cultural and ecological diversity.

After a come back to democracy in 1985, from the republican system the country has been slowly gaining economic and political stability.

PESTEL

Political : -

Brazil’s political system is inherently weak. The attitude of people of Brazil is towards

development of the country. Democratic form of governance is there in Brazil.

PESTEL Economic: -

Brazil is South America’s leading economic power, and show no signs of slowing down.

In 2004 Brazil began to see an economic turn around. Employment and Real wages began to increase, public debt has been reduced, and real interest rates have declined.

The three pillars of this economic plan are a tight fiscal policy, an inflation targeting regime, and a floating exchange rate.

PESTEL

SocialSocial investment in Brazil in areas like health

and education is considerable. They have been fighting against:

Inequality Poverty Food security Human rights etc.

PESTEL

Technological Research Technological research in Brazil is largely

carried out in public universities and research institutes. Nonetheless, more than 73% of funding for basic research still comes from government sources.

PESTEL

Environmental Brazil is the largest energy consumer in South

America (consuming 8.78 quadrillion Btu of commercial energy in 2001).

Brazil also is the largest emitter of carbon dioxide in the region although the amount of carbon emitted per dollar of GDP, is comparatively low.

Brazil has a significant use of Bio-Fuels and other forms of renewable energy .

PESTEL

Legal: Brazil's judicial system plays an important role in the Brazilian economy. Any government decision affecting the rights of the individual is contested and supported by an independent judicial system. Therefore, radical changes in legislature regarding the economy are almost impossible if the judicial system disapproves.

Top 5 Reasons to Invest in Brazil

Brazil’s Agricultural Advantage Brazil’s Population Advantage Brazil Trading Partners Warm Weather Means High Profits Brazil Welcomes Investment

PROCEDURE COST

1. Check company name with State Commercial Registry Office R$9.00

2. Pay registration fees

3. Register with the commercial board of the state where the main office is located and obtain identification number

R$110

4. Register for federal and state tax no charge

5. Confirm Taxpayer Enrollment no charge

6. Receive state tax inspection no charge

7. Get the authorization to print receipts/invoices no charge

8. Register with the Municipal Taxpayers’ Registry no charge

PROCEDURE COST

9. Pay TFE to the Municipal Taxpayers’ Registry R$ 300

10. Get the authorization to print receipts/invoices no charge

11. Order receipts/invoices with CNPJ numbers from authorized printing companies

R$ 600

12. Apply to the municipality for an operations permit no charge

13. Register the employees in the social integration program no charge

14. Open a special fund for unemployment (FGTS) account in bank no charge

15. Notify the Ministry of Labor no charge

16. Registration with the Patronal Union and with the Employees Union

Depending on union

Industrial AnalysisFor Sugar Industry

in BRAZIL

Porter’s 5 Forces Analysis

Threat of New Entrant

Government Rules & Norms The Cost of Capital in Brazil is high Existing Mills will also be a threat Total Tax burden is high and income distribution

remains skewed. To fulfill the need of sugar producers for finance

and security, sugar is traded before production.

Rivalry Among Competitors

At present the system is not liberal.

Expected Demand of sugar would increase world wide.

Bargaining Power of Buyer

Selling sugar at a lower price or on favorable selling conditions.

Bargaining Power of Suppliers

Few supply (for export) and buyers are many.

Labour force is cheaply available

Availability of Sugarcane

Threat of Substitute

Artificial Sweetener. Jaggery.

Conclusion

If all the norms and rules are fulfilled than only it is feasible to set up new mill.

It would be more beneficial if along with sugar ethanol is also produced.

THANK YOU

Shrutika Kaste

Harish Ramrakhyani

Devendra Padhi

Poonam Chhabriya