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Introduction Brazil is the fifth largest country in the world and the largest country in Latin America, with a territory of approximately 8,511,000 square kilometers; it shares borders with every country in South America except Ecuador and Chile. Approximately with 155,000,000 inhabitants (one-third of Latin America’s population and fifth largest population in the world), 72% lives in the urban area of the Atlantic coastal strip. The largest cities in Brazil are São Paulo and Rio de Janeiro, with populations of 17 million and 11 million, respectively, in their greater metropolitan areas. Other cities with populations in excess of one million are Brasília, Belém do Pará, Belo Horizonte, Porto Alegre, Curitiba, Fortaleza, Salvador and Recife. Historically, Brazil has been shaped by a great influx of foreign immigrants
representing diverse ethnic groups. The last 155 years have witnessed the
entry of approximately 5.5 million settlers, mainly in the South and Southeastern
regions of the country.
Organization
The President is elected by direct vote for a term of four years and can be re-elected. The President has a broad range of powers including the right to appoint Ministers and key executives to selected administrative and political posts. The country is divided administratively into 26 states (Acre, Alagoas, Amapá, Amazonas, Bahia, Ceará, Espírito Santo, Goiás, Maranhão, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Pará, Paraíba, Paraná, Pernambuco, Piauí Rio Grande do Norte, Rio Grande do Sul, Rio de Janeiro, Rondônia, Roraima, Santa Catarina, São Paulo, Sergipe and Tocantins) and the Federal District, Brasília. At the state level, the executive power is exercised by governors, who are elected for a four-year term; Brazil is politically stable, with a codified legal system. The judicial power is exercised by the Federal Supreme Court, the Superior Court of Justice, and various lower federal and state courts. The legislative power is exercised by the state and population representatives
in Congress. Each state has two representatives as well as a various number
of population representatives elected by on a proportional representation.
Economy The Brazilian economy is well diversified, with a substantial natural resource base and a large, vertically integrated and modern industrial sector. In 1995 the gross domestic product (GDP) was approximately US$ 865 billion. Furthermore, the economy grew by 2.9% in 1997. This performance was generated by crop and livestock farming and services (3.1% and 3.3%, respectively) and by the industrial sector (2.3%). Per capita product expanded by 1.5%. The increase in the industrial production in the first quarter of 1993 was largely the result of a boost in the manufacturing sector. The industrial growth was particularly strong in the automobile sector, which was expected to achieve its highest production level to date with approximately 1.65 million vehicles produced in 1995, making Brazil eleventh in automotive manufacture. Brazil also occupies a noteworthy position in the chemical and textile industries, as well as in the paper and cellulose sector. It is the third largest producer of paper worldwide, and ranks eighth in the production of cellulose During 1992, US$ 1.717 billion were invested in expansion of telecommunications services. By 1990, the Brazilian aeronautics industry had sold 1,500 aircraft to 39 nations worldwide. The country has a highly developed financial system. There has been a significant influx of foreign capital in light of the unprecedented investment opportunities offered in Brazil. Foreign investment in 1997 was US$ 16 billion (28bi in 1995). Price growth in 1996 continued decelerating for the third consecutive year. The annual rates of the major price indices came to between 9.12% and 10.03% in comparison to the 1995 levels of 14.77% and 23.17%. Brazil continues to enjoy an enviable balance of payment position because of its large trade surplus and substantial capital inflows. In 1992, Brazil's trade surplus rose to US$ 15.5 billion, a 47% increase over 1991. However in 1997, due to the lifting of import restrictions, the trade balance was negative by almost US$ 214 million. International reserves amounted to US$ 51.84 billion in December 1995. Manufactured goods represent 60% of exports, and semi- manufactured goods represent 15% of exports. It is also one of the federal government's priorities to reduce its
participation in economic activities. Important developments in this regard
include establishment of a free foreign exchange market, termination of
price controls, a reduction in the bureaucracy surrounding foreign trade
and capital flows, the creation of mechanisms to allow foreign investors
to access the securities markets, as well as the reduction of restrictions
on foreign investment. The end of market reserve on software and hardware
products has also represented a major step forward. The federal government
has also deregulated certain sectors of the economy, including oil production,
airlines and shipping.
Privatization Process
Since 1990, the federal government has attempted to introduce measures to deregulate the domestic economy and remove many of the distortions that delayed Brazil's development process; the privatization program and reduction of the government participation in economic activities are a reflection of this new trend. The privatization program, a government priority, was initiated with the sale of Usinas Siderúrgicas de Minas Gerais S.A. - USIMINAS in November 1991. Through 1995, more than 35 companies have been privatized. This process entailed cancellation of over US$ 6.2 billion in debt instruments (equivalent to the amount paid by investors in government debt instruments). Some Brazilian states, such as São Paulo, Minas Gerais, Rio de Janeiro and Rio Grande do Sul, are also privatizing state services and companies. The National Privatization Program achieved considerable progress by
selling off Light Serviços Elétricos S.A., five Petroquisa
minority holdings and granting concessions for five of the six networks
into which the Federal Railway System was divided. The financial result
of these operations came to approximately US$ 4 billion. In this same context,
the sale model for the Vale do Rio Doce Company was approved and the auction
scheduled for the first half of 1997, initial steps were taken to privatize
the nation's ports and considerable progress was made on regulating future
concessions of cellular mobile phone services.
Business
Brazil has a diversified industrial park: it is the largest in Latin America and among the most diversified worldwide. According to the most recent data, Brazil's industrial park ranked eighth in the Western world. From 1985 to October 1992, Brazilian industry grew 10.86%. Positive manufacturing growth in 1996 did not seriously compromise the utilization level of installed production capacity. Based on the quarterly FGV Survey, the index moved from 79% in January 1996 to 81% in January 1997, due partly to ongoing industrial modernization. Productivity in the industrial sector registered 12.6% growth. Confirming efforts to enhance the sector's competitiveness, 636 new certificates were issued by the NBR ISO 9000 quality system in 1996, as compared to 353 in the previous year. Brazilian Stock Market currently ranks number four in the world in terms of trade contracts. A good part of Brazilian production is traded at the Commodities & Futures Exchange (BM&F) headquartered in the city of São Paulo. Brazilian shares and other securities represented between 40 and 45% of Latin American portfolios of the main investors in the region. In 1996, the stock market was the best investment alternative available. This had already been predicted in the previous year based on the outlook of declining inflation and ongoing privatization. The IBOVESPA accumulated growth of 63.8%, while the IBV rose by 59.7%. In 1995, BM&F transactions totaled R$ 3 trillion and stock exchanges closed the year with a nominal devaluation of 1.3%. Average daily financial movement expanded from R$ 259.4 million in 1995 to R$ 397.1 million at Bovespa. Foreign investor participation also grew and reached an average level of 28.6% of total trading at the São Paulo exchange. The country's labor force in 1988 included 61 million people, of whom 23% worked in industry, 53% in services and 24% in agriculture-related areas. According to the IBGE survey in six major metropolitan regions, real average earnings of persons employed increased by an average of 7.4% in 1996. A breakdown by sectors of activity shows gains in all areas, led by construction (9.3%), services (9%), commerce (6.8%) and manufacturing (6%). An analysis of the different labor categories points to growth of 7.8% for registered workers, 6.7% for unregistered workers and 7.3% for the self-employed. Brazil also has a significant agricultural presence, with cotton, coffee, sugar, soybeans, oranges, tobacco and cocoa beans being the principal products. Nevertheless, Brazil is a major cattle, poultry and fish producer.
Natural Resources
Brazil has extensive mineral resources. Large iron ore and manganese reserves provide important sources of industrial raw materials and export earnings. Deposits of nickel, tin, chrome, bauxite, beryllium, copper, lead, tungsten, uranium, zinc, gold and semiprecious stones, as well as lesser known minerals, are commercially mined. The world's third largest iron ore deposit is found in Brazil (approximately 50,000 million tons). Iron ore exports in 1990 grew by 7.8%, with iron ore being exported to 35 countries. It is also the seventh largest steel producer in the world, with a production of approximately 25 million tons in 1993; its installed capacity ranks sixth in the world. In 1993, Brazil's fuel oil production was 697,900 barrels/day, which was a production upswing of 8% over 1989. With cutting-edge technology and large unexplored reserves, Brazil expects to be producing 1,500,000 barrels/day by the year 2000, thereby making it self-sufficient in fuel oil. Brazilian petroleum reserves are estimated at 36 billion/barrels. Brazil's fluvial network is the most extensive in the world, and the
country is consequently one of the leading producers of hydroelectric power.
Hydroelectric plants provide nearly all of the nation's electricity.
Diplomatic Relations Brazil maintains commercial and diplomatic relations with virtually all nations throughout the world and trade ties with many of them. This Country is also a member of various international organizations as well as MERCOSUL Common Market, which is composed of Argentina, Uruguay, Paraguay, and Brazil. This market serves almost 200 million people.
Conclusion With considerable natural resources, Brazil offers many opportunities
to foreign investors, especially as the Brazilian Government is determined
to modernize the economy, consolidate the currency, and implement the reforms
in course. Weighing the above achievements leads one to the inevitable
conclusion that Brazil is an excellent market for prospective investors.
Its remarkable economic achievements, its performance of its international
commitments, its democratic structure and political stability have all
served to cement its positive image internationally. Brazil is effectively
and surely on the road to solid growth, and there is no turning back now.
THE GOVERNMENT STRUCTURE OF BRAZIL The Federal Public Administration is directed by the President of the Republic and aided by Ministries, which are independent organs and only subordinated to the Presidency. There are two categories of federal administration: Direct and Indirect Administration. The first deals with services which are integrated with the administrative structure of the Presidency of the Republic and its Ministries. The Indirect Administration deals with matters relating to the diverse entities, public (Autarchies) or private (Societies of Mixed Economy, Public Firms and Foundations), linked to a Ministry, but administratively and financially independent. Ministry of Justice - deals with the following matters: judicial order; nationality; citizenship; political rights; constitutional guarantees; public security; federal police; prison administration; foreigners; defense of economic rules and of consumer rights; etc... Ministry of Finance - is in charge of matters pertaining to currency, credit, financial institutions, capitalization, private insurance and savings, tributary, budgetary, financial and patrimonial administration, public accounting and auditing, administration of public internal and external debts, supervision and control of foreign trade, economic and financial negotiations with foreign governments and entities, etc. Its important to emphasize that notwithstanding the Ministries, The Secretary of Planning, Budgetary and Coordination of the President of the Republic is an organ directly linked to the President which is also part of the Federal Public Administration in charge of assisting the President of the Republic in coordinating the planning and budgetary system and preparing social/economic studies and research; elaborating regional and national plans for development, the law of Budget, directives and annual budget laws; supervision of cartographic system and statistics. National Monetary Council One of the diverse organs of the Ministry of Finance, the National Monetary Council (NMC) is presided over by the Minister of Finance, with the objective of elaborating currency and credit policies, with a view to the economic and social progress of the country. The functions of the National Monetary Council are to: supervise the application of resources of public or private financial institutions with the intent of providing, in different regions of the country, favorable conditions to the harmonious development of the national economy, coordinate monetary, credit, budget and fiscal policies, regulate the foreign value of the currency and the balance of payment, strive for the liquidity and solvency of financial institutions, etc... Central Bank of Brazil The Central Bank of Brazil (BACEN) is also linked to the Ministry of
Finance and its main functions are: fulfill the norms expedited by the
National Monetary Council, be a depository of official gold reserves and
foreign currency reserves, control credit of all forms, control foreign
capital under the Law, control check payments and other papers, represent
the Brazilian Government with international financial institutions, carry
out the inspection of financial institutions, put into effect buying and
selling operations of federal public titles as an instrument of monetary
policy, etc...
With a view to approximating Brazil economically to other countries, increasing the commercial and financial flow between countries, there are a series of Chambers of Commerce. Among them are the American Chamber of Commerce, the Japanese Chamber of Commerce and Industry, and the Italian-Brazilian Chamber of Commerce and Industry. The American Chamber of Commerce was founded in June 1919 according to the general directives of the United States Chamber of Commerce. It is an independent non-profitable organization of private initiative, obliged to represent the commercial interests of Brazilian, American and other firms which have the common purpose of promoting free initiative. The Japanese Chamber of Commerce and Industry, founded on the 1st of June, 1951, has the objective of encouraging commercial trade between Brazil and Japan, such as cooperating with commerce and industry involving these two countries. Following the example of the American Chamber, it is a private non-profitable entity. The Italian-Brazilian Chamber of Commerce and Industry strives to favor commercial relations between Brazil and Italy, operating under strict collaboration with the authorities of both countries. Striving to obtain its objectives it offers a wide range of services such as the recuperation of credit in both countries, the promotion of contacts among businessmen with the aim of "joint ventures", gathering and offering economic and commercial information concerning the opportunities available in the Brazilian market to Italian entities and businessmen, among others. It should be noted that apart from the above mentioned Chambers of Commerce there are various others operating in Brazil, notably the British Chamber of Commerce and the German Chamber of Commerce.
Financial Institutions Financial Institutions are defined as the public or private entities whose main functions are gathering, intermediating or investing their own or third party resources, in local or foreign currency, and the custody of third parties' assets. They may only operate in the country if previously authorized by the Central Bank of Brazil and in the case of foreigners by decree of the Executive Power. It is up to the Central Bank of Brazil to supervise the work developed by financial institutions, repressing any abuse committed with the enforcement of penalties provided by Law. Among the public financial institutions which constitute auxiliary organs in the execution of Government credit policies we must mention the Bank of Brazil S.A., the National Bank of Economic Development and the Federal and State Savings Banks. The Bank of Brazil acts as the financial agent for the National Treasury, as and the principal executor of bank services for the interest of the Federal Government, carrying out foreign commerce policy, finance rural and industrial activity, etc... The National Bank of Economic Development - BNDES is the main instrument of the execution of investment policies of the Federal Government. The Federal Savings Bank's foremost aim is to supervise the financial aspects of the Government housing policy and administer the Workers Dismissal Indemnity Fund (FGTS), the Social Integration Program (PIS) and the Program for the Formation of the Civil Servant Fund (PASEP). As to private financial institutions it must be noted that these may only be formed as corporations and all capital must be represented by nominative shares, with voting rights. It must be emphasized that the work developed by private financial institutions
is regulated by laws and acts of the National Monetary Council and the
Central Bank of Brazil. They must strictly observe the rules, under penalty
of sanctions, which may vary from a fine to the annulling of their authorization
to operate.
Antitrust laws in Brazil are enforced by NATIONAL SECRETARY OF ECONOMIC LAW - Secretaria Nacional de Direito Econômico (SNDE) - which is subordinated to the Ministry of Justice. SNDE and its National Department of Economic Defense and Protection (Departamento Nacional de Proteção e Defesa Econômica - DNPDE) - are in charge of receiving all charges and preparing all evidences against companies charged of antitrust law condemned practices. Trials inside administration are conducted by the Administrative Council for Economic Defense - Conselho Administrativo de Defesa Econômica (CADE) - which is a sort of administrative court and is in charge of deciding whether or not any company is engaged in any antitrust law condemned practice. Condemnations by CADE are usually fines but can also be the liquidation of the condemned company. It is considered final to the government, but condemned companies can go to courts against them. Brazilian antitrust laws were created mainly after the American antitrust laws however, in Brazil, although CADE is supposed to be similar to the Federal Trade Commission (FTC), the system is different. In Brazil a charge through CADE is the only way to start an antitrust action: CADE plays the role which in the United States is played by FTC, Justice Department and courts in general (in Brazil the Justice system can be put into action against decisions made by CADE). Historically, CADE has not yet played its role as it should have done for many reasons, the most important of them being that Brazilian economy has been suffering a lot of intervention, including price controls. It is easily understandable that price controls are opposite to antitrust
regulations, for antitrust regulations need a free market; in this sense,
the economic program which is in course in Brazil is supposed to create
a very fertile ground for antitrust regulations action.
Source: Ministry of External Relations, Central Bank and CESA (Centro de Estudos das Sociedades de Advogados) Reorganized and updated by Lisandre M. P. Zulian (15/03/98)
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