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 Analysis
of 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
 Social
 Social 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 R$110

office is located and obtain identification number

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 R$ 600

printing companies

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 Depending
Union on union
Industrial Analysis
For 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