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Investment Environment

2.1 Economy
2.1.1 Economic Trend
•GDP and Change in the Economic Growth Rate
GDP $2,346 billons 2014 Annual value 0.1%, Brazil represents 3.78 percent of the world economy.

•Change in the Public Finance
“It was during the 1990, that the Brazilian economy went through significant changes. The country liberalized its financial markets and trade, successfully implemented a price stabilization program, and undertook a privatization of state owned enterprises in infrastructure and commodity industries. There changes had a major impact on the country´s institutional framework and changed the behavior of economic agents. Economists have recognized these factors as the main causes of the industrial restructuring process in the period”.

•Control of Inflation
Consumer price index (CPI) 9,929 % more than the double of the official target of 4.5%, substantially higher than the 6.5% in April 2013.

2.1.2 International Trade
Exports by Countries and Regions

China 18, 0%
United States 12, 1%
Argentina 6, 3%
Netherlands 5, 8%
Japan 3, 0%
Other Countries 54, 8%

Imports by Countries and Regions

China 16, 3%
United States 15, 4%
Argentina 6, 2%
Germany 6, 0%
Nigeria 4, 1%
Other Countries 51, 9%

Exports by Products

There were 225.1 billion. USD of products exported in 2014:

•Iron ores and concentrates. 11,5%
•Beans, beans, beans, soy beans soybeans. 10,3%
•Crude oils obtained from bituminous minerals. 7,3%
•Cane or beet sugar and sucrose. 4,2%
•Meat and edible offal of fowls. 3,1%
•Other Products 63,6%

Imports by Products

There were 229.1 billion. USD of imports in 2014:

•Petroleum oils obtained from bituminous minerals. 7, 7%
•Crude oils obtained from bituminous minerals. 6, 8%
•Petroleum gas and other gaseous hydrocarbons 3, 7%
•Motor cars and other automated vehicles 3,4%
•Parts and accessories of tractors, automated vehicles 3,1%
•Other Products. 75,4%

2.1.3 Trends by Industries
Industrial Structures in Brazil
Brazil has one of the most diverse industrial sectors in Latin America with industries of textiles, shoes, chemicals, cement, lumber, iron ore, tin, steel, aircraft, motor vehicles and parts, other machinery and equipment.

Manufacturing Industry
“In the first half of the twentieth century Brazil had a moderately growth, it was until the second half of the century that economic growth improved. The key to growth, from the point of view of the increase in real GDP has been on the development of the manufacturing sector, which has had a great growth during the 1970-2000 periods”. “Major products in the manufacturing sector are televisions, VCRs, telephones, and computer chips. State participation in manufacturing occurs in the production of textiles and clothing, footwear, food, and beverages. These industries comprise a large proportion of the manufacturing sector, but there are also new industries that have been developed in the last few decades with government aid. Machinery and transport equipment, construction materials, sugar cane and wood derivatives, and chemicals are important manufacturing industries. Direct government participation is noticed in the oil processing industry and passenger jet aircraft industry through partial ownership of such companies. Indirect government participation is noticed in the textile industry and machinery industry through export subsidies and low interest loans”.

Livestock and Agriculture.
The typically agricultural, beginning in the sixties a remarkable process of industrialization, from 1934 to 1938 Brazilian economy of the country was producing 55% of world total and represented 80% of export earnings. In the decade of the 80 s Brazil remained the world’s largest producer.
In Brazil it is grown mainly in the states of Paraná, Sao Paulo and Minas Gerais. The first agricultural product is coffee and the second is sugar cane) followed by cotton, soybeans (second largest producer), cocoa (second largest producer), cassava, rice, wheat, bananas, etc.
Livestock in Brazil is considered the first in Latin America, they highlight their cattle, sheep and swine cabins
Brazil has the largest commercial cattle volume in the world. Still, the contribution of agriculture to GDP is relatively low: only represents 5.5%, although this sector ensures 40% of exports.

Mining Industry
The mining sector in Brazil has large deposits of coal, mangonees, dolomite, bauxite, uranium, copper, phosphate, but particularly from the production of iron ore. The exploitation of mineral rich places him as the second largest exporter of iron and one of the leading producers of aluminum and coal

2.2 Investment Environment
2.2.1 Investment Environment in Brazil by Questionnaire
Current Business Environment in 2013.
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Foreign Business Trends of Japanese Manufacturing Companies
The Teikoku Databank found 443 Japanese companies in Brazil. According to an industry breakdown, the largest number of them, or 263 companies, were in “manufacturing,” accounting for approximately 60% (59.4%) of the total. This was followed by “investment” companies (28 companies, or 6.3%), inclusive of holding companies.

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(Data from Teikoku Databank)

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(Data from Teikoku Databank)

2.2.2 Equity Capital Markets (stock market information of brazil) BM & F BOVESPA
Brazil BOVESPA Index decreased 332.2 points or 0.76% to 43411.52 on Monday December 21 from 43910.60 in the previous trading session. Looking back, Brazil BOVESPA Index lost 6073 points or 12.23 percent during the last 12 months from 49,650.98 points in December of 2014. Historically, the Brazil Stock Market (BOVESPA) reached an all-time high of 73516 in May of 2008 and a record low of 0 in January of 1972.

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2.2.3 Foreign Exchange
The name of the currency used in Brazil is real and its exchange rate is: reals per US dollar – 2.1761 (2006), 2.4344 (2005), 2.9251 (2004), 3.0771 (2003), 2.9208 (2002). Brazil’s currency, the real (R$), was introduced on 1 July 1994. One real equals 100 centavos. There are coins of 1, 5, 10, 25, 50 centavos, and 1 real, and notes of 2, 5, 10, 20, 50, and 100 reals.

2.2.4 Foreign Direct Investment (FDI)
Foreign Direct Investment in Brazil increased by 6712 USD Million in October of 2015. Foreign Direct Investment in Brazil averaged 3313.74 USD Million from 1995 until 2015, reaching an all-time high of 20427 USD Million in December of 2010 and a record low of -22.10 USD Million in March of 1995. Foreign Direct Investment in Brazil is reported by the Banco Central do Brasil.

Incomes of FDI by Countries

United States 20.2%
Belgium 11.1%
Spain 10.7%
United Kingdom 7.3%
France 6.5%
Japan 4.9%
Germany 4.0%
Netherlands 3.9%
Italy 3.1%
Switzerland 2.7%
Luxembourg 2.6%

Source: Brazilian Investment Information Network – 2014.

Incomes of FDI by Sectors

Financial services 14.0%
Chemical industry 12.0%
Beverage industry 12.0%
Oil and gas extraction 6.0%
Telecommunications 8.0%
Electricity and gas 5.0%
Trade (except vehicles) 5.0%
Chemical products 4.0%
Automobile industry 4.0%
Metallurgical 4.0%
Real estate 3.0%
Food industry 3.0%
Insurance, social security and healthcare assistance 3.0%

Source: Brazilian Investment Information Network – 2014.

2.2.5 Infrastructures
The Brazilian government announced a huge package of concessions for the construction of roads, railways, ports and airports 198.400 million reals ($ 64,000 million), an initiative that seeks to attract investment to revive its stagnant economy Tuesday.
The program has a first phase scheduled until 2018 by 69,200 million reals and a second from 2019 to 129.200 million and is mainly concentrated in new construction and expansion of railway infrastructure (43%) and road (33% of total).

2.2.6 Another Merits and Demerits of Investment
Human Resources
The area of human resources in Brazil has almost the same problems as in other countries, but as well Brazil has different characteristics.
Money is one of the primaries causes of employee job dissatisfaction. Many of the HR staff extensive clinical training and are licensed to do therapy.
The benefit packages are not common.

Vast Consumers Markets

Brazil is a potential market it has the sixth largest GDP in the world and a population of around 200 million, half of which can be safely categorized as middle class., upper middle and lower class, is increasing.

Japanese Brazilians
Nipo-brasileiro in Portuguese is a Brazilian citizen of Japanese origin or Japanese immigrants in Brazil. Brazil is the Latin American country that has received the most ethnic Japanese immigrants, also has the largest Japanese population outside Japan, numbering over 1.5 million, slightly larger than the 1.2 million in the United States.

2.2.7 Advances of Japanese Companies
FDI of Japanese Companies
Brazil-Japan trade relations are expanding. Japan’s exports to Brazil have doubled and imports have tripled in 10 years. Nevertheless the share of Japan in Brazil’s exports in 2014 is only 3%, coming down from 4.5% in 2000. By the same token, Japan represents currently only 2.6% of Brazilian imports, down from 5.3% in 2000. This means that there is much room for improving bilateral trade in mutual benefit. Japan’s foreign direct investment (FDI) in Brazil is on the increase. Brazil occupies the 10th position in the rank of Japan’s FDI, according to International Monetary Fund (IMF) data. In order to foster bilateral trade and reciprocal FDI, it is key to establish a legal framework aiming at trade liberalization, elimination of investment barriers and enhancement of business environment. Concluding a Brazil-Japan Economic Partnership Agreement (EPA) is a necessary step in this direction

Numbers of Japanese Companies.
443 Japanese companies in Brazil.

2.3 Summaries of Religions
Catholic: 74%
Protestant: 15.4%
Atheism: 7.4%
Spiritualism: 1.3%
Afro-Brazilian: 0.3%

2.3.1 North
Manaus, Amazonas State
Amazon, Amazonas State
The Amazon covers 6.7 million km² and extends over 9 territories of which 53% are in Brazil. The estate of Amazon consists of 62 municipalities, for statistical purposes, it is organized in 4 mesoregions and 13 micro-regions. The capital of the State is Manaus; it is the main financial, corporate and economic center of the northern region of Brazil.

2.3.2 Northeast
Bahia, Ceará, and Pernambuco State
It is located in the center of the northeast region. It occupies an area of 98,311.6 square kilometers and a population of 8,931,028 inhabitants.
Recife is the capital, the most populous municipalities are: Recife, Jaboatão dos Guararapes, Olinda, Caruaru, Paulista, Petrolina, Cabo de Santo Agostinho and Vitória de Santo Antão. The economy is based on agriculture, livestock and animal creation and in the industry. The main industries are food, chemical, electrical, communications, metallurgy and non-metallic minerals.

2.3.3 Southwest
São Paulo State
São Paulo is one of the 26 states that along with Federal District forms the Federative Republic of Brazil. Its capital, the city of São Paulo, is the largest city in Brazil, South America and the eighth largest in the world. It has 44,035,340 inhabitants and is the richest state in Brazil, responsible for 33% of the GDP of the country. Its economy is the largest in South America after the Brazil.3 has a very large and diversified industrial park and agriculture and highly developed and productive farms.

Rio de Janeiro State
It is located in the eastern part of the Southeast. It occupies an area of 43,696 km². Its capital is the city of Rio de Janeiro. Its capital, Rio de Janeiro, is world famous for its beaches, the Sugar Loaf mountain, the Christ the Redeemer statue and its lively culture. The State of Rio de Janeiro is the largest producer of oil and natural gas in Brazil. And it has the second largest economy throughout Brazil (São Paulo alone has an economy larger than that of Rio de Janeiro).

2.3.4 South
Paraná
It is located in the southern region. Its boundaries are: north and east of the state of São Paulo; Also east Atlantic Ocean; south state of Santa Catarina; southwestern Argentina; west the Republic of Paraguay. It has an area of 199,307.9 km, being slightly larger than Senegal. Its population is 10,577,755 inhabitants and its capital and largest city is Curitiba. The climate is tropical. The state’s economy is based on agriculture (sugar cane, corn, soybeans, wheat, coffee, tomato, cassava), industry (agribusiness, automotive, pulp and paper) and plant extraction (wood and yerba mate). According to the GDP, the Parana is the richest state in Brazil fifth, behind São Paulo, Rio de Janeiro, Minas Gerais and Rio Grande do Sul. Paraná has a very productive agricultural sector and diversified, and a growth industry. It is the state’s corn and soybean producer and second largest cane sugar.

2.3.5 Midwest
Goiás
It has an area of 340 086,698 km², a population of 6,154,996 inhabitants and its capital and largest city is Goiânia. The Goiana city is home to the Greater Goiânia. The economy is based on trade, industry (mining, food, clothing, securities, metal, wood), in livestock (mainly cattle and buffaloes) and agriculture (soybean, rice, cotton, sugarcane).

2.4 Investment Regulations
2.4.1 Regulations of Foreign Investment Law
[In Brazil there is no main law governing foreign investment. This are subject to various laws the federal government and the Central Bank of Brazil which, taken together, form the legal framework that governed the foreign investment.]

Forbidden Fields
[FDI is prevalent across Brazil’s economy, although certain sectors are subject to foreign ownership limitations. A 1995 constitutional amendment terminated the distinction between foreign and local capital in general, but there are laws that restrict foreign ownership within some sectors, notably aviation, insurance, and media. The Government of Brazil currently restricts foreign investment in domestic airline companies to a maximum of 20 percent. A bill pending in the Chamber of Deputies (PL6716) would increase that ceiling to 49 percent.]

Regulated Fields.
Requests for Specific Authorizations Foreign investment is restricted and requires special authorization in the nuclear, health, land ownership, fishing, post office, telegraphs, aviation, aeronautics, media communications and highway freight sector.

Regulations of Capital
[There is freedom of repatriation of capital and remittance of interest and dividends abroad (provided that the investment is registered in the Bank Central). In general, there is equal to the national capital and abroad.]

Regulations of Foreign Exchange
[The National Investment Bank (BNDES) and The Brazilian government encourages and promotes FDI, it’s Guaranteed. Freedom of Establishment. Most of the barriers to foreign investor activity have been removed, particularly on the stock market.] [In Brazil there is no main law governing foreign investment. This are subject to various laws the federal government and the Central Bank of Brazil which, taken together, form the legal framework that governed the foreign investment. Foreign investments can be freely made, through subsidiaries or joint ventures.]

Another Regulation.
The main national authorities, promoters of investment are:
•Agency for Promotion of Exports and Investments (APEX).
•National Investment Information Network (RENAI), National Confederation of Industry (CNI).

Investment treaties with; BLEU (Belgium-Luxembourg Economic Union)
Chile, Cuba, Denmark, Finland, France, Germany, Italy, Republic of Korea, Netherlands, Portugal, Switzerland, United Kingdom, Bolivarian Republic of Venezuela.

2.5 Investment Incentives
2.5.1 Investment Supports to Specific Areas
[Support for foreign investment in Brazil depends on the geographic area and sector of the economy to which direct investment in the country. In general, incentives include tax benefits, specific funding programs support and other concessions at the federal, regional, state and municipal levels.
The federal government offers incentives to companies that invest in areas less favored or priority sectors. These incentives are:
•Financing on more favorable terms granted by public banks developmental.
•More favorable tax treatment, with reductions in tax rates, deductions, exemptions and tax credits.]

Manaus Free-Zone
The Manaus Free Trade Zone is a free import and export trade area where special fiscal incentives apply, set up with the objective of creating in the Amazon Region an industrial, commercial and agricultural center under economic conditions that allow its development, given local factors and the great distance separating it from its markets.

Amazon
[The Bank of Amazonia focuses its activity on promoting the development of
Amazon region (northern region of Brazil, Mato Grosso and the state
Maranhão).
It offers various programs of corporate finance (loans) directed basically to agriculture and agribusiness.
•Financing Program for Sustainable Development of Amazonia (FNOAmazônia
•Sustentável).
•Agricultural Finance Hotline.
•Program Fleet Modernization of Agricultural Tractors and Accessories
•Asociados- MODERFROTA.
•MODEINFRA program.
•Agro Development Program business- PRODEAGRO.
•Development Program Fruticultura- PRODEFRUTA.
•Commercial Planting Program and Recovery Floresta- PROPFLORA.]

Northeast
[Banco do Nordeste’s primary mission is promote the development sustainable development of the Northeast region (including in its geographic area of operation northern states of Minas Gerais and Espirito Santo), through the contribution of financial resources and technical training support for projects regional.
The bank offers products and programs of advantageous financing conditions companies located in the Northeast region in the following areas:
•Agro business
•Commerce and services
•Infrastructure
•Industrial
•Rural
•Technology
•Tourism
The initiative of Banco do Nordeste in providing financing includes not only the act of providing credit but also a technical support of the resources granted] .

2.5.2 Investment Supports to Specific Industries
Programma de Incentivos ao Setor de Semicondutores (PADIS) and Programa de Apoio ao Desenvolvimento Technológico da Indústria de Equipamentos para TV Digital “(PATVD)
The PADIS (Programa de Apoio ao Desenvolvimento Tecnológico da Indústria de Semicondutores) is a program developed to Foster investments in this sector through the concession of zero rates to the IPI, PIS and COFINS, incident on local acquisitions and importations of goods destined to be used in the manufacture of a specific list of products enacted by the Brazilian Ministry of Science and Technology.
The PATVD (Programa de Apoio ao Desenvolvimento Tecnológico da Indústria de Equipamentos para TV Digital) program grants the reduction to zero of the rates of the IPI, PIS and COFINS upon the local acquisition and the importation of raw materials, fixed assets and software to be used at the manufacture of digital transmission devices listed by the Federal Government. The PATVD also grants zero rates to CIDE due upon the remittance of payments abroad for royalties, as well as for the payment for the rendering of technology services from abroad. In addition, PIS, COFINS and IPI charged on the sales transactions with products manufactured under the PATVD are also zero rated”.

Regime Especial de Incentivos para o Desenvolvimento da Infla-Estrutura (REIDI)
Técnico Incentivos (TI)
REIDI (Regime Especial de Incentivos para o Desenvolvimento da Infra-Estrutura) is a special regime aimed to foster the investments in the infrastructure sector by private entities, specifically to, companies interested in investing in the transport, port facilities, energy, sanitary and irrigation sectors. In order to be able to be granted by REIDI, the company shall apply within the Federal Government. . The benefits of the REIDI mainly constitute of the suspension of PIS and COFINS charged on local acquisition and importation of new machinery, tools and equipment to be used in or integrated to infrastructure investments destined to be incorporated in the fixed asset of the beneficiary. Furthermore, also the material used in the construction of infrastructure is granted with the suspension of PIS and COFINS under the REIDI regime. Upon the use or incorporation of such goods to the infrastructure investments the suspension of the PIS and COFINS social contributions will be converted into zero rates.

2.5.3 Another Incentives
Incentives by Information Law
Freedom of Information Law
[Freedom of Information laws (FOI laws) allow access by the general public to data held by national governments. They establish a “right-to-know” legal process by which requests may be made for government-held information, to be received freely or at minimal cost, barring standard exceptions.
In Brazil, the Article 5, XXXIII, of the Constitution sets that “everyone shall have the right to receive information of his own interest or of public interest from public entities, which shall be given within the time prescribed by law”. Also, article 22 of the Federal law nº 8.159/1991 grants the right to “full access to public documents”. A statute passed in 2011 and that will enter into force in 2012 (Federal Law 12.527/2011, promulgated on 28 November 2011) regulates the manner and the timetable for the information to be given by the State.]

References:
http://www.datosmacro.com/pib/brasil
https://es.wikipedia.org
http://www.tradingeconomics.com/brazil/gdp
http://es.global-rates.com/estadisticas-economicas/inflacion/indice-de-precios-al-consumo/ipc/brasil.aspx.
https://es.santandertrade.com/analizar-mercados/brasil/cifras-comercio-exterior.
http://html.rincondelvago.com/economia-de-brasil.html
https://santandertrade.com/es/analizar-mercados/brasil/politica-y-economia
http://www.teikoku.com/wp-content/uploads/2014/08/Japanese-Companies-in-Brazil_English.pdf
https://en.santandertrade.com/establish-overseas/brazil/foreign-investment http://www.tradingeconomics.com/brazil/foreign-direct-investment
http://www.compeap.com/human-resources-in-brazil-different-country-similar-problems/ https://es.wikipedia.org/wiki/Nipo-brasile%C3%B1o
https://www.keidanren.or.jp/en/policy/2015/074.pdf
http://www.brazilsourcing.com/manufbase.php
http://www.state.gov/e/eb/rls/othr/ics/2013/204608.htm
http://investmentpolicyhub.unctad.org/IIA/CountryBits/27?lien_externe_oui=Continue
http://www.fayswood.com/en/partenariats/13-brazil-investment-and-plantations-in-the-amazon
http://www.worldbank.org/
http://www.tradingeconomics.com/brazil/stock-market
http://www.lek.com/our-publications/consumer-spotlight/understanding-brazil-consumer-retail-trends-insights