Classroom Exercises - CIBER



EXERCISEAssessing Brazil’s Global CompetitivenessPrepared by the World Economic Forum, the Global Competitiveness Index provides objective measures of the factors (‘pillars’) that determine countries’ effectiveness in international competition. The Index’s measures provide an annual assessment that policymakers can use to enhance institutional quality, skills, innovation, and other determinants of productivity and global competitiveness.Download and review the 2019 Global Competitiveness Report PDF here: the following questions:How does Brazil rank this year on the Global Competitiveness Index? How did it rank last year? How does Brazil compare to other Latin American countries? How does it compare to high performing countries in the Index (e.g., Singapore, Netherlands, United States)? (Hint: In the Report, you can quickly find the Index and information on Brazil by searching the keyword ‘Brazil’. On your keyboard, press Ctrl F and enter the word ‘brazil’. Detailed information on Brazil is in the Report on pages 14, and 110-112).Which two or three of the Global Competitiveness variables (See the 12 ‘Pillars’) are most relevant to conditions in Brazil today? Justify your answer.What do you think of the Methodology used by the World Economic Forum in capturing the Global Competitiveness rankings? Do the 12 pillars capture the most important determinants of global competitiveness? Why or why not? (Hint: Information on the Methodology is in Appendix A, beginning on page 611.)What are the implications of the rankings for Brazil for (i) entrepreneurship in Brazil, (ii) companies now operating in Brazil, (iii) foreign firms wishing to enter Brazil to start a business or perform value-chain activities there, (iv) the economy of Brazil?According to the Report, among Latin American countries, Brazil has improved significantly this past year in the Global Competitiveness rankings. In what areas has Brazil improved the most? What lessons can Brazil learn (if any) from these efforts? What lessons can Brazil learn from those countries that score highest in the rankings?Based upon your analysis, make five public policy recommendations for improving the Global Competitiveness of Brazil.Background on BrazilBrazil is Latin America's largest economy with a Gross Domestic Product of about $1.9 trillion, making Brazil one of the world’s largest economies. In purchasing power terms (PPP), Brazil’s GDP is about $3.4 trillion. Agriculture, mining, manufacturing, and services are key sectors. Brazil’s presence in international financial and commodities markets is expanding. It is one of the world’s largest car markets. Major exports include aircraft, electrical equipment, automobiles, textiles, iron ore, steel, and coffee. Per-capita income is about $9,000, which is significant by world standards. In the past two decades, the country has implemented policies aimed at controlling inflation and promoting economic growth. Earlier efforts by Brazil’s Central Bank to hold interest rates high (in order to combat inflation) tended to dampen investment and entrepreneurship. More recently, the Bank has lowered interest rates. Brazil is a leading emerging market. Emerging markets are countries that, in contrast to advanced economies (such as Germany, Japan, and the United States) are undergoing rapid industrialization, modernization, and economic growth. Brazil is an attractive market and low-cost base for manufacturing and global sourcing. Brazil and other emerging markets (such as China, India, and Mexico) increasingly are giving birth to “new global challengers”, top companies that are becoming key contenders in world markets, and challenging more traditional multinational firms based in the advanced economies. The United States is a top exporter to Brazil, and accounts for 12 percent of Brazil’s total imported goods. Brazil is attractive as a market for several reasons:? Brazil’s population of more than 210 million is the fifth largest in the world.? Brazil has the highest per capita income of any of the leading emerging market countries. In the past decade, 50 million people have joined Brazil’s middle class, and earn between $11,500 and $29,000 per year (in purchasing power parity, PPP, terms).? Many managers consider Brazil an essential market for firms that are serious about international business. However, doing business in Brazil can be costly, including substantial costsrelated to distribution, government procedures, employee benefits, environmental laws, and a complex tax structure. Logistics is especially challenging, in largest part due to insufficient infrastructure and a challenging transportation landscape in much of the country. Foreign firms also face a complex customs and legal environment. Companies that perform best tend to establish subsidiaries in Brazil via foreign direct investment. A physical presence allows such firms to learn the market and access customers more efficiently. Brazil has a track record of bribery and corruption, which hurt business and consumers. A government commitment to fight corruption would improve the business climate. The recent scandal surrounding energy giant Petrobras posed another challenge to business and government, increasing uncertainty and hurting growth. Source: CIA World Factbook, Brazil, Central Intelligence Agency entry at ; Global Competitiveness Report, ; International Monetary Fund, . ................
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