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Example research essay topic: Purchasing Power Parity Gdp Real Growth - 1,674 words

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Report On Economy of Brazil The product to be produced: Clothes Brazil is the largest and most populous country in South America. It went through long-lasting struggle for the ability to govern independently and to develop its industry and agriculture. Thanks to its diverse and rich natural resources and numerical manpower, Brazil in 1970 at last became one of the leading countries on the continent. Though a lot changed from now on, and Brazil continuous to grow and develop rapidly, the large-scale inequality in the income distribution remains to be its keen weakness. As already mentioned above Brazil is situated in South America, particularly in its Eastern part, and is bordering with the Atlantic Ocean. It occupies 8, 511, 965 sq km total, of which 8, 456, 510 sq is land, and 55, 455 sq km is water.

Compared to the Unite States it is slightly smaller, as US occupies the area of 9, 629, 091 sq km. It has boards with Argentina, Bolivia, Colombia, French Guiana, Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela. The population of Brazil is approximately 176, 029, 560, as far as the government last conducted a census in August 1996. This figure was calculated from the previous one (157, 079, 573) with the help of the infant rate, mortality rate, and other indicators of he population growth. Due to the product peculiarities the target market is people aged 18 to 64 (regardless sex). In Brazil they are about 60 % or 10561776.

Brazil climate is tropical on the most part of the country, but some southern territories experience temperate climate. If compare it to the United States, in particular New Jersey, it is obvious that the climate of the south of Brazil is much alike that of New Jersey. It mostly thanks to geographical location - proximity to the Ocean, average temperatures and precipitations. The type of the governments is federative republic. Capital of Brazil is Brasilia. Chief of state is President Fernando Henrique CARDOSO (since 1 January 1995), he is the chief of state as well as the head of the Government.

Brazil economy is primarily market-based. Having highly-developed and considerable agricultural, mining, manufacturing, and service sectors, Brazil is successfully strengthening its influence and share at the world marketplace. The economy of the country outbalances that of the whole South America. One of the most important problems in coming to Brazilian market is the risk an investor takes while investing in the economy.

Due to the huge current account deficit and the consequences of the Asian financial crisis in 1997 some adjustment in the structure of the economy and reforms were made. Having designed a new fiscal policy, the country got IMF-sponsored financial aid in the amount of $ 41. 5 billion in 1998. Up to 2001 some other improvements were made and the economy started to experience some economic growth. It slowed down significantly due to the hints of Central Bank aimed to stop the inflation. Nowadays the situation in Brazilian market is quite stable thanks to the trade balance restoration. CIA World Fact book states that Brazil purchasing power equivalent is $ 1. 34 trillion (2001 est. ) that is not much for the country of such size and population.

In Us, the country with approximately similar population number, this number equals $ 10, 082 trillion, which is about 10 times more. With GDP real growth rate of 1, 9 % its purchasing power parity stays to be as low as $ 7, 400. Considering the comparison with the US, an interesting thing comes to light. With the GDP real growth rate of only 0. 3 %, the purchasing power parity is as large as $ 36. 300.

To find out more about the market the firm is coming to it is important to compare its structure to that of the US market. The composition of GDP in Brazil is different from that of the United States. In Brazil 9 % of GDP is composed by its agriculture sector, In the United States it is only 2 %. Talking about manufacturing and services they are 32 % and 59 % respectively in Brazil, and 18 % and 80 % respectively in the United States. Considering the information stated above, it is no wonder that the population below poverty line in Brazil is about twice as large as in the United States. In the year 1998 it made 22 % of the total population of the country.

The unemployment rate in the year 2001 made 6, 4 % that is rather high but not dangerous. It is a common number for Brazil and it does not reflect that unemployment is a great problem in this country. With about 80 million working force, it still has plenty of opportunities to enter Brazilian labor market thanks to its unemployment and low social security standards. Brazil is quite rich in natural resources. The most important of them are: land, timber, hydropower, petroleum, uranium, iron ore, nickel, bauxite, manganese, phosphates, tin, platinum and gold.

Natural hazards threatening Brazil are continuous droughts in northeast, sudden frost and floods in south regions. Those natural resources are the basis for the industries developed in Brazil. The country is a producer of cement, chemicals, motor vehicles and parts, machinery, machine tools, different equipment, aircraft, iron ore, tin, steel and lumber as well as textile and shoes. Though the stated above resources give enormous potential for the country to develop its industries, its growth rate is just 1 % per year. Agriculture makes 9, 4 percent of gross domestic product. Arable land constitutes only 6 %; irrigated land is 26, 560 sq km.

Crops mostly consist of wheat. rice, soybeans, corn, sugarcane, coffee, cocoa, citrus and beef. Brazil national currency is Real. Its code is BRL, and per one US dollar u can get 2. 378 BRL. It is important to note that since 1999 the official currency exchange rate floats independently with respect to USD. When deciding the opening of some operation facility in a country its communications and transportation infrastructure should be considered.

In Brazil there are relatively good working systems of telephone communications. There were about 17, 039 million telephone lines in use in the year 1997, and approximately 4, 4 million cellular phones in use. Though no update information could be found, it is easy to suggest that those numbers has grown dramatically due to technological progress it communicational systems throughout the world. All other sorts of communications such as satellite systems, radio, television and Internet are developed in Brazil too. Transportation infrastructure is no that well developed in Brazil. It has about 5, 679 km 1. 600 -m broad gauge 1, 199 km of which are electrified; 24, 666 km 1. 000 -m narrow gauge 930 km of which is electrified; 336 km 1. 000 -m and 1. 600 -m dual gauges (three rails); 194 km 1. 440 -m standard gauge.

In addition to that Brazil has 247. 8 km of suburban railway consisting of 170. 8 km of 1. 600 -m gauge, 75 km of which are electrified, and 77 km of 1. 000 -m gauge (1999 est. ). Highways are quite satisfactory in the country. They total up to 1. 98 million km, only 184, 140 km of which are paved and 1, 795, 860 km unpaved. The waterways are about 50, 000 km.

The ports and harbors of Brazil are Belem, Fortaleza, Ilheus, Imbituba, Manaus, Paranagua, Porto Alegre, Recife, Rio de Janeiro, Rio Grande, Salvador, Santos, and Vitoria. There also 3, 365 airports, 627 of which have paved runways, and 2, 738 - unpaved runways. The last, but the most important point is the current economic trends and reforms in the country, its today fiscal policy and taxation. In Brazil it is a matter of importance now, as the economic situation in the country is far from stable.

The last fiscal policy plan was preceded by five other stabilization reforms aimed to master the chronically growing inflation. The end of the inflation tax and the weak monetary policy worsened the situation, causing rapid inflation and real debt to GDP growth. Having accepted new fiscal policy, Brazil received rather sufficient support package from the IMF. It not only provides the country with money, but also assist in the fortifying its international positions, stabilizing currency exchange rate, and assisting Central Bank in lowering the interest rates.

The IMF assistance to Brazil is planned to be continued in 2003. That is why the stabilization of the countrys economic situation seems to be obvious. Though some research on market segmentation and saturation with the product our company is going to produce is useful, having gathered all the above information it is possible to make some conclusions. I would suggest the company to build a branch plant in Brazil and to produce clothes there. The reason of my approval is that the country has needed natural resources and textile production and enough skilled labor force (not too expensive, 6, 4 % unemployment). The communication and transportation infrastructure is developed well enough for the company to not face any troubles of managing its new plant.

Though the distribution of income is not equal in the country, due to the economic and political reforms, that are taking place right now, the middle class is starting to grow in number. This also points out that there is a niche for the middle-class consumer products. The already mentioned economical stabilization and growth will for sure result in the growth of the average family income. More over the target group is about 60 % of all the Brazilians, which will allow generating huge earnings. The last thing I would like to add is that those economical reforms that are held right now alongside with the extensive support from IMF lessen the risk of investing in Brazilian market.

That is why it would be a sound decision to build an operation facility in Brazil and to experience growth together with it. References: web web web web web web web


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