1. As a senior manager with Diebold, carry out a critical evaluation of the benefits, costs and risks associated with doing business in Brazil. (1000 words)作為迪堡的高級經理，對在巴西開展業務的收益、成本和風險進行關鍵評估。（1000字）
This essay focuses on the critical evaluation of the benefits, cost and risks, when the Diebold inc. is doing business in Brazil. The risks of doing business in Brazil are political risks, economic risks (heaver debt burden, high interest rates, and large volatilities of exchange rate), law risks and cultural risks. However, the benefits of doing business in Brazil are stable political situation, growing economic and great population. The high interests rate would be the Diebold’s financial cost.
The risk with doing business in Brazil 在巴西做生意的風險
The overall political situation of Brazil is relatively stable. The Dilma Rousseff's government was established in 1 January, 2011 (The World Bank, 2015). The government stressed that the government policy and development strategy established by previous government would be performed continually. However, there exist some unstable factors in the Dilma Rousseff's government. In June 2013, the people in many places of Brazil staged a demonstration to protest the lack of public services, rising prices and the government corruption and so on. In addition, there are more than 30 legal parties approved by Brazil’s supreme election court.
The social instability factors combined with too much parties would bring risk, difficulty and obstacles to Diebold on doing business in Brazil. 社會不穩定因素加上政黨過多，將給迪博爾德在巴西做生意帶來風險、困難和障礙。
1. The domestic development is not balanced. According to the results of national family sampling survey published by Brazil’s geographical statistics in 2010, in some economy developed area of south and south east, the average per capita income was close to the level of developed countries (PwC, 2013). However, in some areas of Northeast and Midwest, the economy used to very poor and backward. The imbalance of the economic development would be obstacles to Diebold on doing business in Brazil
2. The debt burden of Brazil is very heavier. In 2010, the Brazilian government debt was as much as 242.788 billion BRL, which account for 66.1% of GDP. The Brazilian government debt is much higher than China (17.7%) and South Africa (35.7%). Brazil’s net balance of public debt is 147.582 billion BRL, which account for 40.16% of GDP (PwC, 2013). The method of solving debt problem is increasing taxes and cutting fiscal expenditure. The method will great negatively affect the business of Brazil.
3. The interest rates are very high in Brazil. Both the deposit interest rate and loan rate in Brazil are very high and unstable, which is not conducive to Diebold’s financing. Furthermore, the high interests rate increase the Diebold’s financial cost. In specific, since 2011, the Brazilian held several increases in interest rates to fight inflation. By the end of February 2011, the average one-year deposit rate was as high as 12.0% in Brazil. Specifically, the consumer interest rate on deposit was 12.6%, the company interest rate on deposit was 11.5%. The average one-year loan rate was as high as 38.1%, where the consumer interest rate on loan was 43.8%, the company interest rate on loan was 30.7%, which was for more than other countries 9 (PwC, 2013). In other words, the benchmark interest rate and real interest rate are highest all over the world. Thus, the greatest interest rate in Brazil is the risk to Diebold on doing business in Brazil.
4. The volatilities of exchange rate is large. Brazil is taking floating currency. In recent year, the volatility of exchange rate between BRL and US dollar has been changed frequently, which will threat the investment and business of Diebold (TradePortal, 2014).
5. The tax rate in Brazil is very high and the overall tax burden is very heavy. There are as many as 58 kinds of taxes in Brazil, which brings heavy burden for doing business in Brazil (PwC, 2013).
Brazil has a very rigorous complicated legal process. In addition to domestic laws on business, there are seven important laws which are directly related to overseas-funded enterprise: rules for implementation of Foreign Investment Administration Law, Labour Laws, Corporation Law, Securities Law, Industrial property law, Antitrust Law and Environmental Law(David Biller 2015).
Furthermore, all stipulation of these tax laws is very complex. The Brazilian government divided the taxes into the federal taxes, state taxes, and municipal government taxes and so on. In other words, Brazil is one of the countries with most complex business rules and laws all over the world. According to the global business environment report published by the World Bank in 2015, after comprehensive assessing various index on the business environment of 183 countries and regions, the country’s ranking in 127th in the world. The main reason for the bad ranking is there are some obstacles on doing business in Brazil.
There is great difference on Brazil’s racial and cultural. In Brazil, a part of residents in North and Northeast is Europeans and Africans; another part is the indigenous people. The most part of residents in southern part are descendants of the European. There is closely relationship between different ethnic population structure and the performance of the economy. If Diebold want to do successful business in Brail, Diebold should design ATM with different feature which satisfying the demand and the cultural of differentracial. In other words, Diebold should be familiar with the ethnic structure in different parts of Brazil and reasonably adjust the product according to the different population structure. Thus, different ethnic population structure would be the challenge to Diebold.
The benefits with doing business in Brazil
In recent years, Brazilian jointed in the BRIC countries and the economics of Brazilian has developed rapidly. The growth rate of GDP has maintained a high level for many years. By 2011, Brazil's economy has gone beyond the UK and become the second largest economic entity of America and the sixth-biggest economy in the world (The World Bank, 2015). Thus, Brazilian can provide a good macroeconomic environment for doing business.
The population of Brazilian is ranking fifth in the world and the population density is about 22 people/km2(The World Bank, 2015). Moreover, Brazil’s population has been growing. The great number of population means that the great opportunities for selling ATMs. Thus, demographic of Brazilian is one of the benefits for doing business.
The risks of doing business in Brazil are political risks, economic risks (heaver debt burden, high interest rates, and large volatilities of exchange rate), law risks and cultural risks. However, the benefits of doing business in Brazil are stable political situation, growing economic and great population. The high interests rate would be the Diebold’s financial cost.
David Biller 2015, Brazil’s Highs and Lows, [Online]
PwC, 2013, Doing Business and Investing in Brazil, Sao Paulo,[Online]
Santander TradePortal, 2014,BRAZIL: FOREIGN INVESTMENT, [Online]
The World Bank, 2015, Brazil Overview, Context, [Online]
The World Bank, 2015, Brazil Overview, Strategy, [Online]
The World Bank, 2015, Brazil Overview, Results, [Online]