Brazil as an emerging market - Assignment Example

? Brazil as an Emerging Market BRAZIL AS AN EMERGING MARKET Introduction Emerging markets have their own challenges and opportunities that make them both cautious and viable as the future of the world’s economic powerhouse (Frenkel, 2009). Generally, there are general characteristics that can be associated with as many emerging markets as possible. However, not all emerging markets of the world can be described in exactly the same manner. In most cases, there are leading factors to the determination of the specific characteristics that a given emerging market would possess. Commonest among these factors are the market’s history and its evolutional processes (He, 2009). The nature of changes experienced as part of the history and evolution of the emerging market’s formation goes a long way to determine the rate of growth and development that may be generally associated with the market. In this paper, Brazil is used as a case study for emerging markets to critically assess the market in terms of its history and evolution. Consequently, some of the rapid and pragmatic changes that have been experienced as part of this history shall be outlined, making a case for each change as either being positive or negative for the market’s future fortunes. The approach of the writer is pivoted on a perception that the various emerging markets recognized by global development agencies such as the World Bank and International Monetary Fund are in constant competition with each other and so it is important that each of these markets develop its history to be a competitive advantage for winning competitive global market battles. Brief analysis of Brazil’s market history and evolution Brazil as an emerging market possesses a history that is rooted in the preference for robust domestic activity as against export demands. This is because for several years running, the market has recorded slow growth in exports as against the contributions that local market activities make to the country’s gross domestic product (He, 2009). There is also a history rapid growth in the private sector as against the public sector. This is because most of the government’s economic principles are based on microeconomic principles, making business and investment more lucrative for local private entrepreneurs as against foreign investors who would prefer economies structured on macroeconomic competences (Todea, 2011). What is more, there is a long standing history in the dependence on specific sectors of the economy as against others. Examples of these sectors that receive dominant attention are agricultural sector, which is responsible for 39.4% of Brazil’s GDP and the mining sector, which makes 18.6% of GDP (Galai, 2007). Finally, there is generally unstable to high bank interest rate; a phenomenon that makes foreign investment less lucrative. Brazil GDP Growth Rate, 2008 to 2012 Source: Trading Economics (2013) Significant characteristics of the market, its evolution, and changes Young and Growing Labor Population Right from the history of the country when the first population census was held after colonization in 1872, Brazil has kept a very high population growth rate of 2.4% per annum (Crowder and Phengpis, 2005). This puts the current population of the country at 190 million people. Characteristically, a very high number of these people, made up of 79.8% of the population live in Southeastern region alone (Frenkel, 2009). This trend of single region dominated population has not changed with changing evolution of this emerging market. However, one phenomenon that has changed with time is the fact that there is currently a very young population margin, meaning greater percentage of the population is youth. What is positive about the young and growing labor population of the emerging market is that the large size of the population has been seen by government as an asset rather than a liability, expanding the human capital of these people to take up the labor force. It is however negative if the trend of population growth will not decrease with time because the geographic size of the market never increases and the economy will be too pressurized to meet the population demand. It is also a negative phenomenon that greater part of the population is dense in one city because it defeats the notion of equity of human resource. Technological Advancement Technological advancement in Brazil has come through several evolutions and changes before getting to the stage it is now. From the very noble beginnings, nothing much than the use of plain old telephone systems (POTS) were known to be used by most state and private corporations. Today, mobile telephony, backed by the use of internet services has pushed business transactions in Brazil to a global pedestal. Generally, the role of technology in emerging markets has been said to be very important as it embraces global market principles and standards (Galai, 2007). For example through electronic commerce and electronic banking, the networking of multinational companies can easily become possible, eliminating the need for foreign investors to deal in direct representation of their asset and money before the conduct of business can be possible. The changes in technological advancement are thus considered as positive and hold the key for this emerging market to becoming a preferred destination for foreign investors. Distribution Channels Distribution channels have been identified as very important aspect doing business in any emerging market. This is because greater part of business forms in emerging markets has been found to be dependent on manufacturing, a key component of which is distribution (Crowder and Phengpis, 2005). Specifically in Brazil where the agriculture sector holds the largest stake in GDP contribution, focus on manufacturing through refining of agricultural products is even greater. What is quite disturbing about the distribution channels in Brazil is that because more than half of the country’s population is in Southeastern region alone, there is an unequal distribution range for most remaining cities. Even in Southeastern, millions of products are often found to be locked up in smaller shops and having fewer retailers. Though the connection with the outside world is positive and remarkable, there remains an internal distribution problem where some villages are without retail shops. The effect of this is that the cost of transportation to nearby towns and cities to buy on wholesale basis makes the cost of good and products expensive in villages and other smaller towns. Conclusion From the discussions so far, a number of conclusive remarks can be made on Brazil as an emerging market in relation to its history, evolution and changes. First, it can be concluded that Brazil has made good of most of its history, wined around four major aspects of growth identified as political, economical, social and technological aspects of the nation’s history. The characteristic of Brazil as depending largely on its young and growing population by empowering the population to become the major source of labor and human resource for the emerging market is a step in the right direction because it has yielded several useful benefits, making the country a very ideal destination of foreign investors who want to prioritize in cheap labor (Todea, 2011). Indeed it can also be concluded that there remain significant aspects of the nation as an emerging market that require urgent attention for pushing it into a global economic force. Particularly, there is the need to continue opening up market policies that makes Brazil more attractive to more foreign investors so that foreign direct investments will go up. This may be done through macroeconomic reforms that focus on availability of credit to investors. Reference List Crowder, W. J., & Phengpis, C. (2005) Stability of the S&P 500 futures market efficiency conditions, Applied Financial Economics, Vol. 15, Issue 12: 855-866. Frenkel, J. A. (2009), Further evidence on expectations and the demand for money during the german hyperinflation, Journal of Monetary Economics, Vol. 5: 81-96. Galai, D. (2007), Tests of market efficiency and the Chicago Board Options Exchange, Journal of Business, Vol. 50: 167-197 He, X. (2009) ‘The development of entrepreneurship and private enterprise in the People’s Republic of China and its relevance to transitional economies’, Journal of Developmental Entrepreneurship, 14 (1), pp.39-58, [Online]. Available from: http://sfxhosted.exlibrisgroup.com.ezproxy.liv.ac.uk/lpu?title=Journal+of+Deve lopmental+Entrepreneurship&volume=14&issue=1&spage=39&date=2009 (Accessed: 20 October 2010). Todea, A. (2011), The influence of foreign portfolio investment on informational efficiency: Empirical evidence from Central and Eastern European stock markets, working paper Trading Economics (2013) Brazil GDP Growth Rate. [Online] http://www.tradingeconomics.com/brazil/gdp-growth [14th September, 2013] Read More