Thursday, July 23, 2009

Spotlighting the "B" in BRIC

The Council on Foreign Relation's recent backgrounder on Brazil calls out the country's increasing presence on the world stage on issues of trade and energy. The article points to currency stability and export-led growth as driving Brazil's robust economy, already the eighth largest in the world.

While most multinationals focus their attention on China and India, Brazil is certainly earning its keep in the BRIC (Brazil, Russia, India, and China) club. Like China and India, Brazil is expected to recover quickly from the global recession. Foreign investment has spiked in the country, drawing venture capital and significant investments from multinational giants such as Wal-Mart, Telefonica S.A., and Alcoa. Brazil's potential is not lost on China either. China has surpassed the United States to become Brazil's biggest trading partner.

There are several reasons Brazil may be an attractive target for multinational corporations. First, Brazil is a consumption-oriented society with a population that is wealthier on a per-capita basis than both India and China. Second, unlike the savings-oriented Chinese, Brazilians embrace credit - when they can negotiate zero or extremely low interest rates - as a method of smoothing out their often unpredictable earnings. This increases the affordability of goods and expands the market to include greater portions of the lower-income classes. Finally, 85% of Brazil's population is in urban areas. This concentration of demand makes it easier to get products and services into the hands of consumers. It may be worthwhile, therefore, for multinational corporations to take a close look at the "B" in BRIC when setting strategies for future growth.

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