Brazil The Republic of Brazil is the largest country in South and Central America. Numerous indigenous tribes predated the arrival of the explorer Pedro Álvares Cabral who claimed the territory for Portugal in 1500.

Brazil remained a Portuguese colony until independence in 1822, and the creation of the Empire of Brazil. The country became a presidential republic in 1889. A military junta governed from 1964 to 1985.

Brazil’s Constitution (established in 1988) formed the Federal Republic which is made up of the Federal District, 26 States and 5,564 Municipalities.

Civil society Brazilians make up a diverse multi-racial society composed of descendants of indigenous peoples, Portuguese settlers, enslaved people and European and Japanese immigrants. Interracial marriages have created a tolerant and mixed society.

The Roman Catholic religion predominates, with two-thirds of the population identifying as Catholic.

There is a high income inequality (Gini index =

55). Most of the poor are concentrated in enclaves known as ‘favelas’.

Government Brazil is a Federal Republic headed by the President and the Vice President, elected every four years with the right to re-election for one more consecutive term. The president appoints cabinet ministers who are directly responsible to them and whom they can dismiss at any time. The legislative body is the National Congress, consisting of a Senate and a Chamber of Deputies.

The Heads of the Senate and Chamber of Deputies play a critical role in consensus building prior to key votes. They also control large budgets and can authorize congressional inquiries. In addition, the president of the Chamber of Deputies is third in the line of succession in the event of the president’s impeachment or early death, and the president of the Senate is fourth. Such an event took place in 2016 when President Dilma Rousseff was deposed.

Government in each state reflects the structure at the federal level. States possess those powers that are not specifically reserved for the federal government or granted to municipal councils. States are led by a governor, elected by direct vote. They are only allowed to serve for two consecutive terms. Each state has an elected State Assembly.

Economy The Brazilian economy is characterized by a huge internal market in terms of population and natural resources. After the dictatorship of the 1960s and 1970s, Brazil enjoyed a period of growth but with high inflation. An austerity measure, ‘the Plano Real’

of 1994 reduced inflation but the country still experienced a high account deficit. During President Lula’s presidency from 2003 to 2010 the economic situation improved, and inflation was reduced. Despite external debts, Brazil’s middle class is growing, and poverty is declining. Although in 2015 there were still 40 million people living in poverty, this statistic compares favourably with the early 2000s, when the figure was 60 million. However, the economy remains vulnerable to fluctuations caused by global crises or domestic politics. After 2010, with a reduction in China’s imports and a decline in commodity prices, Brazil entered a period of recession: investors’

confidence declined, and corporate debts and bankruptcy increased. Brazil still relies on a significant degree of government intervention to protect its local industry, such as quotas, tariffs and local-content rules, to implement tax breaks and subsidies to encourage demand for locally produced goods.

However, it has been estimated that 85 per cent of small businesses do not pay taxes.

Labour markets The acceleration of economic growth during the first decade of the twenty-first century produced increased demand for labour. The jobless total fell to below 6 per cent, but by 2016 it had increased to 11 per cent.
The ‘informal’ sector is estimated to account for 40 per cent of GDP (90 per cent of workers in agriculture and fishing are believed not to have formal work contracts). This informal sector has long provided a social safety net for low earners amongst the urban poor, and this group continues to account for the largest proportion of workers employed in the informal sector.
Trade union density (i.e. the proportion of salaried workers that belong to a trade union) is around 18 per cent, a relatively high percentage compared to other emerging countries.
Financial system The Brazilian banking sector, both private and state-owned, is growing rapidly. With more than 140 listed banking institutions, the sector is still of a moderate size relative to the economy, with a credit-
to-GDP ratio of less than 50 per cent. The mix of state-owned, private and foreign banks is highly concentrated, with the five largest banks accounting for about 70 per cent of sector assets. Banco do Brasil, the National Bank for Economic and Social Development (BNDES), and Caixa Econômica Federal (CAIXA) are the first-, third- and fourth-largest banks, respectively, with nearly 40 per cent of sector assets in total – all of them at least partly state-owned.
Brazil also has a buoyant fintech ecosystem, being the headquarters of Nubank, the largest digital bank in the world, with more than 48 million customers.
Business entities Instead of pure privatization, the Lula administration promoted public–private partnerships (PPP). PPP companies are enterprises with the majority of their stock owned by the government, but also having shares owned by the private sector and usually traded on stock exchanges. The take-up of this scheme has been disappointing and state-owned companies are still playing a dominant role in the financing and construction of large infrastructure projects. In 2017, the government considered rule changes for the PPPs that could make them more attractive. Banco do Brasil, Petrobras, Sabesp and Eletrobras are examples of mixed-economy companies.
Other major companies such as Vale (mining)
or Embraer (aircraft manufacture) are former state-owned enterprises. The Brazilian corporate landscape also includes family-owned conglomerates such as the Votorantim group.
Society As already noted, interracial marriages have long been a key characteristic of Brazilian society. The cultural mixing comes from centuries of historical development. In addition to the original indigenous population, the colonization brought Portuguese settlers who brought four million enslaved Africans.
Since independence around 5 million people have migrated from different countries of origin (mainly Germany, Italy, Spain and Japan). This high rate of mixing explains two socio-cultural practices of contemporary Brazilian society: cordiality and jeitinho.
Cordiality denotes cheerful, friendly, welcoming and hospitable people. Brazilians know they are all implicitly mixed and no one is more or less ethnically ‘pure’ than another; in other words, nobody is going to feel or start acting superior to anyone else.
Jeitinho is a process by which someone reaches a goal in spite of constraints such as laws, orders, rules and so on. It is the antithesis of bureaucracy.
While bureaucracy is theoretically rational, impersonal and anonymous, jeitinho is emotional and affective. So when someone is confronted by an obstructive regulation, they will immediately fall back on their interpersonal relationships in an attempt to get around the regulation by appealing to the human beings behind it. Brazilian organizational cultures have, in general, been traditionally seen as closed systems in which leaders with strong personalities, rigid values, paternalistic patterns and highly centralized hierarchical structures prevail. The jeitinho culture translates in business as lack of planning and improvization:
‘Well, there is no clear way to reach the goal, but somehow, with the help of God, we will achieve it anyway.’ The weakness of most employees’
commitment to and engagement with corporate life encourages an unchallenged bureaucratic structure, which, in turn, stifles initiative and promotes the prevalence of regimented rules.
Since the early 2000s, profound changes in the Brazilian economy have been gradually transforming the business climate from paternalistic and protectionist to one of free enterprise, especially in the economically well developed and heavily industrialized southeastern part of the country. The co-existence of old and modern business structures underlines differences in working conditions, such as retirement prerequisites and rights, guarantees of job stability, personal and professional advantages and so on.
Question:
Based on this mini-case and your own research, sketch a business system analysis of Brazil.