PESTEL analysis of Brazil

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PESTEL analysis of Brazil

This detailed PESTEL analysis of Brazil aims to explore some of the political, economic, social, technological, environmental, and legal factors affecting Brazil today. Brazil is the fifth largest country in the world by area. It is officially known as the Federative Republic of Brazil.

Political factors affecting Brazil

Brazil is the most powerful country in South America. It is also considered a middle-power that has moderate influence in international affairs. Being one of the largest democracies in the world has offered Brazil huge potentials in many fields. In fact, many political analysts hold the view that Brazil has the potential to become a superpower in the future.

Brazil is a member of several international organisations and unions e.g. the International Monetary Fund, United Nations, World Bank, World Trade Organization, the G20, Mercosur, and BRICS. It is also a key partner of the OECD. Brazil enjoys strong political and economic relations with the United States. However, Brazil’s relations with neighbouring Venezuela are deteriorating very fast.

In addition to the foreign policy challenges, there are some other issues that have hit Brazil very hard in recent years. For instance, corruption is one of the biggest problems in the country. It is very rampant and hardly is there a sign of cessation. In the Corruption Perceptions Index of Transparency International, Brazil now ranks 105th among 180 countries and territories in the world (Transparency International, 2019). Likewise, the so-called Carwash probe exposed a massive kickback scheme involving a number of politicians and business elites in the country. In fact, many analysts believe that corruption is one of the biggest barriers to economic development in Brazil.

Economic factors affecting Brazil

Brazil is the 9th largest economy in the world by nominal GDP. It enjoyed a strong growth between 2002 and 20013; however, Brazil’s economy entered into recession in 2015 with a growth rate of -3.8% and in 2016 with a growth rate of -3.6%. Things reversed in 2017 and the economy saw a growth rate of 1.4% in 2018. Many forecasts suggest that the Brazilian economy will grow in 2019 and will continue to do so in coming years (Banco Santander, 2019). The unemployment rate in 2018 was 11.8%; however, it was 1% less than the rate recorded in 2017.

Brazil ranks No. 1 in the list of Top 10 coffee producing countries in the world. It produced approximately 55 million bags of coffee in 2016/17 (International Coffee Organisation, 2017). Brazil is also the leading sugar producer and exporter in the world. 25% of sugar produced in Brazil caters for the local needs, while the rest 75% is exported to more than 100 different countries.

Soybeans, Iron Ore, Crude Petroleum, Raw Sugar, and Cars are the top exports of Brazil, while Refined Petroleum, Vehicle Parts, Packaged Medicaments, Integrated Circuits and Cars are the top imports. The top export destinations of Brazil are China, the United States, Argentina, the Netherlands, and Germany. The top import origins are China, the United States, Argentina, Germany and South Korea (Atlas, 2019).

As mentioned above, Brazil is a key part of the BRICS (Brazil, Russia, India, China and South Africa) group. It has undertaken a number of initiatives to encourage foreign direct investment (FDI) into the country. It is worth mentioning that Brazil is the 4th largest FDI recipient in the world; however, FDI in the country took a downturn in the first semester of 2018 (Banco Santander, 2019).

Social factors affecting Brazil

Brazil is one of the most diverse countries in the world. It has a total population of approximately 208 million. The life expectancy for men is 72 years and 79 years for women. Portuguese is the major language, while Christianity is the major religion in the country (BBC, 2019).

There is no doubt that Brazil has made significant economic progress over the last few years. It lifted millions of people out of poverty in the last 15 years; however, an estimated 10% of the population still live in poverty (Banco Santander, 2019). In addition, the gap between the rich and the poor is still widespread. Likewise, criminal violence is also a major area of concern for the country.

There are some other social challenges facing Brazil today. For instance, millions of children lack adequate education, housing, and health care. Thousands of children live and work on the streets in dreadful conditions and are exposed to drugs, crime and prostitution. Discrimination on the basis of gender and race is also rampant in Brazil.

Putting social challenges aside, the middle class is rapidly growing in Brazil. Brazilians are very modern and up-to-date with the fashion world. Many people love buying expensive, luxurious and branded products. Brazilians love football frantically and they are always one of the leading contenders of the world champion title in FIFA World Cup. In fact, Brazil has produced some of the greatest footballers of all times.

Technological factors affecting Brazil

Technological environment is the next element to discuss in the PESTEL analysis of Brazil. Sao Paulo has witnessed a technology boom in recent years, particularly in software for Web and mobile development. Brazilians are among the most enthusiastic users of social media in the world, and approximately 50% people are engaged in online activities of some sorts (BBC, 2019). In fact, Brazil has the 5th largest number of mobile phone and Internet users in the world.

Brazil is the largest ICT market in Latin America, and one of the largest in the world. Brazilians prefer using mobile phones or communicating with family and friends using the Internet. Therefore, not many homes have a fixed line for a telephone. The Government of Brazil invests heavily in innovation and digital transformation projects (International Trade Administration, 2018). Many multinational companies are also heavily investing in Brazil’s ICT sector.

Environmental factors affecting Brazil

Brazil is one of the most beautiful countries in the world. The Amazon River and Rainforest, Iguaçu Falls, 62 National Parks, 2,000 beaches stretching along Brazil’s shoreline and hundreds of conservation areas are some of the attractions that catch the attention of millions of tourists every year. In fact, tourism sector is rapidly growing in Brazil and contributes immensely to the economy of several regions of the country.

However, Brazil faces some grave environmental challenges. For instance, deforestation, illegal wildlife trade, illegal poaching, air pollution, water pollution, land degradation, and severe oil spills are the most challenging ones. It is worth mentioning that Brazil has taken a number of environmentally friendly initiatives over the years to deal with the environmental challenges.

Legal factors affecting Brazil

Legal environment is the last element to discuss in the PESTEL analysis of Brazil. A detailed discussion on the Brazil’s legal environment is beyond the scope of this article. Therefore, the article touches briefly on some aspects of the business and employment laws in Brazil.

It is a very common practice for contracts of employment to be written, even though written contracts of employment are not usually required under the Brazilian law. While Brazil encourages foreign direct investment in general, it puts restrictions in certain sectors. For instance, investing in postal services, financial institutions, nuclear energy, and private security and transport is either restricted to Brazilians only or subjected to the authorisation of the Government of Brazil (Thomson Reuters, 2019).

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Last update: 21 May 2019

Further reading/references:  

Atlas (2019) Brazil, available at: https://atlas.media.mit.edu/en/profile/country/bra/ (accessed 15 May 2019)

Banco Santander (2019) Brazil: economic and political outline, available at: https://en.portal.santandertrade.com/analyse-markets/brazil/economic-political-outline (accessed 18 May 2019)

BBC (2019) Brazil country profile, available at: https://www.bbc.co.uk/news/world-latin-america-18909529 (accessed 01 February 2019)

International Coffee Organisation (2017) Monthly Coffee Market Report – December 2017, available at: http://www.ico.org/documents/cy2017-18/cmr-1217-e.pdf (Accessed 01 January 2018)

International Trade Administration (2018) Brazil – ICT – Informations and Communications Technologies, available at: https://www.export.gov/article?id=Brazil-Information-Communications-Technologies-ICT (accessed 20 May 2019)

Thomson Reuters (2019) Doing business in Brazil, available at: https://uk.practicallaw.thomsonreuters.com/0-503-8385?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1 (accessed 20 May 2019)

Transparency International (2019) Corruption perceptions index 2018, available at: https://www.transparency.org/cpi2018 (accessed 18 May 2019)

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Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.