Doing Business with Brazil

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Table of Contents

Abstract
Background Information
Comparison of Culture: Brazil versus USA
Influence of Cultural Differences on
Conclusion
References

Abstract

Scholars have not yet been able to come into an agreement on a simple definition of the term culture. According to Hofstede (1994) and other prominent psychologists, culture is a system of values and norms common within a society and define the form of living of such a group.

However, it is worthwhile noting that norms and culture do not come up as fully formed. They evolve from other factors including the existing political and economic philosophies. As such, it is widely accepted that culture can influence international business because countries are different.

This paper explores how differences and similarities in culture between Brazil and the United States of America can affect international business between these two countries taking into account the costs of doing business in Brazil, the likely future economic development of Brazil and its business practices.

Background Information

Only few countries in the world are larger than Brazil due to its vast size. “The climate of Brazil is mostly tropical, but temperate within the south with mostly flat to rolling lowland terrain in north” (Brazil Geology, 1997). In connection, there are some plains, hills, mountains, as well as narrow coastal belt (Brazil Geology, 1997). As per the August 2000 census Brazil reported a population of 169,872,855.

However, it is estimated that this population will hit 205,716,890 in July 2012 with a population growth rate of 1.102%. Population is distributed among ethnic groups and major cities with white being 53.7%, mulatto (mixed white and black) 38.5%, black being 6.2%, other (including Japanese, Arab, Amerindian) 0.9% and unspecified 0.7% (2000 census) As at 2009, population by major cities were provided as: Sao Paulo 19.96 million; Rio de Janeiro 11.836 million; Belo Horizonte 5.736 million; Porto Alegre 4.034 million and BRASILIA, the capital city, 3.789 million (Central Intelligence Agency, 2012).

The Federative Republic of Brazil is divided into administrative divisions comprising of 26 states and one federal district. The head of government and the chief of state is President Dilma ROUSSEFF and the Vice President is Michel TEMER (Central Intelligence Agency, 2012).

Economically, Brazil has large and well-developed agricultural, manufacturing, mining as well as service sectors. The economy surpasses that of all other South American states, and Brazil is extending its presence in world markets (Central Intelligence Agency, 2012).

It has consistently seen an improvement in macroeconomic stability especially since 2003.As at 2011, the estimated GDP of Brazil in terms of purchasing power parity was $2.282 trillion, while GDP per capita was estimated at $11,600. The GDP real growth rate was at 2.7% (Central Intelligence Agency, 2012).

It initially appreciated against the dollar, slowly depreciating against the dollar until 2002 and again raising to trade at a current rate of between deprecation until 2002 where it hit an all time R$ 1.50 and R$ 2.50 per $1 for the last couple of years. (UHY International Ltd, 2010).

However, it should be noted that the information presented within this paper is not only vital for education purposes, but can help investors to know about the culture of Brazil and enhance the performance of their business. This paper explores how differences and similarities in culture between Brazil and the United States of America can affect international business between the countries. The main areas captured include the costs of doing business in Brazil, the likely future economic development of Brazil and its business practices.

Comparison of Culture: Brazil versus USA

Hofstede’s taxonomy is one of the widely used criteria of in international comparisons of cultures (Hofstede, 2001). According to (Hofstede, 2001), the difference between individualism and collectivism is the most commonly used criterion in cross-cultural studies. Individualism refers to the tendency of people to put individual targets ahead of the targets of a larger social group, such as the organization.

In contrast, people in collectivistic cultures tend to give a priority to the goals of the larger collective in which they belong resulting in actions of a person which contribute to the welfare of the society as a whole. Bhagat (2002) noted that USA is a characterized with and individualistic culture as opposed to Brazil which is characterized by a collective culture especially in processing information.

Hofstede’s (2001), analyses power distance dimension and argues that people in vertical cultures tend promote inequality and to a larger extent recognize themselves as different from others. As opposed to vertical cultures, in horizontal cultures, he notes, power distance is not significant. This implies that disparities in status are less evident. Brazil is seen as a vertical collectivistic country as opposed to the United state of America which is to a larger extent seen as a horizontal collectivistic country (Bhagat, 2002).

Hofstede’s uncertainty avoidance seeks to measure the degree to which cultures help their members in coping ambiguous situations as well as being tolerant during uncertainty. Lower uncertainty cultures according to him are the cultures which have members that are willing to take risks and readily accept change.

On the other hand, higher uncertainty avoidance exhibit the opposite characteristic for instance requiring job security, rules and regulations, defined career pattern and tightly controlled subordinate indicatives (Hofstede, 1994). The United state of America is a high uncertainty avoidance state while Brazil presents a relatively lower percentage of uncertainty avoidance.

In the dimension of masculinity versus femininity, Hofstede observed that the United States of America, sex roles were highly differentiated as compared to Brazil. As such, the United States of America scores high on the masculinity versus femininity indicating that a major distinction exists between men and women, especially in the work field.

Although the findings by Hofstede gives an important insight on how cultural differences can be analyzed, it is critical to mention that his work has been criticized on several bases and just as we should not reject his findings immediately, we cannot accept the findings completely.

His main critics includes the argument that he assumed a one-to-one correspondence between cultures yet it is possible for different cultures to exist within a state; that the results might have been culturally bound since it covered specific areas with respondents as well being picked from one industry and lastly, in addition to the respondents being from the same industry they were also picked from the same company creating more room for biasness.

Influence of Cultural Differences on

The costs of doing business in Brazil

From the preceding text, it has been noted how different societies can be as a result of their cultural differences. From a different angle, this means how the culture of a country particularly Brazil, influences the cost of doing business in Brazil. Brazil shows some valuable characteristics that can impact the cost of doing business positively meaning that as compared to the United State of America, doing business in Brazil would be far much cheaper.

This translates to an ethnic of productive hard work and cooperation between the managers and the workers promoting the good for the company. Likewise, reciprocated duties and honesty which was observed to be high in a collective culture helps to establish trust between companies and their suppliers.

Thus, these parties are able to enter into a long term relationship with each other and they are able to work on inventory reduction quality control and design. These improve the companies’ competitive advantage. As noted earlier, these characteristics are non-existent in the United States of America culture and the relationship between the business partners ranging from the workers to suppliers tent to be a short term one.

For international business, therefore, the relationship between culture and the cost of doing business is important since it suggests which countries can make strong competitors; and also because it has an implication for the choice of countries to do business in. Thus as much as we should not overemphasize the impacts of culture on cost of doing business beyond the contribution made by political, economical and legal structures, it is worthwhile noting the importance of culture in international business.

The likely future economic development of Brazil

It is evident among many scholars that Brazil has developed a vibrant and unique culture. With this type of culture it follows that this country will be able to gain extra miles in economic development. In short, the culture of Brazil and economic development are positively related. For instance, among the most outstanding cultural activity in Brazil is sporting which mainly points to football.

With the current rate of US$ 1 = R$ 1.75 or € 1 = R$ 2.33, this amount translates to about US$ 105 billion or € 79 billion (About: Impact of the World Cup 2014 on the Brazilian Economy, 2010). It is worthwhile noting that the culture of Brazil will play an important role in this event. For instance, the impact of this activity on the Brazilian economy will be felt more than the way it was felt on the economies of France, Germany and South Africa when this same activity was hosted by these countries.

Further details reveal that direct investments will be of R$ 47.5 billion, to be put in infrastructure, tourism and consumption by individuals; the balance, R$ 135.”7 billion, will be of indirect investments, which will be from the recirculation of money” in the course of the event. It is expected that infrastructure will total to approximately R$ 33 billion, 78% of which will be derived from the private sector.

The World Cup could create a total of 330,000 permanent and 380,000 temporary jobs for the Brazilians (About: Impact of the World Cup 2014 on the Brazilian Economy, 2010). As such, it is expected that permanent payroll will increase by R$ 6.8 billion, and temporary payrolls by 1.6 billion. This translates to a rise in expenditure of more than R$ 5 to Brazilian families. This situation happens because investments, consumption, as well as tourism continue even after the World Cup games are overdue.

When Brazilian culture is combined with the stable political system, currency and mineral deposits Brazil becomes a ‘must’ for all companies with truly global ambitions. With population of nearly two hundred million, it is one of the largest five market opportunities in the world.

However, some cultural and structural barriers may exist and which might slow down economic development likely to be brought about by foreign firms. The ‘Custo Basil’ or the ‘Brazil Cost’ which refers to the very real extra costs of doing business in Brazil, including corruption, governmental inefficiency, among several other factors may contribute negatively to the economic development of this country since investors may shy away.

Business practices of Brazil

An understanding of how the culture may affect the business practices of a country requires cross- cultural literacy. Cross cultural literacy is the understanding of different cultures. From this knowledge, information on the effects on business that accrue to a certain culture becomes clear.

Cultural differences give rise to four types of difficulties in international business, at the levels of language, values, thinking and decision-making processes. When the language of a certain society is difficult to understand and interpret, foreign investors and international business negotiations may not be successful.

As such, the proper understanding of the verbal and non verbal signs of a country of Brazil may be important to an investor. Business operations may come into a halt in extreme cases of misunderstanding. The other major constituent of business practices is decision making.

In all businesses, it is essential that effective decision making process is followed if there has to be effective results. In Brazil, decision making process has been treated with the appropriate intensity; hence, many organizations are established on firmer rules than in several competing nations. Therefore, this scenario enables the country to be forefront in finding solutions for effective management process. As a result, businesses within the region are categorized with high efficiency, effectiveness, as well as productivity.

When faced with a complex negotiation task in business, most individuals within the United States of America minimize the enormous task into a series of smaller tasks. Problems associated with costs, delivery, warranty, and service contracts tend to be discussed one at a time, and the final agreement comes as a sequence of the small procedures.

This culture has impacted on the business activities making business various transaction processes to be much faster than several countries in the world. As a result, the country maintains a remarkable relationship with other countries in terms of business activities, cultural integration, as well as other social activities.

Conclusion

As established within the paper, it can be concluded that the culture of Brazil has impacted much on the economy of this country and will still impact in the future economic development. As compared with the United States of America culture, a big difference exists which translates to different way of doing things, especially in business. As mentioned earlier, the information presented in this paper is not only vital for education purposes, but can help investors to know about the culture of Brazil and enhance the performance of their business.

References

About: Impact of the World Cup 2014 on the Brazilian Economy. (2010, April). Web.

Bhagat, R. (2002). Cultural variations in the cross-bordertransfer of organizational knowledge: an integrative framework. Academy of Management Review , pp. 40-7.

Brazil Geology, Geomorphology, and Drainage. (1997). Web.

Central Intelligence Agency (CIA). (2012). The World factbook. Central Intelligence Agency (CIA).

Hofstede, G. (2001). Culture’s Consequences: Comparing Values, Behaviors, Institutions and Organizations across Nations,. Thousand Oaks, CA.: Sage Publications.

Hofstede, G. (1994). The Business of International Business is Culture. International busiiness Review.

UHY International Ltd. (2010). Doing Business in Brazil. Porto Alegre: UHY International Ltd.

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