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Part A
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Executive Summary

This report has been prepared to select a BRICS or N-11 nation and to examine its business
environment. Data and reports from various sources have been collated to arrive at the inherent
scenario prevalent in that nation. For our study, we have selected Brazil and analyzed in detail
the ease of doing business there.

Various factors have been taken into account to conduct a proper research on the selected
country, not restricted to only the current or past situation. Rather, a long-term and a more
forward looking vision is taken to rationally achieve our objective of advising a company
(Verizon) from a developed country (in our case, USA) to gain an entry into this country and
also it is clearly explained how the company should take the help of this entry mode to establish
its shop on this fledgling economy.

The research has been undertaken to basically act as a guiding tool for companies to understand
the Brazilian market and apply proper strategy to successfully make their entry in this country
and gradually expand their business here. Although the research is more inclined towards a
particular sector in that country, yet it can be considered as a test case for application to other
sectors in the country. So, all in all, the research work is supposed to provide a comprehensive
outlook on the business environment of Brazil and to provide a game plan for capturing some
market pie of this lucrative market
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Contents

Introduction......................................................................................................................................4
Why is Brazil considered a developing country?............................................................................5
Business Environment in Brazil......................................................................................................7
Telecom sector in Brazil..................................................................................................................9
Why should Verizon enter Brazil?................................................................................................10
Mode of entry for Verizon in Brazil..............................................................................................11
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Introduction

Brazil is a republic country and South America’s largest economy. It is large in terms of both

geographical as well as economical sense. The country is also the largest in the continent in

terms of area and the large coastline (Please refer Appendix 1) and is also fifth largest in the

world. In terms of population, it ranks sixth in the world, with close to 202 million population

size. (Cole, 1965) Moreover, it ranks seventh in the world with a huge GDP (Please Refer

Appendix 2). It is one of the chief economies of the BRICS group and one of the most important

emerging economies of the world.

Source: tradingeconomics.com

Why is Brazil considered a developing country?

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The above statistics and numbers seem to be very impressive for a country and it sounds strange

that in spite of these wonderful numbers, Brazil still falls in the category of developing countries

in the world. But, this is the fact and it is mainly because the country falls short of the global

standards required to attain the tag of a developed country. Human Development Index (HDI) is

considered as an indicator by the UN to estimate a country’s level of human development.

(Anand, 1994) Brazil, because of its low Human Development Index of 0.744 (as per 2014

Human Development Report published by UNDP) with a rank of 79 th in the world, has obtained

the tag of developing country. It ranks even below the other neighboring Latin American

countries like Chile, Argentina, Cuba and Uruguay. (Acs, 2015) As per UN data, 49 countries,

including Brazil’s neighbor Argentina (49th rank) are in the top quartile of the HDI levels and are

classified as possessing a "Very high human development" and so can be termed as developed

country.
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Source: 2014 Human Development Report, UNDP

Please Refer Appendix 3 to see the various components of HDI for Brazil and the highest ranked

country, i.e. Norway.

The HDI is low because of the following reasons: (Sagar, 1998)

 Gross National Product per capital (a measure of poverty)

 High Birth and Death Rate

 Low Life Expectancy

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Although it is still considered a developing nation, Brazil has experienced a high increase in its

HDI score as of 2015. It is classified as a "high" HDI country, which is the quadrant that contains

the upper tier of countries with ranks that place them in the middle of the developed nations list.

In the BRICS group, Brazil is second in terms of high HDI. (Sehnbruch, 2015)

Business Environment in Brazil

As per the Doing Business 2015 data, Brazil ranks in the lower half at 120 out of 189 economies

surveyed by the council.

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Source: http://www.doingbusiness.org/data/exploreeconomies/brazil

Moreover, the data by 2015 Index of Economic Freedom (Please Refer Appendix 4) also does

not portray a rosy picture for the country as it fairs poorly in that also. The ranking, as per the

data, shows its low position not only in the world, but also in the South and Central American

region. (Hennart, 2015)

The low rank of the country is mainly because of the following reasons:

 Developing nation: As cited above, Brazil’s image is immensely affected because of its

developing nation’s tag. It has to improve a lot to shed this tag

 Bureaucracy: One of the major bottlenecks for the growth of the economy has been the

huge hurdles imposed by the country’s laws and regulations for overseas corporations to

set up business in this country. Due to its setting up of business procedures still being of

bureaucratic nature with huge delays and paper work involved, foreign companies do not

find the business environment that conducive here. (Please Refer Appendix 5 for the

whole data) (Fregidou-Malama, 215)

 Corruption: Another dent to the country’s image is its murky and corrupt political and

business environment, which does not go down well with any overseas company

planning to invest here.

 Taxes: There is also prevalence of huge disputes and complexities involved in the tax

regime of the country, thereby posing another roadblock for foreign investors.

 Preference for local companies: Many regulations in the country impose restrictions for

foreign entities to establish their shops in the country.

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 Infrastructure: Infrastructure is also a major issue impacting the convenience of doing

business here. (Arruda, 2015)

Telecom sector in Brazil

The telecom sector of Brazil is a highly regulated sector and entry for a foreign entity is very

difficult. Currently, four companies dominate the market: Telefónica’s Vivo, América Móvil’s

Claro, Telecom Italia’s TIM Brasil, and the domestic player Oi. Together, these four operators

control 97% of the country’s mobile subscriber base. So, it can be fairly said that the market is a

highly concentrated one among these four players. Apart from this, the highest challenge for

Verizon, the largest telecom operator in USA, will be to deal with the highly difficult regulatory

environment of the country. Anatel is the main regulatory body in the country overseeing the

functioning of the telecom operators here. (Júnior, 2015) Although, the rules and regulations for

entry of any foreign telecom company is very stiff, yet there are some foreign operators in

existence here. The following table gives a brief overview of the same:

Controlling shareholder
Economic group
nationality

Claro/Embrate/NET Mexico

Telefónica/Vivo Spain

GVT/Vivendi France

TIM (Telecom
Italy
Italia)
Source: Telebras/Teleco

Why should Verizon enter Brazil?

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Despite of all the restrictions and regulatory bottlenecks in the country, the economy of the size

of Brazil will be a very lucrative market for Verizon to enter and expand its operations gradually.

(Ghezzi, 2015) Following are some of the reasons which make Brazil an attractive market to

enter:

 It is Latin America’s largest telecom market with a concentration of one-third of the total

market of the region

 It has generated a lot of global attention because of its recent hosting of 2014 Fifa World

Cup and the upcoming event of 2016 Olympic games in its territory

 Most importantly, it is astounding to see from reports that almost whole of the country is

covered with mobile communications, thereby projecting it to be the world’s largest

telecom market. (John, 2015)

Mode of entry for Verizon in Brazil

Following points provides a guiding tool for Verizon to enter Brazil:

 Limited Liability Company: Although the country does not enforce any restrictions on the

types of companies that can enter into the telecom sector and start its business here, the

most common is the usage of vehicles incorporated as limited liability companies or

corporations

 Strike partnership with a local entity: The major limitation imposed on foreign entities is

the direct control of companies that hold concessions, permission and authorisations to

exploit telecommunication services and regardless of any choice of law governing the
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contract or the nationality of the foreign entity, the Brazilian Labor Law will apply for the

entity. (Elg, 2015) This limitation makes it all the more necessary for Verizon to strike a

partnership with a local company like Oi and others. Its global competitors have already

realized this entry mode and it can be clearly seen from the above table as well as

AT&T’s gradual acquisition of domestic player DirecTV and Sky Brazil, Vodafone’s

attempt of acquiring TIM Brasil and others. So, this will be the best strategy for Verizon

to partner a local entity in Brazil, gauge the market properly, to expand its existence

slowly to gain a foothold and then with the improving regulatory environment, try and

establish its own entity there. (Baena, 2015)

References

Acs, Z. J. S. L. &. A. E., 2015. The global entrepreneurship and development index. s.l.:Springer

International Publishing.

Anand, S. &. S. A., 1994. Human Development Index: methodology and measurement. Human

Development Report Office (HDRO), United Nations Development Programme (UNDP).

Arruda, C. N. V. S. C. A. &. C. V., 2015. The Brazilian Entrepreneurial Ecosystem of Startups:

An Analysis of Entrepreneurship Determinants in Brazil and the Perceptions Around the

Brazilian Regulatory Framework. Entrepreneurship in BRICS, pp. 9-26.

Baena, V. &. C. J., 2015. New criteria to select foreign entry mode choice of global franchise

chains into emerging markets. Procedia-Social and Behavioral Sciences, Volume 175, pp. 260-

267.
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Cole, J. P., 1965. Latin America: an economic and social geography. Latin America: an

economic and social geography.

Elg, U. &. G. P., 2015. Institutional Forces and Firms’ Positioning in China and Brazil.

Entrepreneurship in International Marketing, pp. 239-266.

Fregidou-Malama, M. &. H. A. S., 215. Impact of culture on marketing of health services–Elekta

in Brazil. International Business Review, 24(3), pp. 530-540.

Ghezzi, A. C. M. N. &. F. A. G., 2015. Strategy and business model design in dynamic

telecommunications industries: A study on Italian mobile network operators. Technological

Forecasting and Social Change, Volume 90, pp. 346-354.

Hennart, J. F. S. H. H. &. P. G., 2015. Local complementary inputs as drivers of entry mode

choices: The case of US investments in Brazil.. International Business Review, 24(3), pp. 466-

475.

John, P. M. A. D. A. &. T. A., 2015. Impact of Private Sector Participation on access and quality

of services: systematic review of evidence from the electricity, telecommunications and water

supply sectors. Journal of Development Effectiveness, 7(1), pp. 64-89.

Júnior, S. L. F. &. P. N. D., 2015. Pricing and Costing Practices in Telecommunications: the

Brazilian Experience and Challenges. Brazilian Journal of Operations & Production

Management, 10(1), pp. 7-24.

Sagar, A. D. &. N. A., 1998. The human development index: a critical review. Ecological

economics, 25(3), pp. 249-264.

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Sehnbruch, K. B. B. A. N. &. P. A., 2015. Human Development and Decent Work: Why some

Concepts Succeed and Others Fail to Make an Impact. Development and Change, 46(2), pp. 197-

224.

Appendices

Appendix 1

Brazil has 3,290,000 square miles, bordering 10 other countries and has 4,650 miles of coastline.

Appendix 2

Brazil has a Gross Domestic Product (GDP) in 2014 of US$2.3 trillion, and it is the world’s

seventh-largest economy (as per World Bank data)

Appendix 3

Following table shows the different components of HDI for the best ranking country, i.e. Norway and

Brazil as per the last report of 2014 by UNDP:

Gross
Mean Expected national
Life income
Human years of years of Human Change
expectanc (GNI)
HDI Countr Development Development in rank,
y at birth schooling schooling per
rank y Index (HDI) Index (HDI) 2012-
(years), (years), (years), capita
Value, 2013 Value, 2012 2013
2013 (2011
2012 a 2012a PPP $),
2013
1 Norway 0.944 81.5 12.6 17.6 63,909 0.943 0
79 Brazil 0.744 73.9 7.2 15.2 14,275 0.742 1
Source: http://hdr.undp.org/en/content/table-1-human-development-index-and-its-components

Appendix 4
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Brazil’s economic freedom score is 56.6, making its economy the 118th freest in the 2015 Index.

Its score is 0.3 point worse than last year, reflecting declines in half of the 10 economic freedoms

including investment freedom, the management of government spending, and monetary freedom.

Brazil is ranked 21st out of 29 countries in the South and Central America/Caribbean region, and

its overall score is below the world average.

Appendix 5

The reform of the laws and regulations for opening and running a business in Brazil has not

adapted at the rate with which the economy has grown, presenting many hurdles to overseas

corporations. Brazil ranked 126th out of 183 countries in the World Bank’s latest annual global

report which evaluates the ease of starting a business, dealing with construction permits,

registering property, and paying taxes. On average, it takes 13 procedures and 119 days of work

to start a business in Brazil, and construction permits demand an average 17 procedures and 469

days to finally get authorised.