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Cohort: November 2011 Student ID Number: K1168687 Assignment: Business & Finance Environment.
Brazil Investment Attractiveness. Tourism & Travel Industry
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Assignment: Information Management 1

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Evgeniya Lyapunova

Student ID Number: K1168687

KINGSTON UNIVERSITY BUSINESS SCHOOL

BUINESS & FINANCE ENVIRONMENT Assignment I: Brazil Investment Attractiveness. Tourism & Travel Industry.

Prepared by: K1168687 Word count:

Moscow, November 2011

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Table of contents

Executive Summary..4 Introduction.....5 Brazil Investment Attractiveness.....5 Political and Legal factors .5 Economical factors..6 Social factors.......6 Technological factors .7

Brazil Tourism & Travel Industry ....8 SWOT Analysis//..8 Porters 5 Forces..10 7P Marketing Mix.....11

Conclusin.,,. 12 Appendix 1. References . Bibliography..17

Executive Summary.

Brazil is one of the four fastest growing and largest emerging market economies, i.e. Russia, India and China (BRIC). Brazil is distinguished for its sustainable growth and outstanding performance during the economic slowdown of 2008-09, as Brazil was one of the first emerging markets to recover. This report presents the analysis of the investment attractiveness of the country in general and the developing tendencies of booming Tourism & Travel Industry. The main objective is to outline the trends affecting the investment climate in Brazil. Therefore the PEST analysis was carried out. Tourism & Travel Industry has great investment opportunities as it is a main driving force of world trade. The following frameworks were used for the analysis of the industry: SWOT analysis to determine investment opportunities and challenges; Porters 5 Forces framework to determine competitive advantages of the companies engaged in Tourism & Travel Industry; 7P marketing mix to outline the influence of the current economy trends.

Based on the analysis we may conclude that: Growing market with strong macroeconomic framework thanks to anticipatory fiscal and monetary policies attracts investments to different sectors. Government support FDI with various incentive programs. The main challenge is undeveloped infrastructure that hampers the economy development, but at the same time provides opportunities for the investments.

Lack of price competitiveness, red tape and informal business issues are gradually being improved. FIFA World Cup and Olympic Games give it a push. Tourism is one the key priorities of the authorities as well as investors focus. The industry trends show that it is developing in accordance with the demand. Governments development strategy of the industry ensures attraction of long-term investments for sustainable growth.

Introduction
Recently the close attention has been drawn to Brazil. Apart from being attractive tourist destination with its sunny beaches and famous annual carnival, Brazil has become increasingly involved in international trade expanding its presence in world markets. Throughout last decade the country has experienced economic and financial stability. Brazil encourages foreign investments. The government takes initiatives in various social and environmental programs. Brazil and for those who are looking to invest in Brazil is that Brazil is experiencing growth across all sectors which presents many and diverse opportunities for investment.

Brazil Investment Attractiveness.

Brazil has experienced stable economic growth throughout the decade. According to the World Investment Report 2011 of the United Nations Conference on Trade and Development (UNCTAD) Brazil was ranked the 5 among the countries that attracted foreign direct investment in 2010. And according to Forbes Brazil was ranked 73 country for business out of 134. (www.brasil.gov.br/news) Brazil's strong domestic market, improved macroeconomic environment, and friendly government policies make it an attractive destination for foreign investors.
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Political Legal & Factors. Trade and finance liberalization, state reforms, privatization during the 1990s resulted in the increase of investors interest in Brazil. The entry barriers were eliminated to ensure equal treatment of all the investors (http://www.investinbrazil.biz/investmentbrazil/2011/10/september-unemployment-rate-drops-toa-record-low-in-brazil/). In 2007 the Growth Acceleration Plan (PAC) was introduced providing tax incentives in order to promote investment. Brazil actively participates in international trade policies . 2008 2011 Country Partnership Strategy, i.e. the cooperation between Brazil and the World Bank, encounters US$ 7 bln to support Brazils sustainable growth and development. Nevertheless, Brazil ranked 129 among 183 countries in 2010 Doing Business report by the World Bank, esp. in regards to starting and closing the business, and paying taxes
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(http://www.miamiherals.com/2011/06/19/2272769/doing-bisness-in-brazil-opportunities.html).

Finance or Economic Development Departments of each State decide on the tax incentives to be granted. Investments in sectors of high importance to the local area may receive reduction of state VAT up to 95%.
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Brazil was a leader of the G-20 group of nations and in 2009 became a creditor country to the International Monetary Fund (IMF)

Brazil has more than 19 separate types of taxes. The tax system is complex and misleading in some cases, therefore multiple interpretation are possible. (INSEAD.PE)

Economical Factors. The carried out reforms and conservative fiscal and monetary policies enhanced economy diversification and contributed to sustainable growth rate, manage debt and accumulate large foreign currency reserves. (http://www.coha.org/flow-of-chinese-investments-continue-to-aid-brazil%E2%80%99s-ascendency/). Real GDP grew 3.5% per year between 2003 and 2009 (Appendix 1.Table 1.). The global economic crisis of 2008-09 had its effect on the growth rates, although Brazil faced the financial downturn later than the majority of the countries worldwide and the impact was less. Moreover, GDP grew 7.5% in 2010 and is expected to grow 4-5% in 2011. Due to such high growth rates the inflation has been rising. In response the central bank introduced tighter monetary policy and raised the interest rates. That inevitably fostered the national currency; Real appreciation of 40% since 2009 has attracted more capital inflows among which are the speculative investments. That resulted in the introduction of a short-term capital inflows tax (http://www.bloomberg.com/news/2011-01-25/brazil-current-account-deficit-was-3-5-billion-indecember.html#). In order to sustain the growth and prevent the economy from overheating the central bank reduced the interest rates recently. The inflation rose, and the Real
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weakened

(http://www.bbc.co.uk/news/business-14743866). Although the global rise on commodity prices puts pressure on the currency. The growing households earnings lead to swift consumption rates . This has boosted investments in Brazils commodity sector

(http://www.deloitte.com/view/en_GX/global/0937c352b8141310VgnVCM3000001c56f00aRCRD.htm). National Bank of Economic & Social Development (BNDES) financial support contributes to the credit expansion . Growing middle class and the availability of credit boosts the real estate market. There is a deficit in Brazil current account due to sufficient economic growth and strong Real, which has been covered with foreign investments.
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Social factors. The economic growth has had great impact on social environment of the country. The unemployment rate declined and reached 6% in September 2011 according to Brazilian Institute of Geography and Statistics (IBGE) (http://www.investinbrazil.biz/investmentbrazil/2011/10/september-unemployment-rate-drops-to-arecord-low-in-brazil/). There are now approximately 1.45 mln unemployed people in Brazil. The average payroll has increased as well. According to the World Bank poverty level fell from 21.7% of the population in 2003 to 9.9% in 2009. There are government social and educational programs aimed for country development.

According to Inflation Outlook Report by Central Bank of Brazil household consumption rose 1.0% in 2Q 2011 after growing 0.7% in 1Q 2011. Government consumption grew 1.2% in 2Q 2011 after growing 0.9% in 1Q 2011.
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BNDES is a State company that provides long-term financing for projects relating to small and medium businesses. It also provides non-reimbursable financing to projects aimed at social, cultural, and technological development of the country.

Technological Factors. With upcoming sport events there are various infrastructure development projects. Brazil has the third largest number of broadband lines in the Americas. E-commerce has been rapidly developing recently. Brazil's IT-BPO sector is among the strongest and most mature in the world . Combined with the communications sector it accounts for about 7 percent of Brazil's GDP.
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Brazil has shown stable overall growth supported by the government policies. The country welcomes investments and moreover FDI, esp. in the form of private equity (PE), have played an essential role in the development of the Brazilian economy . Since 2008, Brazil earned the investment grade status, according to the evaluation of rating agencies Standard & Poors, Moodys and Fitch. The quick recovery after 2008-09 crises boosted the confidence in the country. Hence by 2010 private equity investments in Brazil reached a record level of US$10.5 billion invested in the country (Appendix 1. Pic 1.). In the 2011 EMPEA/Coller Capital Emerging Markets Private Equity Survey, Brazil replaced China as the most attractive emerging market for PE investment (INSEAD.Private Equity Investments). (Appendix 1.Pic 2.) There are three major trends the investors focus on: growing middle class with its increasing consumption rate and demand for commodities (i.e. growth of services sector); Infrastructure development and modernization; Brazils main exported products (iron ore, gross oil, steel).
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Brazilwith its 250,000 IT professionals, 23,000 annual IT graduates, and infrastructure capable of supporting double-digit growthis at the heart of the IT services supply chain in the Southern Hemisphere. According to the Brazilian Association of Information Technology and Communication Companies (BRASSCOM) Brazil's offshore outsourcing market hit $1.4B in 2008, rising 75 percent in a single year.
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Brazil attracts more FDI than any other nations in South America and in the developing world. Brazils central bank said the economy received $6.8 bln in overseas investment in March this year. http://www.businessweek.com/news/2011-04-26/brazil-realnears-strongest-since-2008-on-risk-appetite-fdi.html

Brazil Tourism & Travel Industry (T&TI)

Brazil has an expanding services industry and it contributes about 67.5% to the country's total GDP, and employs about 66% of the total labor force (Appendix 2. PIc 1, Appendix 2. Pic 2.). The services industry shows continuous growth according to the quarterly GDP report of the central bank (link) In spite of the global slowdown in 2008, tourism in Brazil was expanding. As per the World Travel & Tourism Council (WTTC) data, the tourism sector accounted for 6.2% of
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the There

GDP is

in

2009

(http://www.apexbrasil.com.br/portal/publicacao/engine.wsp?tmp.area=509).

year-on-year

increase of 18.8% in tourist arrivals reaching US$ 5.9 bln in revenues in 2010 . Brazil Ministry of Tourism is positive about future industry progress, as well as Business Monitor International (BMI) that predicts an increase of 21.5% in tourist arrivals between 2010-11 and 2015. (http://www.worldpropertychannel.com/international-markets/vacation-leisure-real-estate/world-tourismorganization-brazil-tourism-report-brazil-ministry-of-tourism-brazilian-hotel-industry-2014-fifa-world-cupnew-hotels-in-brazil-brazil-2014-2016-olympics-rio-di-janeiro-4770.php).

SWOT Analysis. Analyzing the T&TI the following opportunities can be outlined: Brazilian government prioritizes and facilitates the industry development providing various programs. (Appendix 3.) Hence facilitating investments; The real estate boom attracts investments for tourism and residential purposes . Recently there was a significant number of the hotel acquisitions and conversions by international hotel chains as well as purchases of the plots for the constructions. Brazil now has the 4 Total pipeline room
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largest

count (http://worldpropertychannel.com/international-marketes/vacation-

leisure-real-estate/latin-america-total-construction-pipellne-new-hotels-in-latin-america-world-cup2014-olympic-games-in-2016-lodging-econometrics-westin-lima-hotel-convention-centercartagena-marriot-hotel-in-colombia-4341.php). According to the Ernst and Young survey

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hotel

investments are the main target of around 50% of the investors looking at Brazilian real estate. (http://www.overseaspropertymall.com/region/south-american-property/brazil-

property/brazil-hotel-investment-to-surge-in-2011-says-esrnst-and-young-survey).

5.1 mln travellers visited Brazil in 2010, ranking in terms of international tourist arrivals as the second main destination in South America. http://en.wikipedia.org/wiki/Tourism_in_Brazil
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the Northeast region is the most focused on area in terms of real estate-tourism development. This region, together with the Southeast, accounts for 63% of all real estate demand in Brazil. http://www.apexbrasil.com.br/portal/publicacao/engine.wsp?tmp.area=509
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A survey of 60 international investors (including private equity fund managers, investment bankers and real estate developers) released by Ernst & Young.

The T&TI growth is leading the airlines to open new routes to Brazil or reconsider the existing ones (Appendix 4.). The U.S. and Brazil signed an Air Services Liberalization Agreement in 2008 that increased commercial air travel between the two countries

(http://www.state.gov/r/pa/ei/bgn/35640.htm). Brazilian authorities signed several open skies agreements during 2009-2010 which is expected to result in more affordable prices and efficient air transportation both domestic and inbound (http://www.euromonitor.com/travel-andtourism-in-brazil/report). The growing middle class is the key driving force for tourism development. Research presented in Veja Magazine (January 31, 2010) revealed that the number of Brazilians who traveled at least once over the last two years increased to 58.8%

(http://www.apexbrasil.com.br/portal/publicacao/engine.wsp?tmp.area=509). International arrivals grew 13% in 2010, the domestic trips still dominates with 26% growth ( http://www.itbberlin.de/media/itb/itb_media/itb_pdf/worldttr_2010_2011~1.pdf). According to UNWTO data Brazilians spending abroad increased at 54% in 2010 (Appendix 5.Table 1.). This number is expected to grow, due to strong real it proves to become cheaper for Brazilians to travel and shop abroad (particularly in U.S.).

The major challenges that hamper industry development are: The undeveloped infrastructure
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and the poor adherence to the construction timetables.

The travel distance as well as the recent depreciation of the euro, US dollar and British pound against the Brazilian Real might result in decrease of tourists. Issuing visas is another difficulty due to the reciprocal visa policy of Brazilian government. The labor laws in Brazil are not flexible enough taking into consideration seasonal nature of T&TI (http://www.brazzil.com/component/content/article/235-august-2011/10507-who-and-what-is12

killing-tourism-in-brazil.html ).

Crime and corruption

level still remains a concern.

Lack of the qualified personnel leads to low customer satisfaction level. But there are currently numerous undergraduate programs in tourism and hotel management.

(http://www.apexbrasil.com.br/portal/publicacao/engine.wsp?tmp.area=509 ).

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E.g. Brazilian cruise industry expects slowdown due to the infrastructure deficiencies of Brazilian ports. http://en.mercopress.com/2011/07/21/brazilian-cruise-industry-expects-sharp-slowdown-becausse-of-limited-port-capacity
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Brazil records high rates of violent crime. Kidnappings have declined recently. There are constant efforts to combat child prostitution and sex tourism. It is expected that tourism safety and security will increase further as the country prepares for the 2014 World Cup. http://www.eturbonews.com/21561/brazil-boldly-expands-tourism-options

With the industry overview presented above, we shall further see into the competitive structure of the industry. Porters 5 Forces. The entry barriers are significant in terms of laws and regulations , obtaining licenses and certification. On the other hand investors are welcomed to the industry as they bring new technologies and expertise; in return they are offered tax incentives. Franchisors are entering Brazilian tourism market benefitting from economy of scale and the brand recognition. The suppliers bargaining power is low. There are many tour operators both domestic and international; different ways of travelling is available (rail ways, air, sea, car); Government fosters tourism promotion with countries intangible assets. The labor force is available and comparatively cheap. The franchisees have their own supply chains and training facilities for employees. Therefore switching costs are insignificant. Buyers influence is one of the major: the geographical location prevents many foreigners to travel to Brazil; visa issues and the language are the barriers as well. But there is a great potential of the domestic tourists and the tourists from the neighboring countries . The substitute threat for T&TI in Brazil is intense. There are alternative countries to travel to, providing better services and are less costly.. Overall there is a competition within T&TI, esp. with the new players coming to the Brazilian market. Although there is a growing demand which is being fulfilled as there are numerous projects being developed, new routes introduced by airlines, and tour packages being diversified.
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Many international hotel chains entered the market through acquisitions or joint ventures; real estate laws restricting the plots for sale for hotel purposes; conversions are difficult as it is not easy to find the building suitable for a hotel as per international standards.
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Argentina ranked #1 with 1.4 mln people travelling to Brazil in 2010, i.e. 16% more comparing to 1.2 mln people visited Brazil in 2009. http://investba.com/tag/brazil-tourism-statistics/

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7P marketing mix T&TI product comprises various products and services as well as intangibles within itself. Brazilian tourism product is sensitive towards the market and global trends offering diversified product, e.g. ecotourism, social tourism , rural tourism, accessories tourism , medical tourism , etc. is on offer. It is Brazilian government strategy to focus on the differentiation advantage by developing niche tourist markets. Taking into consideration growing middle class the price of the T&TI products should meet the demand. Annual carnival and future sport event attract mostly young and mid age people who opt for budget accommodation. Place. There are numerous distribution channels for T&TI tour depending on the industry segment. As the number of internet users in Brazil increases (esp. mobile internet users), thus the availability of websites with online booking and purchasing option is definitely an advantage. Promotion. Brazilian government along with the range of tourism associations promotes travelling to Brazil internationally
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(e.g. participation in International trade fairs). Apart from that future sport events

contributes to the countrys recognition and promotes tourism. Again the internet resources (e.g. social networks, web advertising) is a key to success. Processes is the one of the challenges of the T&TI in Brazil. Travel experience starts with the moment of choosing the tour or booking the flight, etc. Therefore if any part of the trip is unsatisfactory, it may hamper the overall experience. People, being the main asset of a company, esp. in T&TI, need to be trained. Bilingual staff is difficult to find. Quality of the customer service is poor (www.tripadvisor.com). Getting ready for FIFA and Olympics authorities support the educational programs as T&TI is concerned. Apart from the natural beauty of the country, such physical evidences as streets & beach cleanliness, low traffic jam, food quality, etc. are of major concern of T&TI in Brazil.

T&TI in Brazil is booming. It is a fragmentized industry. Thus there are possibilities for choosing cost or differentiation advantage strategy for the tourist companies. Tourism industry benefits from the international chains opening their operations in Brazil, i.e. bringing knowledge and innovations to the industry; training the staff in order to meet the shifting demand. The T&TI companies adapt to a changing environment quickly, being more flexible as the competition is getting stronger.

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Social tourism targets the audience who, due either to low-income or prejudice, are not included in the national tourism drive. E.g. program Best Age to Travel More. (http://www.brasil.gov.br/sobre/tourism/types-of-tourism/social-tourism-1).
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Accessories tours or so called shopping tours. As for Brazilians tend to travel to U.S. as the shopping is cheaper there. Brazil is sought after as a plastic surgeries destination. https://www.healthbase.com/hb/cm/medical-tourism-in-brazil.html

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Brazil, esp. Rio de Janeiro, appeared as a scenery in the latest movies and cartoons.

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Conclusion
Brazil has attracted investors attention as the growing market with strong macroeconomic framework thanks to anticipatory fiscal and monetary policies. The economy is in a transitional stage now with the rapid developing services segment. Government support FDI with various incentive programs. And as the government plans to invest in offshore oil, nuclear power, and other infrastructure sectors over the next few years, Brazil continues to attract investments. The main challenge is undeveloped infrastructure that hampers the economy development, but at the same time provides opportunities for the investments. Public-private partnerships are being promoted by the authorities, providing more opportunities for investors. The National Tourism Plan is a good example based on PPP. Lack of price competitiveness, red tape and informal business issues are gradually being improved. FIFA World Cup and Olympic Games give it a push. Tourism is one the key priorities of the authorities as well as investors focus. The industry is booming due to the increasing international recognition and increase of domestic travellers. The industry trends show that it is developing in accordance with the demand. Governments development strategy of the industry ensures attraction of long-term investments for sustainable growth.

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APPENDIX 1. Table 1. Annual GDP growth rate (%)

2003 1.1% 2004 5.7% 2005 3.2% 2006 4.0% 2007 6.1% 2008 5.2% 2009 - 0.6% 2010 7.5%

Annual % growth rate of GDP at market prices based on constant local currency

Pic 1. Private Equity Investment in Brazil

Source: Venture Equity Latin America (2011)

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Pic 2. EMPEA/Coller Capital Emerging Markets Private Equity Survey Investment strategies of the respondents.

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Appendix 2. Pic 1. Brazil Labor Force by segments (%)

Source: http://www.economywatch.com/world_economy/brazil/. 2010.

Pic 2. 2011 EMPEA/Coller Capital Emerging Markets Private Equity Survey 2011 INSEAD PwC Survey
Survey question: Which are the most attractive industry sectors in Brazil in terms of investments?

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Appendix 3. List of Government Programs and Initiatives to Support Tourist & Travel Industry (T&TI)

Emphasizing the social function of tourism, the government introduced the 2007/2010 National Tourism Plan promoting domestic tourism and therefore enhancing regional development (http://www.turismo.gov.br/turismo/ingles/plano_nacional/).

BNDES has opened a credit line worth R$ 1 billion aimed at promoting the modernization of national hotels and construction of new ones, i.e. BNDES ProCopa Tourism Program. The program has a portfolio of 63 projects. There are requests for financing R$ 573.4 mln for new projects and R$ 267.5 for modernization of existing hotels. The interest rates are the lowest practiced by the BNDES. In the case of Micro, Small and Medium-Sized Companies, the BNDES may participate in up to 100% of the eligible items. The terms may reach up to 18 years (http://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/Institucional/Press/Noticias/2010/2010051 4_ProCopaTourism.html).

BNDES has introduced the Archive Preservation Program 2010/2011, which supports projects aiming to preserve museum collections (http://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/Institucional/Press/Noticias/2010/2010051 7_preservation.html).

Aquarela Plano 2020 a campaign aimed at maximizing tourism both international and domestic with regards to world sporting event (http://traveltrademagazine.com/brazil-2/#).

To support the growth of ecotourism in Brazil, the Inter-American Development Bank (IDB) provided a US$13 million pilot program, Proecotur, to support ecotourism projects in the Amazon (http://www.eturbonews.com/21561/brazil-boldly-expands-tourism-options).

The special autarchy within the Ministry of Tourism, Embratur, was established to promote Brazil as a tourist destination internationally ( www.embratur.gov.br).

Brazil Tour Operators Association (BTOA) is non-profit organization established in New-York in 2005 to promote tourism to Brazil in U.S. (http://braziltouroperators.org)

Latin American Travel Association (LATA) was established to promote travelling to Latin America, it comprises more than 200 companies (tour operators, hotels, airlines, etc.) http://lata.org

The program Best Age to Travel More offers special conditions for people over 60 to know the beauties of the country during the off-peak season. The benefits include customized packages

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with activities targeted to the elderly and 50% discounts on hotels accredited by the program (http://www.brasil.gov.br/sobre/tourism/types-of-tourism/social-tourism-1).

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Appendix 4. Airlines routes to Brazil. Recent Trends.

Emirates Airlines opens the daily non- stop service Bangkok /Rio de Janeiro/ Buenos Aires. http://en.mercopress.com/2011/09/06/emirates-airlines-to-open-daily-non-stop-service-bangkokrio-do-janeiro-buenos-aires In October, 2011 American Airlines in addition to existing transit flights to Brazil via Miami reintroduced direct flight New-York /Rio-de-Janeiro. One new American Airlines route MiamiManaus (Manaus - capital of Brazils Amazonas state popular with ecotourists) is to start running later in 2012. http://riotimesonline.com/brazil-news/rio-business/american-airlines-boosts-newyork-rio-route Chilean airlines Lan Airlines and Brazilian TAM Airlines plans to merge through a single holding company Latam airlines Group, therefore offering more coordination on routes and pricing. http://www.euromonitor.com/travel-and-tourism-in-brazil/report TAM Airlines has already established a partnership with JetBlue offering more options to flight to and from U.S., as well as single e-ticket for the entire trip and integrated luggage service. Starting with August 2011 TAM Airlines operates new daily service Sao Paulo/Orlando, U.S. in order to meet the high and increasing demand. http://www.braziltouroperators.org/?p=1097 Brazilian Airlines are adding flights from cities in Europe, the U.S. and Latin America. http://investba.com/tag/brazil-tourism-statistics/ In the beginning of 2011 British Airways having merged with Iberia and forming International Airline Group is expected to boost tourists traffic to Brazil. http://worldpropertychannel.com/international-marketes/vacation-leisure-real-estate/worldtourism-organization-brazil-tourism-report-brazil-ministry-of-tourism-brazilian-hotel-industry-2014fifa-world-cup-new-hotels-in-brazil-brazil-2014-2016-olympic-rio-di-janeiro-4770.php In September 2010 Singapore Airlines announced the launch of thrice-weekly flights between Singapore and the Brazilian city of Sao Paulo, via Barcelona in Spain. http://www.singaporeair.com/jsp/cms/en_UK/press_release_news/ne100930.jsp Transaero, Russian Airlines opened the direct flight Moscow/Rio-de-Janeiro in January 2011. http://en.rian.ru/russia/20110104/162040712.html

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Appendix 5. Table 1. Tourists Expenditures Abroad In 2010.

Growth in % vs. previous year

Brazil Russia China Japan

Source: UNWTO

+54 % +26% +24% +8%

Italy USA France Germany

+3% +2.5% +2% +1.5%

http://www.itb-berlin.de/media/itb/itb_media/itb_pdf/worldttr_2010_2011~1.pdf

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Appendix 6. PEST Analysis

Political & Legal

Economical

liberalization, state reforms, privatization resulted in the increase of investors interest;

Globalization; Growing stable economy with longterm potential;

Authorities provide tax incentives. Although the tax system is very complex and misleading in some cases;

Growing consumption rates due to the availability of cred and strong national currency;

Lower raw labor cost; Growing import and export;

Proactive political relationships among nations;

Social

Technological

Growing middle class and significant reduction of poverty rates;

Undeveloped infrastructure is the main challenge of countries development;

Decline in unemployment rates; Environmental initiatives of the government;

Rapid development of internet and e-commerce;

IT-BPO sector is among the strongest and most mature in the world;

Lack of qualified professionals;

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Appendix 7. Porters 5 Forces. Tourism & Travel Industry. Brazil.

Entry Barriers: laws & regulations hampers the industry development and inflow of investments; red tape and unofficial business; Tax incentives and various government programs attract investments; PPPs facilitates the industry development.

Moderate Influence

Suppliers: Numerous tour operators, restaurants and tourists attractions; International airlines are increasing flights to Brazil; Countrys resources, i.e. national parks, beach areas, cultural heritage, etc. These factors enhance the industry development. Availability of labor force, but lack of qualified professionals.

Buyers: Geographic location as well as visa and language issues prevent many foreigners of traveling to Brazil; The growing number of domestic travellers as well as tourists from neighboring countries ensures the industry development.

The competition is strong with growing demand and international franchisees entering the market

Significant Influence Low Influence

Significant Influence Substitutes: - Availability of alternative travel destinations with lower costs and better services

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References.
1. Flow of Chinese Investments Continues to Aid Brazils Ascendency. Faizaan Sami, COHA Research Associate. October 12, 2011 http://www.coha.org/flow-of-chinese-investments-continue-to-aid-brazil%E2%80%99s-ascendency/ th Accessed on November, 24 2011. 2. BBC News Business. Brazil in surprise interest rate cut to 12%. 1 September 2011 http://www.bbc.co.uk/news/business-14743866

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