Improving The Trade Environment Of Brazil Essay

810 Words Aug 1st, 2015 4 Pages
In the past few years, Brazil had gotten their hyperinflation under control and it was estimated to be 8% in the future. Brazil was the second largest trading partner with the US and the nation’s economy was going to be the sixth largest in the world by 2015. For Wiley and the automobile industry Brazil’s 3-4% growth rate in the next few years presented a great opportunity given its influence in the Latin American economies. Other advantage and disadvantages of locating its operations in Brazil included:
Advantages
High number of diverse and skilled industrial workforce. Significant decline in import tariffs. Supply from a single point that increased economies of scale. Low ratio of people to automobiles. In developed countries, it is 9/1 versus 2/1. There is potential for significant growth opportunities. Leader in improving the trade environment for all Latin American countries.

Disadvantages Volatility of the Real. Although the country has inflation under control, there is a potential return of hyperinflation. Difficulty in acquiring local labor. Uncertainty of profitability due to aggressive pricing strategy designed to gain market share.

(1+R_F)/(1+R_S ) = 〖E (1+i_F) 〗_ /(E (1+i_S))

(1+R_(Brazil Real))/(1+R_$US ) = (〖E (1+i 〗_Brazil))/(〖E (1+i 〗_US))

(1+R_(Brazil Real))/(1+0.9) = (1+.08)E/(1+.03)E
(1+R_(Brazil Real))/1.09 = (1.08)E/(1.03)E

1.03E +1.03E (R_(Brazil Real)) = 1.1772E
1.03E (R_(Brazil Real)) = .1472E
R_(Brazil Real) = .1429 or…

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