PESTEL Brazil Why Brazil? * Brazil is politically stabile and has democratic rules achieved under the presidencies of Fernando Henrique Cardoso and Luiz Inácio Lula da Silva. * Brazil has a diversified and growing economy that plays a significant role in the global economy. Brazil is the largest economic power in Latin America and the world’s 10thlargest economy. * The country is open to and encourages foreign investment by implementing investor-friendly policies. The country is one of the world’s leading destinations for foreign direct investment. * Brazil is the fourth biggest producer of gold in the world. It has abundant reserves of natural resources and many regions are still unexplored which make the country an attractive location for mine development. * Brazil has an established Civil Law system and a modern mining legislation. * The country is a green energy leader, renewable energy supplying nearly 45% of the country’s energy needs. * Expanding into Brazil will allow Newmont to reinforce its presence in South America where its competitors are already well established.

PESTEL Analysis Political Type: Federative republic (with 26 states and a federal district)
Independence: September 7, 1822.
Constitution: Promulgated October 5, 1988.
Branches: Executive–president (chief of state and head of government popularly elected to no more than two 4-year terms). Legislative–Senate (81 members popularly elected to staggered 8-year terms), Chamber of Deputies (513 members popularly elected to 4-year terms). Judicial–Supreme Federal Tribunal (11 lifetime positions appointed by the president).
Political parties: Workers’ Party (PT-center-left), Democrats (DEM-center-right), Brazilian Democratic Movement Party (PMDB-center) , Brazilian Social Democratic Party (PSDB-center-left) , Green Party (PV-left) , Socialism and Freedom Party (Psol-left) , Brazilian Labor Party (PTB-center-right) , Brazilian Socialist Party (PSB-left) ,Democratic Labor Party (PDT-left) ,Communist Party of Brazil (PCdoB-left).
Brazil has been a leading player in the World Trade Organization’s Doha Round negotiations and continues to seek to bring that effort to successful conclusion.
President Lula has made economic growth and poverty alleviation top priorities. Export promotion is a main component in plans to generate growth and reduce what is seen as a vulnerability to international financial market fluctuations. To increase exports, the government is seeking access to foreign markets through trade negotiations and increased export promotion as well as government financing for exports.
Economy
GDP (official exchange rate): $2.023 trillion
GDP (purchasing power parity): $2.182 trillion
Annual real growth (2010 est.): 7.6%.
Per capita GDP (official exchange rate): $11,220
Per capita GDP (purchasing power parity): $11,514
Natural resources: Iron ore, manganese, bauxite, nickel, uranium, gemstones, oil, wood, and aluminum. Brazil has 14% of the world’s renewable fresh water.
Agriculture (5.6% of GDP): Products–coffee, soybeans, sugarcane, cocoa, rice, livestock, corn, oranges, cotton, wheat, and tobacco.
Industry (27.8% of GDP): Types–steel, commercial aircraft, chemicals, petrochemicals, footwear, machinery, motors, vehicles, auto parts, consumer durables, cement, and lumber.
Services (66.6% of GDP): Types–mail, telecommunications, banking, energy, commerce, and computing.
Trade: Trade balance (2009)–$ 25.3 billion surplus. Exports–$153.0 billion. Major markets—China 13.20%, United States 10.20%, Argentina 8.36%. Imports–$127.7 billion. Major suppliers–United States 15.69%, China 12.46%, and Argentina 8.84%
Brazil is generally open to and encourages foreign investment. It is the largest recipient of foreign direct investment (FDI) in Latin America, and the United States is traditionally the number one foreign investor in Brazil. Since domestic saving is not sufficient to sustain long-term high growth rates, Brazil must continue to attract FDI. Many business groups and international organizations have highlighted the need for Brazil to improve its regulatory environment for investments and to simplify the tax code in order to attract increasing levels of FDI.
Today, Brazil economy is on the rise. Blessed with abundant natural resources, Brazil has become the most powerful country in South America in economic terms and thus is leading the other countries of South America.
With large and growing Agricultural, mining, manufacturing and service sectors, Brazil economy ranks highest among all the South American countries and it has also acquired a strong position in global economy.
Brazil’s gold production is rated as fourth in the world. The main problem associated with this factor however, is the pollution from mercury, which is a main component in the current gold processing techniques. Mercury is used in the process of separating the gold from other surrounding rock sediments that usually come together with the mineral when it is mined. The largest gold deposits in Brazil in current times are found along the Venezuelan Brazilian border. This area is commonly referred to as the shield and covers an estimated 415,000 square kilometers of jungle and savanna grassland.
With over 2,500 currently known gold occurrences within the country, Brazilian gold mining, development, and production is expected to continue increasing significantly in the foreseeable future.
Brazil’s gold and mining sector is going through a phase of real growth. New mine projects and expansions in progress are expected to ensure that the country retains its leading position in global mineral commodity production for years to come. Brazilian gold explorers like Magellan Minerals should do very well over the next few years.
Social
Population: 190,732,694 (largest population in Latin America and ranks fifth in the world)
Annual growth rate: 1.17%.
Ethnic groups: African, Portuguese, Italian, German, Spanish, Japanese, Indigenous peoples, and people of Middle Eastern descent.
Religion: Roman Catholic (74%).
Language: Portuguese (Brazil is the only Portuguese-speaking nation in the Americas)
Education: Literacy–88% of adult population.
Health: Infant mortality rate–21.86/1,000. Life expectancy–72.6 years in 2010.
Work force (2009 est.): 101.7 million.
Brazil underwent rapid urban growth; by 2005, 81% of the total population was living in urban areas. This growth aids economic development but also creates serious social, security, environmental, and political problems for major cities. Environmental
Brazil is the world’s fifth largest country with a total area of 8.5 million square kilometres. It benefits from a good river system and 7.500 kilometres of coastline (1).
The country has abundant reserves of natural resources such as iron, copper, nickel, manganese or tin. Despite having an estimated gold reserve of 2,000 tones the country accounts only for 2.5% of the global production and many regions are still unexplored, which make Brazil an attractive location for mine development and investment opportunity (1).
However, the lack of transportation infrastructure (under-developed railway network, poor quality of the highways with development inconsistent between regions) has long been seen as a major obstacle to economic growth (2).
In addition, the country also lacks reliable and affordable energy. Most of the country’s energy is produced from renewable sources, particularly hydroelectric power plants that provide four fifths of Brazil’s electricity. This dependence on hydroelectricity has resulted in severe supply shortage for example in 2001-2002 the Government had to implement an energy-rationing program (2).
Brazil’s investment in infrastructure fell to just over 2% of its GDP from the year 2000, one third of the proportion allocated in China and Chile (1). However, investment in infrastructure has more recently become one of the priorities of the Government. In 2007, it launched an infrastructure development program, the Growth Acceleration Program (PAC) to address the country significant “road, rail, energy supply and other infrastructure needs” (2).
Recent development includes the construction of two new railways connecting central Brazil to ports in the states of Rio de Janeiro and Bahia, and the construction of Açu Superport, a port and industrial complex one and a half times the size of the island of Manhattan that should be completed by 2012 (2).
Technological
Brazil is the leader in science and technology in South America as well as one of the global leaders in fields such as biofuels and deep-water oil exploration (7). The Brazilian government tries to develop and support innovation in business, for example in 2004 the Innovation Law was passed, is meant to provide incentives to increase innovative activities, facilitate scientific and technological research by private companies and encourage collaboration between public and private sector (5).
More specifically, the mining industry has benefited from the Government’s support in terms of technology and research, for example the Center for Mineral Technology (CETEM) is a federally funded research and development centre under the Ministry of Science and Technology. Sixteen universities now offer courses in geology, geochemistry and geostatic and seven offer degrees in mining engineering (4).
Legal
Brazil has an established Civil Law system based on codification and statutory legislation. The country ranks as one of the world’s leading jurisdictions for mining investment but because of its complex federal legal structure, the regulation in this area is bureaucratic, inconsistent and lacks certainty. The prospecting and mining of mineral resources may be carried out by Brazilian citizens or by companies duly incorporated in Brazil holding an authorization or grant by the Republic of Brazil (10). Mineral resources are defined and mining rights guaranteed under the Brazil’s Federal Constitution and Federal Mining Code (8).
Mineral resources belong to the state and can only be extracted pursuant to a concession (8). According to the Mining Code, mining activities require the grant of concessions from the Departamento Nacional da Produção Mineral (DNPM) that consists of application for prospecting permits, exploration licenses and mining licenses (8). A law enacted in 2010 limits foreign investors to own more than 5,000 hectares of land (11). Brazilian law also protects Indigenous lands estimated to be around 895,000km. For example, the Constitution covers the interface between the mining industry and indigenous rights. It provides that the National Congress must approve the exploration and mining activities and that the Indigenous community has the right to give permission and if the project is accepted, to share the results in the conditions defined by the Congress (12).
Brazil has also implemented strict environmental regulations. The regulations of environmental aspects of mining at both federal and local level and the inconsistencies between regulations in different states can create confusion and duplication in the application procedures (13). At Federal level regulations are developed by the Ministry of Environment and implemented by the National Council of Environment (CONAMA) and the Brazilian Institute of Environmental and Renewable Resources (IBAMA) controls the environmental licensing process (9). Three levels of control have been established, first an environmental impact assessment (EIA) and environmental-impact reports (RIMA) must be completed, an environmental license is then required and finally a plan of recovery of degraded materials (PRAD) has to be submitted (13).
The Brazilian tax system is also a matter of complexity. Brazil comprises numerous federal, state and municipal taxes. The law does not distinguish between domestic and foreign owned companies. Companies are generally subject to tax at a rate of 25% (15%, plus an additional tax of 10% on profits exceeding 240,000 BRL), plus social contribution tax equal to 9% of accounting income (10). The country has also implemented a royalties regime for the mining companies, the ‘Compensation for exploiting mineral resources’ (CFEM) which varies depending upon the mineral mined. Gold extraction is subject to this CFEM tax, which is set at 1% of total revenues (8).
The Brazilian Ministry of Mining and Energy has proposed a reform of Brazil’s mining regulation and proposals will be put before the Brazilian Congress in June 2011 (8). If adopted this reform may have important implications for the mining sector.
The aim of this reform is reportedly to increase government control and revenue from commodities as world demand and prices rise and to making Brazil’s mining sector easier to manage for international investors (8). Some of the key proposals are to:
- Establish a new National Mining Policy Council to rewrite the Mining Code
- Replace the DNPM with a new National Mining Agency
- A public bidding process will be established to award prospective concessions
- Limit the duration of exploration permits to 5 years rather than 30 and impose a minimum exploration requirement on recipients of concessions.
- Replace existing mining licenses by mining contract valid up to 30 years
- Raise the rate of royalties but charge them at differential rates, progressively lower for firms that adopt more comprehensive ore processing within their overall production strategy in order to incentivise a move towards downstream production in Brazil.
However, some concerns have been expressed that raising royalties could do Brazil more harm than good, making countries with lower taxes more appealing to investors (13) (14).

PEST Mexico
Political
This hub takes a look at Mexico political and economic outlook for 2011-2015. The main sources for this outlook include Economist Intelligence Unit (EIU), CountryWatch, the U.S. State Department, and CultureGrams. According to the Economist Intelligence Unit updated report for November 2010, the following are the highlights of Mexico political and economic outlook for 2011-2015:
• The opposition PRI will co-operate with the ruling PAN on some of the reform proposals of the president, Felipe Calderón, but energy and labour reforms are unlikely to advance during the remainder of his term, which ends in 2012.
• For most voters the PRI will be the only acceptable alternative to a beleaguered PAN, which, given the bleak economic outlook and the deteriorating security situation, has weak prospects of securing a third term.
Economic

• GDP growth of 5% in 2010 will mark only a partial recovery from a 6.6% contraction in 2009. We expect growth to slow to 3% in 2011 as the US slows, before firmer growth of around 3.8% annually in 2012-15, as the US picks up.
• We now expect the central bank to keep interest rates on hold throughout
2011, but a solid inflation-targeting regime, combined with weak demand-side pressures, will keep inflation contained. Rates are forecast to rise from 2012.
• Reserves will help shield against volatility, but concerns about the recovery will prevent peso appreciation in 2011. A wider current-account deficit and the normalisation of US rates will prompt some weakening from 2012.
• A wider trade deficit will increase the current-account deficit to 2.2% of GDP by 2015, from an estimated 1.1% of GDP in 2010. However, given projected investment inflows, this will remain manageable.

Social
Key Data Region: Middle America
Population: 109,561,057
Area Total: 1,972,550km2
Area Land: 1,923,040km2
Coast Line: 9,330km
Capital: Mexico City
Climate: Varies from tropical to desert.
Languages: Spanish, Various Mayan dialects.
Currency: 1 new Mexican peso (Mex$) = 100 centavos
Holiday: Independence Day is 16 September (1810), Constitution Day is 5 February, Cinco de Mayo is 5 May

Average Daily Temperature January: 13.30°C / 55.90°FJuly: 16.70°C / 62.10°FAnnual Rainfall: 762mm / 30"

Boundaries United States 3326km Guatemala 962km Belize 250km
Notable Cities City Population Estimated * Mexico City 8,560,994 2010 * Ecatepec 1,997,036 2010 * Tiajuana 1,659,872 2010
Ethnic Divisions Mestizo 60 % Indigenous 30 % European descent 9 % Other 1 %

Religions Nominally Roman Catholic 89 % Protestant 6 % Other 5 %

Tehnology

The Australian Government predicts Mexico’s IT spending is forecast to grow at a compound annual growth rate of 11 per cent over 2011-2015.
Based on the information managed by the Scopus, a bibliographic database for science, the Spanish web portal SCImago places Mexico in the position 28 of the country scientific ranking with 82,792 publications, and in the position 34 if considering its value of 134 for the h-index. Both positions are computed for the period 1996-2007.
http://en.wikipedia.org/wiki/History_of_science_and_technology_in_Mexico