Международный бизнес — выход Stilsoft на рынок Мексики — PESTLE, SWOT, TOWS

Brazil is the largest economy in Latin America, the second largest economy in the Western hemisphere behind the United States and the ninth largest in the world, with a nominal GDP equal to US$ 2,055.1 billion (2017). It is also the largest country in Latin America, as regards both area (8,515,767 km2) and population (210,147,125). It is still considered an advanced emerging economy, with the eighth largest GDP in the world by both nominal and real measures. It is classified as an upper-middle income economy by the World Bank. Brazil is also member of the G20 and BRICS. Despite the recent worst economic recession in its history in the period 2015-2017, the country is recovering, and since the late 2017, GDP has one back to growth in all the sectors of the economy. A path of fundamental reforms has been initiated in the field of labor market, and has been effective in sustaining the growth, but many reforms are still needed, especially in the pension system. The result of the recent presidential elections may generate uncertainty about the continuation of the economic reforms and reduce the attractiveness for foreign investments. In 2018, it is ranked 125th on 190 countries by World Bank for the ease of doing business (medium).

Mexico is the second largest Latin American economy and the second most populous nation in the region, after Brazil. It has the fifteenth largest nominal GDP, equal to US$ 1,151.1 billion (2017), in the world and its economy is strongly linked to NAFTA partners, especially United States. The nominal GDP per capita is equal to US$ 9,821. Mexico is classified as an upper-middle income country by the World Bank and is often classified as a newly industrialized country and as an emerging global power. It has become a manufacturing hub, linked to the North American supply chain, because of its low labor cost. Mexico has more free trade agreements than any other country in the world: 12 FTAs covering 46 countries, involving the European Union, European Free Trade Area, Japan, the Pacific Alliance, Israel and ten other countries in Latin America. In the political field, several structural reforms have been implemented for the liberalization in the energy and telecommunications sectors, in last years. However, an uncertainty factor come from the renegotiation of NAFTA. Anyway, the macroeconomic perspectives of the country should remain stable also in following years. In 2018, it is ranked 49th for the ease of doing business (very easy).

Argentina is the second economy in South America after Brazil and the third in Latin America, with a nominal GDP in 2017 equal to 637.6 billion US$, benefiting from its richness in natural resources, a highly literate population, a diversified industrial base and an export-oriented agricultural sector. The nominal GDP per capita is equal to 15,582 US$, the second highest in South America and the human development index is “very high” (0.825). The country has a considerable internal market size and a growing high-tech sector, and it is also a member of the G20 economies. However, its historical economic performances have always been very uneven, with phases of high economic growth alternating with severe recessions, income maldistribution and increasing poverty, especially in last few decades. An important problem in the country comes from high inflation, which reached a rate of 25.7% in 2017. The future perspectives for the country are positive, thanks to the GDP’s growing trend, the reduction of the unemployment rate and the recovery in private consumption. Huge opportunities come from the construction and automotive industries. Some important measures will help in sustaining this positive path. In 2018, it is ranked 117th for the ease of doing business (medium).

Colombia is the fourth largest economy in Latin America. The nominal GDP in 2017 is equal to US$

309.2 billion, with nominal GDP per capita amounting to US$ 6,302. By the end of the 20th century the country grew steadily, moving from its historical status of agrarian economy to a market economy, however still the 26.9% of the population are living below the poverty line. However, the political stability, a growing middle class, a vastly improved safety and security environment support a generally optimistic outlook and moderate economic growth in recent and following years. In 2018, it is ranked 59th for the ease of doing business (easy).

Chile is one of the South America’s most economically and socially stable and prosperous nations, with a high-income economy: in 2017 the nominal GDP is equal to US$ 276.99 billion and the nominal GDP per capita amounts to US$ 15,346. Chile leads Latin American countries in rankings of human development index, competitiveness, state of peace and economic freedom. It has also the lowest homicide rate in South America. In 2010 Chile became the first South American country to join the OECD. Chile also performs well in terms of low inflation, advanced financial market

development, low levels of corruption and openness to foreign trade. These factors make Chile the most open and stable market in Latin America, with sound perspectives for the future as well. In 2018, it is ranked 55th for the ease of doing business (easy).

Uruguay is ranked first in Latin America in democracy, peace, low perception of corruption, e- government, press freedom, size of the middle class and prosperity. Its nominal GDP amounted to US$ 56.2 billion in 2017, with a nominal GDP per capita equal to US$ 16,246, the highest in the region. It is also the best country in the region in terms of HDI, GDP growth (+3.1% in 2017), innovation openness and infrastructure. The country is regarded as one of the most socially advanced country in Latin America, as shown by its high rankings in the field of measures of personal rights, tolerance, and inclusion issues. The general prosperity combined with institutional stability, the strong rule of law and the great commitment to international agreements and norms, make Uruguay an interesting opportunity for foreign companies’ expansion. In addition, its strategic position between Argentina and Brazil and at the mouth of the vast riverine transportation system of South America, allows the country to serve as a regional distribution platform and a test market in the region. In 2018, it is ranked 94th for the ease of doing business (easy).

Peru is classified as an emerging market: in 2017 its nominal GDP is equal to US$ 211.4 billion and the nominal GDP per capita amounts to US$ 6,572. The level of human development is high (0.750) and the global economic condition are improving, as proved by the 2.5% GDP growth rate and the fast industrial-growth rate equal to 9.6% in 2017, but the poverty rate is still high, amounting around 20%, despite it has been steadily decreasing, falling by more than half in recent years. The country also ranks high in social freedom and it has the lowest homicide rate in south America. The reduction of corruption, the necessity to increase the productivity and the infrastructures are still ongoing challenges for the country. Peru’s economic growth began with the pro-market policies implemented by the former President Fujimori in the 1990s, and all subsequent governments, including the current Vizcarra’s one, have continued them, ensuring long-term positive outlooks for the country. In 2018, it is ranked 58th for the ease of doing business (easy).

Venezuela has the world’s largest known oil reserves and has been one of the world’s leading exporters of oil. In 2017, the nominal GDP amounted to US$ 320 billion and the nominal GDP per capita is equal to US$ 10,968. The petroleum sector accounts for roughly a third of GDP, around 80% of exports and more than half of government revenues. For years the government’s anti- market orientation has been a complicated and limited business opportunities in the country. The populist social welfare measures implemented by Chavez’s government aimed to reduce economic inequality and poverty in 2000s ended with destabilizing the nation’s economy. The consequent crisis of the country’s currency, the Venezuelan Bolivar, resulted in hyperinflation (expected to reach the rate of 1,370,000% by the end of 2018), economic depression, shortages of basic goods and dramatic increase in unemployment, poverty, disease, child mortality, malnutrition and crime. The current extremely complex scenario makes it hard to find opportunities for a foreign company in the country. In 2018, it is ranked 188th for the ease of doing business (below average).

Based on this first overview on Latin American main economies, the available information is sufficient to make an initial skimming. For each of the countries that have been presented, the most interesting factors will be highlighted below.

Brazil is the first economy in Latin America and the largest market in the region, with more than two hundred thousand million people. Despite the recent crisis, it is a major economy, important at global level, as proved by its membership at G20 and BRICS. These are the reason why it will be taken into consideration for the following part of the analysis.

Mexico is the second largest economy and the second most populous country of the region. It is a member of G20. The size of its economy, together with its great commitment in worldwide free trade agreements make it one of the most interesting market for the entry in Latin America, and it is worthy of being furtherly studied.

Argentina is one of the richest countries in Latin America and it is a generally high developed economy (third in size in the region). Despite some structural weaknesses of its economy (high inflation in particular), the country must be taken into consideration by a company that is planning to enter the Latin America.

Chile is another highly interesting country, because of its stability, the development of its economy and the quite widespread prosperity. However, the extension and, consequently the opportunities

arising from its market are smaller than in Brazil, Mexico and Argentina, and this is the reason that explains its exclusion from the set of countries to deeply examine.

Uruguay is one of the most developed and rich countries in the region as well, and it is located in a strategic position in South America. Nevertheless, the small size of its economy with respect to the other examined countries and the smaller opportunities, in particular from the public sector, for crime and security issues, make Uruguay less attractive than other markets.

Peru is experiencing a path of economic development, and the general framework of the country is stable. Anyway, the country still has high poverty rates and lacks some important infrastructures, which may be penalizing factors for a foreign advanced company: thus, it has been rejected for the following part of the work.

Venezuela is one of the greatest producers and exporters of oil in the world. However, the dramatic conditions of its economy strongly discourage foreign companies’ entry in this market.

In conclusion, the analysis will be focused, from this point forward, on Brazil, Mexico and Argentina.

First screening: Brazil, Mexico, Argentina

After the former introductory phase, aimed to give a general overview of Latin America’s market, the analysis will now focus on the most attractive countries. The set of countries has been narrowed down to Brazil, Mexico and Argentina, which have been selected as the most interesting, due to the size and the level of development of the market, to growth prospects and to the number of opportunities to exploit they offer for a company like Stilsoft. Thus, in the following second step, Brazil, Mexico and Argentina will be analyzed in depth, through the tool of PESTLE (Political, Economic, Socio-Cultural, Technological, Legal, Environmental) analysis. This step, addressed to evaluate the impact of the macroenvironment’s factors on the activity of the firm, will be instrumental in choosing the final target market for Stilsoft’s entry strategy in Latin America.

2.1

PESTLE analysis: Brazil

Brazil is a democratic federative republic, with a presidential system. The federation is composed of the union of 26 states and the Federal Districts, which contains the capital Brasilia. The National Congress is the Federation’s bicameral legislature, consisting of the Chamber of Deputies and the Federal Senate. The president is both head of state and head of government. The current president is the newly elected Jair Bolsonaro, who has taken up office starting from January 2019. His economic team espouses more free-market policies than the previous Temer’s government: however, his agenda of privatization and liberalization will probably face the obstacle of a fragmented Congress, where his party has just 10% of the seats. Some uncertainty and instability may arise from Bolsonaro’s will to change some commercial deals with other countries.

A structural big issue in the country is corruption and opening an operation in Brazil may require additional payments to government officials and this can be an obstacle to entering the market. Brazil ranks 70th place in level of corruption among 180 countries.

The government expenditure amounts to 37.93% of GDP in 2017. The total corporate tax is equal to 34% (in addition to statutory corporate tax rate of 15%, surtax of 10% on income in excess of BRL 240,000 per year imposed and 9% social contribution tax levied on adjusted net income).

Brazil is the largest economy in Latin America and the ninth largest in the world, with a nominal GDP equal to US$ 2,055.1 billion. The GDP based on PPP in current prices of 2010 is equal to US$ 3,247.5. The GDP growth rate in 2017 was 1.44%.

Brazil has a diversified economy, including agriculture, industry and a wide range of services. Agriculture and allied sectors account for 5.1% of the GDP. Industry, concentrated in metropolitan São Paulo, Rio de Janeiro, Campinas, Porto Alegre and Belo Horizonte and driven by automobile, steel, petrochemicals, computers, aircraft and consumer durables, accounts for 30.8% of the GDP. Nearly 25% of citizens live under poverty line, namely more than 50 million Brazilians (2017). The GINI index equal to 0.513 (medium) reveals inequalities in the distribution of income, even if the gap between rich and poor is decreasing gradually, and there is a significant trend of growing middle class. The unemployment rate amounts to 11.7% (October 2018).

The HDI in 2017 is equal to 0.759 (high).

Due to large population and inflow of FDI, Brazil has extremely high potential for growth. The inflation rate is now under control (around 4% in November 2018) and the risk of domestic currency devaluation is low. However, the reform of the expensive Brazilian pension system is an urgent issue, expected in 2019, in order to avoid the re-emergence of debt-sustainability and inflation concerns.

There is abundance of unskilled and semi-skilled workers, and labor costs on the global level are quite low. When it comes to import duties, there is a system in place which gradually reduces the tariff according to the number of years of successfully importing.

Government’s treatment is generally equal for both foreign and domestic enterprises. Local state governments have also the right to offer incentives for investing, and the set of incentives for foreign companies is almost the same as domestic enterprises.

However, the corporate tax level at 34 % does not encourage to leave profits in the country. The consultant agency Price Water Coopers highly recommends that exporters seek assistance from local trade and tax consultants before shipping any goods in the country.

The inflation rate in 2017 amounted to 3.4%.