Brazil in Focus: Economic, Political and Social Issues
Brazil in Focus: Economic, Political and Social Issues
1. There are various countries both developing and developed that are attractive for American companies seeking foreign direct investment opportunities. Brazil provides opportunities for foreign companies. The number of companies investing in Brazil has increased greatly for the past years. This is due to several factors. The stable monetary policy, employed and control of inflation have attracted foreign firms. Also, the falling risk ratings have also attracted investors. Brazil has grown rapid economically for the past decades, and it is one of the powerful economies globally.
Brazil economy provides investment opportunities for foreign companies. The country’s economy is growing faster, and this will contribute to growth in investment. Companies investing in Brazil are assured of profits because of the stable economy. In addition, Brazil provides adequate labor for companies planning to invest there. The country has a low rate of unemployment. The country has controlled inflation, and this has increased consumer purchasing power. Consumers are the main attraction in Brazil. Consumers in the country have a high capacity of buying imported goods and access credit. The increase in consumer purchasing power has led to industrial growth and attracted foreign companies. Brazil has low interest rates.
The interest rates in the country are low and hence attract investors. Therefore, Brazil has minimal economic risk because of its stable economic growth. It also has a low currency risk because of the controlled inflation. The country has experienced high inflation rates for a couple of years, but the government has managed to control it. On the other hand, Brazil has a high political risk. Brazil is not stable politically as it has a volatile political environment. The unstable political environment increases the risk of investing in Brazil as companies have to account for risks associated with political chaos and conflicts. The country also depends more on exports than other developed nations such as US. It also depends heavily on external funding and a problem with global demand and financing will affect the country negatively (Almeida, 2008).
2. The United States money supply is expanding rapidly because of the stimulus, bailout package and quantitative easing. Quantitative easing entails purchasing monetary assets from commercial banks to increase the supply of money if the traditional monetary policy is not effective. Using quantitative easing to increase the money supply can have a detrimental impact on the country in the future. Quantitative easing can increase inflation in the future if the amount of easing needed is overestimated. It can also lead to inflation in the future if a lot of money is created by buying liquid asset.
Also, quantitative easing can have a negative effect on the economy if banking institutions fail to lend money to small businesses. The Federal Reserve has planned to use quantitative easing to increase the supply of money as the foreign policy has not been effective. The easing will have an inflationary effect if it results to increase in money supply. The rate of inflation per year will increase due to the easing. The inflationary pressure linked with money growth from the quantitative easing could build before the central bank develops measures to counter the pressure. Thus, the Federal Reserve should develop measures to counter the pressure resulting from the money growth to prevent inflation in the future (Labonte, 2011).
Reference
Is this your assignment or some part of it?
We can do it for you! Click to Order!
