Brazil: Leading the BRICs?

The longtime football powerhouse may soon be known for more than just its football. Brazil’s triumph in World Trade Organization has put it at the forefront of powerful developing economies. Between their victories using the World Trade Organization compulsory licensing to break patents, fighting agricultural subsidies in more developed countries, and its diplomatic negations with Iran, Brazil has proven itself to no longer be a country to be slept on. However the underlying question remains as to whether these developments will prove to be beneficial in their long term economy. Some of these developments however, have antagonized the United States and European Union along with potentially scaring away future businesses. That being said, although the success has put them on many countries radars, being on the bad side of the US and European Union can make things very difficult. In addition, using the WTO compulsory licensing due to a trivial price difference will have deterred companies from wanting to invest in Brazil with the fear that they may end up like Merck Pharmaceuticals.

Financially and from a business perspective, Merck was making a financially sound decision in asking a higher price from a country that was more financially capable. In addition, Brazil’s tariffs were much higher thus forcing Merck to offer a higher price. However, Merck was selling to other developing countries for less such as Thailand for 65 cents and to Brazil for $1.10, double. In 2007, Brazil offered that a single annual purchase as a compromise to save some of the company’s marketing expenses but Merck refused to retain higher profit margins. Therefore not only was Merck Pharmaceuticals offering deceptive pricing but also bringing a question of ethics to the table. This enraged Brazilian President Lula to the point where he announced that “From an ethical point of view the price difference is grotesque, and from a political point of view, it represents a lack of respect, as though a sick Brazilian is inferior.” This strong statement perfectly represented the Brazilian government’s point of view. It also showed that Brazil was not going to be pushed around by some foreign pharmaceutical company and that it held its people to a higher priority even though Merck had a large amount invested in Brazil. Therefore even though it may have hurt its reputation among potentially interested investors, many companies will overlook the quarrel with Merck because of what Brazil’s economy has to offer. Additionally, Brazil’s actions will be seen lesser because it was compulsory and an extreme case. Although the financial aspect and numbers being argued were in the bigger scheme, trivial, Brazil’s actions were more motivated more by principle and nationalism rather than simply breaking a patent for a drug they could afford. I believe Brazil made the right decision in the greater picture as Merck’s pricing was to a certain extent discriminatory towards Brazilians.

Brazil’s capitalism is a very controlled capitalism. The government holds a key role not only by owning many of the larger firms but serves as the primary source of capital, thus making it extremely influential in its economy’s direction. A key component of Brazil’s success has been its political and macroeconomic stability. Sizeable improvements in their public debt, reduction of poverty, rising standard of living, and industrial policies have brought it the success it holds today. These advancements have made Brazil an agricultural powerhouse and have been supplying commodities to China since 2003. Brazil’s weaknesses only lie in its infrastructure, as high interest rates bar entrepreneurial Brazilians from economic opportunity. Additionally Brazil has been labeled as on of the harder countries between the BRICs to work in due to all the red tape foreign and domestic companies need to cross to bring business to Brazil. These issues are issues found in any developing country and can be fixed with the right leadership.

With the World Cup coming in 2014 and the Olympics in 2016 Brazil’s future has only been looking brighter. With victories not only on the international economic podium but also politically, Brazil has put itself at the forefront of the BRICs. With the right leadership, and the right direction, Brazil has the opportunity to have the brightest future among the four biggest developing economies.

 

 

 

Work Cited

Daemmrich, Arthur A., and Aldo Musacchio. Brazil: Leading the BRICs? Boston: Harvard

Business School, 2011. Print.

 

 

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