Political and Legal Forces in Brazil
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Political and Legal Forces in Brazil
As the country is handling a program for economic growth, investors can access the support of the government in both financial and advising aspects. One potential barrier for the Australian energy producer is the presence of state-level federations. These are association of industrial companies that cooperates to achieve operational success and also to lobby effectively to the government. MERCOSUL is supportive to direct investments in the country that even non-members such as Australian would be benefited.
Although the general stance of the government is to favor investments, energy production is neither a labor-intensive industry nor produce agricultural products. As these two points are explicitly stipulated by the Brazilian Constitution and serve as the “passport” for investors, the Australian firm would find it hard to supersede Brazilian policy. In addition, the justice system in the country is cumbersome and slow which would make any efforts from the firm to lobby its position and services difficult and costly. In contrast, in consideration of the state and federal officials, a foreign firm can own the company 100%. The absence of government share of corporate power is an incentive to management.
When the investors have ongoing operation, there is also a restriction of forming additional branches. This undertaking is also highly dependent on the decision of the President of Brazil. As the nature of energy production and transmission is retail, potential economies of scale will not be exploited by the firm. Finally, the government favors those investors that are able to uplift the local economy of poorer regions and the energy firm can is relevant to this feat.