Let's play God for a moment. Let's design a country with enormous economic potential -- what characteristics shall we grace it with? How about:
- Vast natural resources.
- Large population.
- Temperate climate.
- Arable land.
- Long coastline.
Which potential business utopia has these traits in spades? Not the U.S., not China, not Russia, not India. Winner is: Brazil.
Alas, here's where playing God ends and mortal work begins. And the mortals in Brazil have done a poor job over the past 40 years of turning the country's blessings into sustained economic growth.
Pity the past
A September 2006 World Bank report compared the investment climates in Brazil, India, and South Africa, and described how bad it's been: "Over the past 25 years, economic growth in Brazil has demonstrated substantial volatility around a relatively low mean."
That's right. Slow and wildly unpredictable growth. Could there be a worse investment?
The culprits -- as identified by Brazilian business managers and reported by the Bank's Investment Climate Assessments -- are clearly human inventions:
- High tax rates
- Macroeconomic instability
- Political uncertainty
- Cost of finance
- Corrupt tax administration.
And while the government is undertaking some reforms, the Doing Business 2008 report ranked Brazil 122nd in the world for "Ease of Doing Business" -- down a spot from 2007. It's gotten so bad, in fact, that "tax complexity bedevils small business to such a degree that it drives most under the table," according to the Latin Business Chronicle.