Business Case Studies, Leadership Case Study, Tata Group,Ratan Tata

Code : ECC0036

Year : 2009

Industry : Banking, Insurance and Financial Services

Region : Brazil

Teaching Note: Available

Structured Assignment : Available

Abstract: This case study is aimed at an analysis on how various sectors of Brazil were affected due to the US financial crisis and also to validate the relevance of decoupling theory for the Brazilian economy. This case also helps debate on how a singular unintended incidence – the US financial crisis in this case – could put the recovery efforts of an economy in jeopardy.

Brazil, some argue, was blessed in disguise when it was tested with perennial economic crisis throughout the 1990s and global downturn following the September 11 terrorist attacks. The economy not only emerged more resilient, but also grew self-sustainable. 2008 Statistics tell the whole story – imports equal to 9% of the Brazilian GDP and exports about 12%. Just when economists started believing that this country is decoupled from the developments in the US economy, the US financial crisis (2008) struck Brazil off-guard. The global credit dried up, unemployment increased, international investor confidence dwindled and above all, Brazilian real shrunk against the US dollar. Brazilian companies have bet huge amounts on currency derivatives, since 2003, with the assumption that the real would strengthen against the US dollar. What should companies do firstly to avoid an impending bankruptcy and stay afloat in the medium term? What should be government's response?

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