TNC Case Study: Fiat in Brazil

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TNC Case Study: Fiat in Brazil
Originally opened in Betim in 1976 and employed over 10,000 workers and produced over 130,000 cars a year. Betim is part of the industrial
belt of Belo Horizonte, the capital of Minas Gerais, a prosperous state in South-East Brazil
In 1990's, Fiat invested 1.5 billion dollars in updates, and developing the Palio and Tipo cars. It now employs 12,000 workers in producing
650,000 cars a year.
Why did Fiat locate in Brazil?
Factors that influenced Fiat's Description Explanation
decision to locate in Betim
Employment Brazilian government wanted Local government of Minas Gerais offered car companies
reliable, long-term employment for like Fiat good deals to locate there because car production
its population employs large numbers of unskilled/semi-skilled labour.
Having its population in reliable jobs means that Brazil will
prosper as more people will be paying taxes and will have
disposable income to spend in Brazil's shops and services.
New Market Fiat was looking to open up new Cars made in Brazil were affordable for Brazilians because
markets ­ sell cars to the large Fiat's operating costs were lower so they could charge less.
Brazilian population who previously The cars were cheaper as there were less transport costs,
could not afford them cheaper labour, and the cars were smaller. Fiat could now
sell to the South American market.
Loans, Grants and Cheap Incentives were offered by Minas Stable employment that car factories offer outweigh the
Land Gerais to get Fiat to locate there. costs involved in getting them to locate in the region. It is
Other regions and countries wanted more profitable for Minas Gerais in the long term to spend
Fiat so it was about who could offer money on getting Fiat to locate there than it would be to
the best deal. Minas Gerais' incentive miss out on the opportunity.
package amounted to 50% of Fiat's
initial investment.
Cheap Labour Car factories need large labour By locating in places that have low average wages, or have
forces. Paying workers is a large high unemployment, car companies can pay their workers
proportion of a car company's cost. less. In Minas Gerais workers get approx $7 an hour
whereas in the UK the same worker would demand 12
pounds an hour. The company saves money on labour, so
makes a bigger profit.
Population won't strike In 1976, Brazil had a strong military Brazilian people will not strike because of their strong work
government that would not have let ethic, which is fuelled by the knowledge that if they do not
labourers go on strike. Even now, work hard enough, there are unemployed people who
under a different government, the would take their jobs. Jobs are valued by the population of
Brazilian people have a strong work Minas Gerais. By not losing a single hour of production
ethic that prevents strikes. (1997), Fiat maximises its profit - it is efficient.
Why has Fiat expanded in Brazil?
Fiat opened a new plant ($240 million) at Sete Lagos in November 2000. It is a joint venture between Iveco which will produce light
trucks and Fiat automotives which will make Ducatis vans. Fiat Iveco has a 9% share of the light van market in Brazil ­ it hopes to
increase its share to 15% by 2001.
Minas Gerais gave Fiat $135 million towards building their new factory ­ over half the construction cost. Fiat believes that there will
be an increase in demand for these vehicles in Brazil in the next few years
If 2.2million cars and light vans are produced within the country (by 2003 ­ their prediction), Fiat will save on transport costs and
import duties. Fiat also predicts that the Western European and North American markets will remain constant.


Mr A Gibson

A well written and presented document on this relevant case study. If you need one for this topic then Fiat in Brazil will be perfect.

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