Brazil has climbed positions in the global economic ranking over the last decade and is now the ninth largest economy in the world, as well as the fifth largest country by population. The country is also the fifth largest in land area and the largest nation in the Southern Hemisphere.
But what do business leaders need to know about doing business there?
Joanna Crellin, Trade Commissioner of the Department of International Trade (DIT) for South America, explains: “Brazil has 28 states, and each has different regulations. Therefore, before starting any type of business in Brazil, it is necessary to conduct a significant amount of research on this vast market and identify where in the country your business will be most successful in launching and growing.
“Different states have different strengths – some are more manufacturing-oriented, others are more agriculture-related, and in the southern states, where there is a higher concentration of the middle class, there are more professional service companies.”
And it’s not just the regional differences that you need to prepare for, but also the vast amount of legal work that will need to be completed before you can step foot in the country.
According to TMF Group: “On average, 11 procedures and about 90 days of work are required to open a company in Brazil, and construction licenses require an average of 20 procedures and 404 days to finally be authorized.”
However, despite the challenges, Brazil is a very promising destination for investments and ventures.
Crellin continues: “One of the interesting things about Brazil and Latin America is that they have suffered from a perception problem in recent years. Currently, there is a lack of understanding.
“For companies that are in the market and operating, they find it to be a great market. It can be complicated and labor-intensive, but it is very profitable. With the right support and guidance, it is possible to do great business in Brazil.”
Cultural Customs
Regardless of the sector or industry, there are many cultural customs that one should be aware of.
A large part of the Brazilian economy is driven by family-owned businesses, which is important to consider before starting any venture in the country. A significant part of Brazilian business culture and entrepreneurship revolves around having a good family background – as this is a common topic of discussion before, during, and after business meetings.
This close and personal element in business is crucial to embrace if you are a British company looking to expand into Brazil, as Ferreira explains: “Personal relationships in business transactions are very important. It is possible that the success or failure of a deal – such as an acquisition or partnership – depends on the chemistry between the Brazilian owner and the foreign investor.
“It is important that, in addition to the normal activities expected, such as conducting proper due diligence, the foreign investor also invests time in developing the relationship.”
What Are the Challenges?
It is clear that Brazil offers many opportunities, especially if its cultural customs are embraced.
However, any company planning to start a venture in Brazil needs to be aware of potential pitfalls.
The country has a very complex tax system, with many extra taxes for companies that are not Brazilian. This also applies to import fees. Overall, there are over 90 taxes, fees, and contributions that British companies need to be aware of, according to TMF Group.
Hiring a local law firm, in addition to the services of the Department for International Trade (DIT), is vital before anything is done.
Sarah comments: “Services can attract taxation of 40-50% on the base cost. Some products still attract significant tariffs, and an initial requirement will be to calculate the tariff level on your product. Additionally, import duties may apply at entry and between states for certain products, increasing the cost of some products by 60-80%, depending on the sector.”
Should You Start a Venture in Brazil?
Despite the clear and serious challenges facing those wishing to do business in Brazil, carefully negotiating your way through the Brazilian business community can lead to rapid growth for companies seeking international expansion.
Sarah comments: “Perceptions of the Brazilian market are often outdated. The demand for international goods and services is strong.”
However, due to its complexity, it is worth having experience in international expansion before targeting the Brazilian market.
Joanna summarizes: “Brazil is suitable for companies that have already exported and worked in previous countries. Brazil should not be the first country to enter – it is a common phrase that ‘Brazil is not for beginners’ – and that is true.”
Source: Business Leader