Brazil has been climbing the global economic ladder over the last decade and is now the world’s ninth largest economy, and fifth largest by population. The country is also the fifth largest in terms of land mass, and the largest nation in the Southern Hemisphere.
But what do business leaders need to know about doing business there?
Department of International Trade (DIT) Trade Commissioner for South America, Joanna Crellin explains: “Brazil has 28 states, and they all have different regulations. So, before you do any sort of business in Brazil, you need to do a great amount of research into this enormous market and to locate where in the country your business will be most successful to launch and grow.
“Different states have different strengths – some are more about manufacturing, some are more related to agriculture, and in the states in the south of the country where there are more of the middle classes based, there are more professional service companies.”
And it is not just regional differences you need to be prepared for, but the vast amount of legal work that will need to be completed before you can set foot in the country.
According to the TMF Group: “On average, it takes 11 procedures and around 90 days of work to start a business in Brazil, and construction permits demand an average of 20 procedures and 404 days to finally get authorised.”
However, despite the challenges, Brazil is a very promising investment and venture destination.
Crellin continues: “One of the interesting things about Brazil and Latin America is that they have suffered from a perception problem in recent years. There is currently a lack of understanding.
“For those companies that are here in the market and working, they think it is a great market. It can be tricky and hard work, but it is very profitable. With the right support and guidance, you can do great business in Brazil.”
No matter the sector or industry, there are many cultural customs should be aware of.
A major part of the Brazilian economy is driven by family businesses, which is important to consider before starting any ventures within the country. A large part of Brazilian business culture and entrepreneurship is about having a decent family background – as this is a common topic of discussion before, during and after business meetings.
This close and personal element of business is key to embrace if you are a British business looking at expanding 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 – could depend on the chemistry between the Brazilian owner and the foreign investor.
“It is important that besides the normal activities one would expect like carrying out a proper due diligence, the foreign investor must also invest some time in developing the relationship.”
What are the Challenges?
It is clear to see that Brazil has many opportunities available, especially if their cultural customs are embraced.
However, any business looking at starting a Brazilian venture does need to be aware of any potential pitfalls.
The country has a very complex tax system, with many extra taxes for companies who aren’t from Brazil. This also applies to import tax duties. Overall, there are over 90 taxes, duties and contributions that British companies need to be aware of, according to the TMF Group.
Getting a local law firm, as well as services from the Department for International Trade (DIT), are vital before anything is done.
Sarah comments: “Services can attract taxation of 40-50% on the basic cost. Some products also still attract significant tariffs and an early requirement will be to work out what the level of tariff is on your product. Not only that, but import duties can apply on entry, and between States for certain products, increasing the cost of some products by 60-80%, depending on the sector.”
Should You Start a Business Venture in Brazil?
Despite the clear and serious challenges that face anyone looking to do business in Brazil, carefully negotiating your way through Brazil’s business community can lead to rapid growth for businesses looking for overseas expansion.
Sarah comments: “Perceptions of the Brazilian market are often out-of-date. Demand for internationa goods and services is strong”.
However, due to its complexities, it is worth having experience of international expansion before looking at the Brazilian market.
Joanna summarises: “Brazil is suited to companies that have exported and worked in previous countries before. Brazil should not be the first country to move into – it is a common phrase that ‘Brazil is not for beginners’ – and that is true.”
Source: Business Leader