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Doing Business in Brazil demands local knowledge When considering investing in Brazil there are relevant aspects to be weighed such as: Culture
We are not Hispanic! Brazilians do not consider themselves "Hispanic" (as all those not born in US or at its North are called) as they do not speak Spanish but Portuguese; they do not listen to "Hispanic" music but local (Brazilian) and international (mainly American) and they eat avocado (the fruit) with sugar and not with salt (like in salads). Brazil is also a multi-cultural country as a formed by Europeans, Africans Arabs (from Lebanon and Syria) and Asians (mainly Japanese). The influence of the "natives" (original inhabitants) is limited and confined to certain parts of the country (mainly in the states of Pará and Amazonia);
Military coup - built a society which is hierarchical; adaptive and bureaucratic ( you have to prove that you are you or that you did something) - also an inheritance of our colonial past;
Relationships - who you know & your name (“for the enemies the Law for friends everything!”) and
Entrepreneurial – intuitive; lack of managerial preparation & resources.
Environment
Economy - evolving, nevertheless with problems (low investment; the government burden – almost 40% of the GDP and the education gap). There are good things: more transparency; more discipline in the macroeconomic policy based on the combination of inflation control; free fluctuation of the currency and fiscal discipline. Problem is that we should be moving faster;
The economy growth is slowing down. Consumption is lower. So this last quarter and 2012 we will less growth;
There is a certain degree of insecurity when doing business in Brazil. There is a local saying stating that in Brazil even the past can be changed, and
In summary laws are in general not well made exposing companies; there is a lot of compliance to be dealt with and taxes are high, in large number and difficult to calculate.
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Think Straight | Talk Straight
Supply
Suppliers in general suffer from bipolar disorder. The Bosses they say (and promise) one thing while sales force do another thing. It is a “push” market!
Another aspect affecting supply efficiency is the tax war among states. One will find a lot of suppliers with plants or DCs in regions far from the customers, and
Lastly, one when visits Brazil may find a tremendous opportunity in imports. Importing is not easy! There are tariff and not tariff barriers. Yet feasible, but 3 things make it difficult: the final cost after all duties make the final product expensive; the lack of payment terms (exporters want to receive at sight) and logistics (incl. customs)
Operations
Real Estate prices, due the country’s growth and also the decrease in interest rates, have increased tremendously in the last 5 years. Additionally Brazilians are fond of RE. An inheritance of our Colonizers;
Zoning is a problem. The environmental aspect also grew in importance, and
Construction cost has also increased: material, services and work-force.
Customers
Customers in general are price focused. They want price + everything else. Important is to have a clear Value proposition otherwise you will be lost (without any direction), and
There is a difficulty of “selling” the “total cost of ownership” concept. Customers see only the price as their final cost. Challenge is to prove that you can add value to your customers by offering other aspects such as post sales service; packaging or maintenance.
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Conclusion
Brazil although an attractive market is challenging in view of its competitiveness and idiosyncrasies;
In order to enter the market any company should bring something new, and
Local knowledge is very important!
We at KF Trade & Consulting Group are a local financial advisory firm with local and regional knowledge and we can help you to have a good start in Brazil. We are a finance advisory firm covering: (1) deal origination (M&A); (2) interim management; (3) financial management consulting and (4) tax efficiency.
Contac ts - Partners
Marcos Camargo do Canto e Castro Cel.: +55 (11) 8899-0001 E-mail: marcosc3@kfgroup.com.br
Rubens Batista Jr. Cel.: +55 (11) 7883-4279 E-mail: rbatistajr@kfgroup.com.br
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