Doing business in Brazil Doing business in Brazil

Doing business in Brazil
14 Jun 2016

Brazil has been one of the most exciting growth stories of the past decade and this month’s football World Cup is likely to mark the country on the map as a prominent global investment destination. Brazil has cemented its position at the heart of a burgeoning Latin America economy which is set to go from strength to strength as international appetite increases

Brazil’s economy was once intrinsically tied to American prosperity, living on the old adage that ‘what’s good for the US is also good for Brazil’. However by creating political and economic allegiances with its neighbours, the country has cemented its role at the heart of a Latin American resurgence. It has become a strategic home for businesses looking to penetrate a region bursting with potential.

Top 10 challenges of doing business in Brazil

Recent estimates have suggested that hosting the World Cup and the Olympics in Brazil could be worth $3.5 billion and $5 billion to the economy respectively. Consumer confidence is also at an all time high in the country, with 40 million Brazilians escaping poverty over the last ten years, boosting the middle class bracket in the country. What is more, strong manufacturing growth, a young population and an abundance of resources have got international investors rather excited about the country’s prospects.

Another reason to be excited about the Brazilian economy is that - after several quarters of disappointing growth levels - there is an air of optimism about future growth levels. If the economy picks up soon, many global investors will see it as a catalyst to move in their operations and thus boost foreign direct investment (FDI). However doing business in Brazil is notoriously complicated, and there are several things organisations should consider before making the leap.

Developing nation

Brazil is still considered a developing nation, and although that is often interpreted as a precursor for ‘high growth levels’, it also means that several areas of the economy remain underdeveloped. The consumer base, regulatory environment and sphere of investment are not as mature as those of developed nations, and considerations must be made with this in mind.

Bureaucracy

The reform of the laws and regulations for opening and running a business in Brazil has not adapted at the rate with which the economy has grown, presenting many hurdles to overseas corporations. Brazil ranked 126th out of 183 countries in the World Bank’s latest annual global report which evaluates the ease of starting a business, dealing with construction permits, registering property, and paying taxes. On average, it takes 13 procedures and 119 days of work to start a business in Brazil, and construction permits demand an average of 17 procedures and 469 days to finally get authorised.

Corruption

Brazil has become somewhat notorious for the levels of corruption. However, a recent report by The Economist, suggests that the country is finally ready to clean up its act, estimating more corruption will result in appropriate custodial sentencing, thus prompting a petering out effect.

Financial

Brazil’s economic boom has pushed prices up in the country, and from a financial perspective, doing business is not as cheap as you might think. The currency has moved closer to parity with many of its leading peers and commodities have shot up in price. The country’s stock market is also stuck in a rut, which makes investment a little trickier.

Taxes

Taxation in Brazil can be an unpredictable beast, with many native firms already battling the authorities over huge sums of disputed tax revenue. A recent article in The Economist noted that “tax disputes are as Brazilian as string bikinis or samba,” outlining many of the high profile cases currently passing through the legal system.

Preference for local companies

Brazil’s diverse and varied economy means that many ompanies moving into the country choose to do so in partnership with local companies. This makes the transition less disruptive for consumers, as well as giving the company developed nations, and considerations must be made with this in mind.

Infrastructure

Brazilian ex-footballer Pele recently launched a full scale attack on the government for the lack of infrastructural developments that have taken place in the run up to the 2014 World Cup and the 2016 Olympics. However, the government has woken up to the urgent need to improve the country’s infrastructure, auctioning road, railway and airport concessions as well as cutting financial transaction tax on several major projects.

Technology

Brazil has been hampered by a lack of technology during its development. However there are concerted efforts to improve the country’s infrastructure. Indeed, many technology start-ups have grabbed the headlines of late, and large corporations have also pledged a commitment to the economy. Microsoft is investing $100 million in Rio de Janeiro over the next four years.

Local labour force

Unions have a lot of influence in Brazil, and although their achievements have led to a more developed labour market, businesses should be aware of how they operate. It is easy to fall prey to Brazil’s labour laws, which are set out in 900 articles and are difficult to navigate. Non-compliance can lead to fines and a soured reputation.

Export and import barriers

Businesses can often be confronted with complications when exporting and importing goods. Most imported goods are held in port for some time while the correct procedures take place and the average cost per container is rather steep. Exports can expect similar treatment, taking an average of 13 days just to leave Brazilian territory.

Contributed by TMF Group.



 

Brazil has been one of the most exciting growth stories of the past decade and this month’s football World Cup is likely to mark the country on the map as a prominent global investment destination. Brazil has cemented its position at the heart of a burgeoning Latin America economy which is set to go from strength to strength as international appetite increases

Brazil’s economy was once intrinsically tied to American prosperity, living on the old adage that ‘what’s good for the US is also good for Brazil’. However by creating political and economic allegiances with its neighbours, the country has cemented its role at the heart of a Latin American resurgence. It has become a strategic home for businesses looking to penetrate a region bursting with potential.

Top 10 challenges of doing business in Brazil

Recent estimates have suggested that hosting the World Cup and the Olympics in Brazil could be worth $3.5 billion and $5 billion to the economy respectively. Consumer confidence is also at an all time high in the country, with 40 million Brazilians escaping poverty over the last ten years, boosting the middle class bracket in the country. What is more, strong manufacturing growth, a young population and an abundance of resources have got international investors rather excited about the country’s prospects.

Another reason to be excited about the Brazilian economy is that - after several quarters of disappointing growth levels - there is an air of optimism about future growth levels. If the economy picks up soon, many global investors will see it as a catalyst to move in their operations and thus boost foreign direct investment (FDI). However doing business in Brazil is notoriously complicated, and there are several things organisations should consider before making the leap.

Developing nation

Brazil is still considered a developing nation, and although that is often interpreted as a precursor for ‘high growth levels’, it also means that several areas of the economy remain underdeveloped. The consumer base, regulatory environment and sphere of investment are not as mature as those of developed nations, and considerations must be made with this in mind.

Bureaucracy

The reform of the laws and regulations for opening and running a business in Brazil has not adapted at the rate with which the economy has grown, presenting many hurdles to overseas corporations. Brazil ranked 126th out of 183 countries in the World Bank’s latest annual global report which evaluates the ease of starting a business, dealing with construction permits, registering property, and paying taxes. On average, it takes 13 procedures and 119 days of work to start a business in Brazil, and construction permits demand an average of 17 procedures and 469 days to finally get authorised.

Corruption

Brazil has become somewhat notorious for the levels of corruption. However, a recent report by The Economist, suggests that the country is finally ready to clean up its act, estimating more corruption will result in appropriate custodial sentencing, thus prompting a petering out effect.

Financial

Brazil’s economic boom has pushed prices up in the country, and from a financial perspective, doing business is not as cheap as you might think. The currency has moved closer to parity with many of its leading peers and commodities have shot up in price. The country’s stock market is also stuck in a rut, which makes investment a little trickier.

Taxes

Taxation in Brazil can be an unpredictable beast, with many native firms already battling the authorities over huge sums of disputed tax revenue. A recent article in The Economist noted that “tax disputes are as Brazilian as string bikinis or samba,” outlining many of the high profile cases currently passing through the legal system.

Preference for local companies

Brazil’s diverse and varied economy means that many ompanies moving into the country choose to do so in partnership with local companies. This makes the transition less disruptive for consumers, as well as giving the company developed nations, and considerations must be made with this in mind.

Infrastructure

Brazilian ex-footballer Pele recently launched a full scale attack on the government for the lack of infrastructural developments that have taken place in the run up to the 2014 World Cup and the 2016 Olympics. However, the government has woken up to the urgent need to improve the country’s infrastructure, auctioning road, railway and airport concessions as well as cutting financial transaction tax on several major projects.

Technology

Brazil has been hampered by a lack of technology during its development. However there are concerted efforts to improve the country’s infrastructure. Indeed, many technology start-ups have grabbed the headlines of late, and large corporations have also pledged a commitment to the economy. Microsoft is investing $100 million in Rio de Janeiro over the next four years.

Local labour force

Unions have a lot of influence in Brazil, and although their achievements have led to a more developed labour market, businesses should be aware of how they operate. It is easy to fall prey to Brazil’s labour laws, which are set out in 900 articles and are difficult to navigate. Non-compliance can lead to fines and a soured reputation.

Export and import barriers

Businesses can often be confronted with complications when exporting and importing goods. Most imported goods are held in port for some time while the correct procedures take place and the average cost per container is rather steep. Exports can expect similar treatment, taking an average of 13 days just to leave Brazilian territory.

Contributed by TMF Group.