How to do business and succeed in Brazil?

Orlando Merluzzi
Orlando Merluzzi

Yes, Brazil is a great country to do profitable and consistent business, especially if the investor takes the right path with the assistance of serious and competent professionals. Choosing a good business partner is always a challenge for newcomers, wherever you are in the world, and it doesn’t suffice to establish proper communications between two distinct cultures in order to be successful in these competitive markets. One must understand the other culture beyond the handshake, in addition to building trust.

“Brazil is not for beginners” goes the famous quote used by speakers, politicians and comedians. It is taken from a book published in the early 60s, written by a Hungarian naturalized Brazilian named Peter Kellemen, entitled “Brazil for Beginners, Adventures and Misadventures of a Naturalized Brazilian Citizen”. With this book, Kellemen provides a small guide for con artists and swindlers. It seems the author learned the art so well – applying financial frauds in the market – that he later had to flee to another country.

Although the country has recently been embroiled in corruption scandals in various political and corporate sectors controlled by the government, those who think Brazil is a country suitable and ripe for illicit business are sorely mistaken. These scandals make headlines, but the vast majority of domestic and foreign companies established in the country follows strict corporate governance rules.

Brazil has a complex tax and fiscal system, with hundreds of different types of fees and duties for business and revenues. Peter Kellemen’s disciples would certainly see opportunities for tax fraud, but it pays to note that the Internal Revenue Service (Dept.) in Brazil is equipped with the most modern techniques, controls and search tools. It’s therefore perfectly feasible for law-abiding companies to comply with the tax system and properly manage overall operations, returns on investment, costs, margins, prices, funding, and profitability according to a successful business plan built with the support of professionals and experts. Brazil offers funding and fiscal benefits for new investments and startups, but a good professional advisor is recommended.

The banking system in Brazil is one of the most modern in the world (and also one of the most profitable). Interest rates are very high, but this has always been the case and the country grew that way. It’s a peculiar and sensitive financial structure that is not bound to change anytime soon.

Large multinationals of different segments have had a presence in Brazil for decades. These include companies of the Automotive, Heavy Equipment, Chemical, Technology, Food and Consumer Goods industries, Financial institutions, Logistics operators, and others, which keep promoting further investments despite local crises. This is especially true for all those companies who know the local culture and have adapted to it.

It is worth mentioning that although Brazil has recently lost its investment grade from the main rating agencies, its potential market remains very attractive and the location of the country in South America is strategic.

Brazil has one of the most attractive automotive industries and consumer market in the world, with a territory of continental dimensions, one of the largest economies of the planet, and beating all time-records for agricultural production with impressive productivity, year after year. The annual grain harvest is estimated to exceed 250 million tons in a few years. In the new economic world order, which has China as one of its major players, Brazil will continue to be the main supplier of agricultural and mineral commodities for the foreseeable future. In strategic terms, this means Brazil will continue to participate in the global economic game, despite temporary ups and downs. Iron ore and agribusiness represent over 50% of Brazilian exports, and this is not expected to change so soon.

The mix between a Latin culture and a country in its teens, results in a diverse atmosphere. Unions, associations, corporations, and the press are as powerful as religious communities. Politicians are enemies and friends at the same time. Corruption is a problem, as it has been in other large countries in the world. The Press is free while Muslims, Jews, Catholics, black people, white people, Asians, men and women can walk in harmony on the same sidewalk.

The crisis in which the country finds itself currently has been mostly political and will be resolved one way or another, since the lack of governance doesn’t interest anybody in the country. Historically, Brazilians are accustomed to crises that affect the economy and for the past 35 years, the country has undergone 17 crises arising from internal or external factors. During that time the economy grew, governments were replaced, companies made a lot of money, generating jobs, and today the country holds foreign reserves exceeding US$ 360 billion.

Democratic institutions in Brazil are solid and the proof lies in the fact that powerful politicians and business men, including a former president, a political leader with passionate followers, have been called to testify by the Federal Police to clarify suspicions of corruption. And the expectation is that this cleaning-up process for the restoration of moral values will remain in charge.

So why should we look at Brazil differently, despite all the negative news spread by the local and international press? Because Brazil will always remain a great place to do business. But caution is advised nonetheless. In order to successfully do business in Brazil, one must know the difference between an amateur and a beginner. The amateur runs a serious risk of getting hurt in business because he usually comes unprepared, with the wrong business partners, using outdated information, and sometimes trying to impose his culture to drive the demand of local markets. Several investors have learned that “what is good for one country, is not always good for the Brazilian market”. The quote is quite simple to understand, but it has caused damage to some newcomers. The risk is real, therefore, as it is in several other countries. The beginner, on the other hand, is aware of the needs and knows the importance of following the correct paths, with the right partners and competent advice.

Brazil is a very dynamic country, with a its own peculiar language – Brazilian Portuguese is very different from the mother language from Portugal. However, there are a wide range of business opportunities to operate and compete in areas where the country is still deficient and will need improvement in the short term to support the country’s economic recovery in a few years. Investors should keep both eyes on business opportunities for the development of infrastructure, logistics, education, communication, and especially on renewable energy, always bearing in mind that Brazil is a hub of business for all Latin America, despite having huge bureaucracy. No need to panic, you can find great professionals and experts to help you with any business strategy and with the development of a reliable business case.

Brazil is not for amateurs, but it can be an excellent place for beginners who want to compete in a large market that’s still maturing and in development, with consumers who are up to date regarding leading global trends in technology and management, who demand high quality, the availability of product or services, and customer support.

For companies that are already established in the country, the current situation seems to be very concerning. For Brazilians or connoisseurs of the country, it is just another crisis and now is the right time to start planning for the reacceleration of business with the economic recovery, which will surely come in two or three years leveraged by the Chinese second wave of growth. The formula for managing and enjoying the wonderful Brazilian characteristics involves market intelligence, cost control, recycling competencies and developing people, taking care of customers, and especially having a good deal of patience and tolerance. To succeed in Brazil, always try to get support of local experts, even if only for get temporary council from seasoned masters.

Orlando MerluzziMarch, 2016

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