Doing Business In Brazil

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Market Entry and Start-Up Considerations

Brazil Regional Options

Questions to ask yourself

• Where is there greatest 
demand for my product?

• Where is there greatest 
growth potential?

• How easy will it be to market,
distribute and sell my product 
in the states I am looking at?

• What is the local/state
authority's attitude to
international trade?

• Do they welcome it or do they 
have a reputation for
bureaucracy and obstructiveness?

• Who are my competitors?

Once you have decided that entering the Brazilian market is right for your company, you will need to identify which part of the country you will start in - unless, of course, you are doing business in Brazil as a result of an initial enquiry from a Brazilian company.

UK Trade & Investment has teams in six of the main commercial centres in Brazil, structured on a sectoral basis. Please click here for contact details.

São Paulo

The city of São Paulo is one of the largest metropolitan areas in the world and recognised as the business centre of Brazil. The interior of São Paulo state is also a very rich industrial and agricultural region, accounting for 25 per cent of the nation's industrial production. The UK Trade & Investment team in São Paulo is the co-ordinating office in Brazil and the first point of contact for all customer enquiries.

The team in São Paulo covers: education and training, creative and media industries, food and drink, ICT and software, security, aerospace, automotive, engineering, environment, water, life science, transport, financial services, construction and consumer goods.

Rio de Janeiro

Rio is the second-largest city in Brazil. Aside from tourism, Rio has a vibrant business district and is home to the dominant oil and gas industry, many of Brazil's largest companies and many multi-nationals.

UK Trade & Investment's team in Rio de Janeiro covers: oil and gas, power and renewable energies, marine, infrastructure, sports infrastructure, defence and security.

Brasília

The economy of Brasília is driven by the federal government, which employs most of the city's workers. Aside from some light industry serving the needs of the city, there is little industry in Brasília.

The team in Brasília covers: agriculture policy (related to biotechnology) and agribusiness.

Recife

Recife is one of the most important cities in the North East region, with a strong sense of a separate economic, political and cultural identity. Recife has a busy port and is the centre of aquaculture.

The team in Recife covers marine, aquaculture and fisheries.

Porto Alegre

Porto Alegre, in the south of the country, considers itself the hub for Mercosul as it is only an hour's flight from all the major Mercosul business centres (São Paulo, Rio de Janeiro, Buenos Aires, Montevideo and Asunción).

The team in Porto Alegre covers chemicals.

Mercosul

Brazil is a huge market in its own right. However, it should also be viewed in the context of Mercosul (Mercosur in Spanish-speaking Latin America), the South American trading bloc that operates a similar principal of tariff-free trade to that of the EU between its member states. Mercosul encompasses Brazil - its largest and most influential member - and neighbours Argentina, Uruguay, Paraguay and Venezuela. So in addition to the 200 million people in Brazil, there is a regional market of over 250 million!

You can find out more information by visiting: www.mercosur.int

 

Agents and Distributors

To export successfully to Brazil you will probably need to employ an agent or distributor. An agent is a company's direct representative in a market and is paid commission, while a distributor sells products on to customers after buying them from the manufacturer - their income comes from the margin they can make on resale.

The Brazilian legal concept of a sales agent is rather broad, including almost any independent agent who works as an intermediary in the sales of products or services. Given the size of the country, many companies employ sales representatives so that they can take best advantage of Brazil's vast market potential. As a result, a number of rules have been established regulating the activities of autonomous commercial representatives ("sales agents") and creating an extremely protective environment for sales representatives in Brazil. Employing an agent or distributor can have several advantages and can greatly reduce the set-up costs and time taken to enter the market.

By employing an agent or distributor, you gain the experience of a seasoned local who will have expert local knowledge and contacts, and you will have someone on the ground to look after your interests.

Finding the right agent or distributor

The checklist below details things you
should bear in mind when looking for a
suitable agent or distributor.

Background

• Size of agency

• History of agency

• Other companies they act for

• What is the core business of the agent or
distributor?

• Does the agent or distributor carry
products that will compete with yours?

• Does the agent or distributor have
qualified staff who can offer the necessary
technical support, without which clients
will not buy the products?

• Experience

• Number of sales people, their length of
service and qualifications

• Success record

• Banking and trade references

Distribution

• Geographical coverage

• Types of outlets covered

• Transportation

• Warehousing

Are they right for your product?

• Knowledge of local market conditions

• Marketing competence

• Degree of English-language skills
throughout the organisation

• Their interest in and enthusiasm for new
products - and yours in particular

• After-sales service levels

• Required skills of salespeople

• Personal relationships - this is very
important in Brazil.

However, there are some drawbacks to this approach. Employing a third party will raise the cost of your products in the market and you will also lose some control over sales and/or marketing. Using a distributor may also increase the risk of your product being copied or counterfeited. Some of the larger agents and distributors may manage so many product lines that not enough attention is given to yours. Consequently, as sales develop, you may wish to open a representative office or some other form of permanent representation. To manage agents and distributors properly you will need to identify the agent or distributor that is right for you. The information in the box to the right provides a checklist of issues you should take into account when looking for a suitable agent or distributor.

Once you have chosen an agent or distributor you will want to ensure that your products receive a fair share (or more than a fair share) of the agent's attention. This can be achieved as follows:

  • Visiting as regularly as possible at senior management level - this shows interest in, and commitment to, the agent and the market. This will also provide you with an opportunity to learn about conditions in the market and see how your products are faring. This is particularly important in Brazil, where it is benificial to develop personal relationships to do business. Distributors in Brazil often complain that their suppliers rarely visit the market. This can be one of the reasons why UK suppliers fail to achieve their full market potential in Brazil.

  • Working closely with your agents and distributors to show them how they can profit from your products.

  • Helping to prepare marketing and sales plans for the agent.

  • Providing regular training for the sales staff, and aftersales training for the technical staff in the UK.

  • Linking performance to incentives and agreeing milestone targets.


Establishing A Permanent Presence in Brazil

Direct and indirect investment

There are both direct and indirect investment options in Brazil. Direct investments are those made through a newly created corporate entity or by acquiring equity participation in existing Brazilian companies.

Equity participation includes:

  • Currency investments,

  • Investment by conversion of foreign credits, and

  • Investment by importation of goods without exchange cover.

Indirect investments are those made by foreign investors in the financial and securities markets where there is no requirement to establish or acquire participation in a Brazilian company.

Foreign branches

To set up a branch in Brazil a foreign company must submit an application to the Brazilian government, which must be approved by a Presidential decree.

A certificate of the decree will then be published in the Official Gazette, and a copy registered at the appropriate commercial registry. The branch can only start its activities when all the formalities have been completed. The foreign company must also empower a representative (who need not be Brazilian, but must be resident in Brazil) to act on its behalf.

Due to these complex and time-consuming requirements, you will probably only want to set up foreign branches in Brazil if this is required by law (e.g. for financial institutions and insurance companies). The UK Trade & Investment team in Brazil can provide further advice on this subject.

Limited liability companies

As a rule, foreign firms who choose to set up a Brazilian company can establish either as a limited liability company (the most common corporate entity) or as a corporation. A Brazilian company is legally defined as one which is incorporated according to Brazilian law and has its head office in Brazil.

Corporations

The registered capital of corporations is divided into shares. Corporations can be capitalised either by private or public subscription. Open capital corporations offer public subscriptions by offering their shares to the public through the stock market. Closed capital corporations offer theirs privately to existing shareholders.

If you are considering setting up or forming a company in Brazil, it is recommended that proper legal advice is sought.

UK Trade & Investment teams can supply a list of law firms in the UK and in Brazil with appropriate expertise. The British Chamber of Commerce and Industry in Brazil can also offer advice and help on a wide spectrum of business related issues.

If you decide to establish a permanent presence in Brazil, then the following steps are essential:

  • Carry out thorough research and due diligence checks,

  • Seek good-quality independent legal and professional advice,

  • Allocate sufficient time and money to do this properly,

  • Research local market conditions,

  • Investigate any restrictions that may apply to your investment,

  • Acquaint yourself with the relevant legal requirements and regulations,

  • Identify the potential risks and plan for them, and

  • Get to grips with anything that might impact on your investment.

REMEMBER: Forewarned is forearmed!


Joint Ventures

In Brazil, a joint venture is - as the name suggests - an organisation jointly owned by a Brazilian and a foreign partner, and was for a long time the only option available for foreign investment in Brazil. In some sectors, a joint venture is still the only permitted route for establishing a permanent presence.

Joining forces with a Brazilian partner can be beneficial if you wish to sell direct to the Brazilian domestic market. You will be able to take advantage of the Brazilian partner's contacts and local knowledge, while they in turn benefit from technology transfer or your company's expertise in other areas. However, the major concern with joint ventures is finding a partner with whom you can work. Many joint ventures fail where, for example, due regard has not been given to the importance which Brazilians attach to personal relationships in business. It is often better to select a joint venture partner who complements you rather than a potential competitor. Plan for your exit from a joint venture from the outset - it is rare that joint ventures are permanent, and it is better to have a "pre-nuptial agreement" than a messy divorce. If you do decide to go down this route, it is essential that you carry out thorough due diligence checks on your potential partner.

While no specific Brazilian law governs joint ventures, they are usually classified under two types - contractual joint ventures and corporate joint ventures.

Pointing Man

Under a contractual joint venture, it is not necessary to set up a Brazilian company. This type of joint venture is a co-operation mechanism between the parties whereby the profit or loss distribution, and the relative management, can be freely stipulated.

Under a corporate joint venture, a Brazilian company will be incorporated under the limited liability or corporation format. Although there is no specific law in Brazil relating to joint ventures, the laws on mergers and acquisitions should be taken into account when establishing a corporate joint venture.

Source - UKTI

 

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