Brazil – Pros and Cons

Aug 15, 2012 by admin    No Comments    Posted under: Brazilex

1) Reasons to invest in Brazil

• Stable economic growth and social situation;
• Unsaturated and enormous domestic market;
• Gateway for exports to other Latin American countries;
• Country with inexhaustible renewable and clean energy;
• Country with enormous natural and cultural resources;
• Country with a dynamic business environment.

2) Attractive sectors for investments

• Infrastructure;
• Agribusiness;
• Automotive industry;
• Life science and medical devices;
• Natural oil and gas;
• Renewable energies;
  • Wind energy
  • Solar photovoltaic energy
• Private equity and venture capital;
• Aerospace industry;
• Tourism.

3) The inherent risks involved in trade

• High costs of establishing a position in the local market;
• Non-transparent tax system;
• Large protectionist measures of domestic production;
• The lack of structural reforms;
• High degree of bureaucracy;
• Language barrier.

4) Brazil credit rating

• STANDARD & POOR’S: BB-
• MOODY’S: Ba2
• FITCH: BB-

5) Brazil: Macroeconomic indicators in a nutshell  

* CNI (National Confederation of Industry) forecast

Source: Central Bank of Brazil, Statistical Office of Brazil, Ministry of Finance, Ministry of Development, Industry and Trade, CNI

6) More information on foreign trade and industry

Major Importing Countries to Brazil: China (15.35 %), the United States (14.50 %), Argentina (7.37 %), Germany (6.37 %) and South Korea (4.08 %).

Major Countries for Brazilian Exports: China (17.0 %), the United States (11.01 %), Argentina (7.42 %), the Netherlands (6.20 %) and Japan (3.28 %).

Main products exported by Brazil: ores, oil and fuels, transport material, soybeans and products, metallurgical products, sugar and ethanol, chemicals, machinery and equipment, meat, coffee, paper and pulp, electrical equipment, leather and footwear, textiles, precious metals and stones.

Main products imported by Brazil: fuels and lubricants, mechanical equipment, electrical and electronic equipment, automobiles and parts, inorganic and organic chemicals, fertilizers, plastics and its products, steel, iron and their products, pharmaceuticals, optical and precision instruments, rubber and its products, cereals and milling products, copper and its products, airplanes and its parts, artificial and synthetic fibbers and filaments.

Commercial organizations that Brazil belongs to: Mercosur (an economic and political agreement among: Brazil, Argentina, Uruguay, Paraguay, Venezuela), Unasur (The Union of South American Nations), WTO, G20, BRICS and the CAIRNS Group.

Main agricultural products produced: coffee, oranges, sugarcane (production of sugar and alcohol), soybeans, tobacco, corn, and mate.

Main products of livestock: beef, chicken, pork.

Main minerals produced: iron, aluminium, manganese, magnesite and tin.

Major services sectors: telecommunications, road transportation, technical and professional services provided to companies, cargo transportation, building and household cleaning, informatics, air transportation, and alimentation.

Main industries: food and beverages, chemicals, vehicles, fuel, basic metal products, machinery and equipment, rubber and plastic products, electronics, and pulp and paper products.

Source: Ministry of Development, Industry and Trade

7) Some useful tips on how to lead negotiations in Brazil

• Arm yourself with patience, and always keep a great amount of time as a reserve.
• Men usually shake hands when greeting one another and women generally kiss each other. Hugging and backslapping are common greetings among Brazilian friends.
• In general, Brazilians like the physical proximity.
• Brazilians prefer face-to-face meetings to written communication, as it allows them to know the person with whom they are doing business.
• Brazilians are very friendly and hospitable, and it is advisable not to rush the business subject, but instead to express vivid interest in things that seemingly are unrelated to business.
• Brazilians need to know who they are doing business with, so get ready for a series of business negotiations. Brazilians need to feel a confidence in person that they are dealing with.
• Wait for your Brazilian partner to raise the business subject. Never rush the relationship building time.
• Surprise your host with a small gift. It is appreciated.
• English is generally considered the working language rather than Spanish.
• Be prepared to be interrupted while speaking.
• Don’t underestimate the Brazilian partners. They are serious and always ready to negotiate.
• Communication is often informal and does not rely on strict rules however do not be fooled by this informal way, as Brazilian society is also very conservative.
• Negotiations often conclude by sharing a lunch, or dinner. If you are invited, do not deny the invitation.
• In the long run, take care of personal relations. Constantly keep in touch with business partners that you have known inside a company and if convenient, invite them to visit your company.
• In Brazil the hierarchy inside a company plays an important role, which might not be obvious at first glance. Decisions are made by the highest-ranking person.
• Before taking serious business decisions, always check the background and credibility of potential business partners.

8) Starting a business in Brazil

Source: IFC

Notes:

1. Depending on the structure of the company and how it will outsource services, the responsibility for the actions may be with the company or with the Law Firm, or possibly other service providers (e.g.: external accountants, etc.). As a consequence, the indications are merely an example.
2. Non-resident investors and local companies need to appoint one representative for service of process and to act before the Brazilian Central Bank and Tax Department. Such appointments involve a certain level of responsibility normally only accepted by full time employees in a position to evaluate risks and exposure on a current basis.

9) Double taxation treaties

Brazil has double taxation treaties with the following countries: Argentina, Austria, Belgium, Canada, Chile, China, the Czech Republic, Denmark, Ecuador, Finland, France, Hungary, India, Israel, Italy, Japan, Luxembourg, Mexico, the Netherlands, Norway, Peru, the Philippines, Portugal, Slovakia, South Africa, South Korea, Spain, Sweden, Turkey and Ukraine.

Treaties with Venezuela, Paraguay and Russia have been executed but are pending final approval from the National Congress.

The treaty between Germany and Brazil was reversed by Germany in 2006.