Doing Business with Brazil
Basic data | |
Capital | Brasília |
Population | 214,388,866 |
Language | Portuguese |
Religion | Catholics (50%), Protestants (31%), no religion (10%) |
State system | Federal Republic, presidential system |
Head of State | Jair Messias Bolsonaro |
Head of government | Jair Messias Bolsonaro |
Currency name | Brazilian real |
Travel | |
Time shift | – 4 to (in summer – 5 hours) |
Economy | 2021 |
Nominal GDP (billion USD) | 3,443.60 |
Economic growth (%) | 4.8 |
Inflation (%) | 10.06 |
Unemployment (%) | 12.7 |
Brazil’s gross domestic product grew by 4.8% in 2021. Brazil’s GDP growth estimate for 2022 oscillates between 0.7% and 2.5%.
All estimates of economic development in Brazil were fundamentally changed by the war in Ukraine and the severe energy and raw material crisis in Europe. The first half of 2022 showed that Brazil has become a popular destination for foreign investment. If the tensions in Europe persist, Brazil will increasingly profit from this, and from the “country of the future” will become the “country of the present” for investors and for companies that want to produce under sustainable conditions of energy and material prices.
Inflation
Similar to other countries in the world, inflation in BFR in 2021 was partly imported, or seeped in from the international context. Problems with the lack of some inputs and rising prices on world markets were exacerbated by internal political developments. At the end of 2021, there were concerns in the business environment and in the media regarding the possible victory of the former left-wing president Lula in the presidential elections in 2022. However, in the first quarter of 2022, most of the most important investment and consulting companies in the BFR concluded that the market had already ” “absorbed” the consequences of a possible victory for both Bolsonaro and Lula and concluded that both options were acceptable. Inflation for 2021 ended around 10.18%, but for some food and fuel it far exceeds these values. Since Brazil belongs to the countries which have already suffered from considerable inflation in the past, it is natural that this specter causes concern. The Brazilian Central Bank responded to rising inflation with the predictable step of raising the base monetary policy interest rate (SELIC), which it raised to 9.5% at the end of 2021. In May 2022, the SELIC base rate was increased to 12.75%.
Foreign investment
In 2021, BFR received FDI amounting to USD 58 billion. In the first quarter of 2022, Brazil began to profit unprecedentedly from unfavorable developments in Europe, where the war in Ukraine made markets uncertain and made raw materials and energy more expensive. A significant part of the world’s investors began to relocate their investments to Brazil. In just 75 days of 2022, the BFR received more than USD 71 billion in foreign investment. In 2022, BFR will probably receive a record volume of foreign investments.
Unemployment
For 2021, unemployment reached 12.7%. But it must be remembered that this is a figure relating only to citizens who had a properly registered formal job, which they lost. In addition to them, around 65 million people survive in the BFR in the sphere of the “gray” informal economy. Support of 400 BRL per month is mainly intended for them, for which the amount of 89 billion BRL was approved in the BFR budget for 2022 under the name of Aid to Brazil (Auxilio Brasil).
Foreign trade
According to preliminary data from the BFR government, exports increased by 34% year-on-year in 2021 and reached USD 280.39 billion. BFR imports increased by 38.2% in 2021 to reach USD 219.39 billion. So overall, the BFR recorded a positive balance of USD 61.01 billion in foreign trade for 2021.
Practical telephone numbers (emergency services, police, firemen, information lines, etc.)
Ambulance (Pronto-Socorro) 192
Firefighters (Bombeiros) 193
Order Police (Polícia Militar) 190
Federal Police (Police Federal) 194
Criminal Police (Civil Police) 197
Important web links and contacts
Government and institutions Presidential Palace – www.planalto.gov.br
Ministry of Foreign Affairs – www.mre.gov.br
Ministry of Finance – www.fazenda.gov.br
Brazilian Institute of Geography and Economics (Statistical Office) – www.ibge.gov.br
Central Bank – www.bcb.gov.br
General Directorate of Customs – www.aduaneiras.com.br
National Confederation of Industry – www.cni.org.br
National Confederation of Commerce – www.cnc.com.br
Brazilian Federation of Exhibitors – www.ubrafe.org.br
Chamber of Commerce of the State of São Paulo – www.acsp.com.br
Industry Association of the State of São Paulo – www.fiesp.com.br
Union of Industry of the State of Rio de Janeiro – www.firjan.org.br
Selected media O Globo (newspaper of the largest media group Globo, Rio de Janeiro) – https://oglobo.globo.com/
Folha de São Paulo (biggest newspaper in São Paulo) – http://www.folha.uol.com.br/
Valor Econômico (the most important economic newspaper) – http://www.valor.com.br/
The Ten Commandments for Doing Business with Brazil
The PaulSourcing agency has prepared ten recommendations for doing business with Brazil for Czech entrepreneurs interested in business relations with Brazil. In 2020, it was supplemented with 4 current tips.
4 recommendations for entering the Brazilian market during the coronavirus pandemic situation:
- Current situation The coronavirus infection caught Brazil in a period of economic growth that followed the economic-political crisis of 2014-2016. The pro-reform government succeeded in pushing through major changes to improve the competitiveness of Brazilian companies, make it easier to do business in the country, improve the state of the treasury and open the country to foreign technology. In 2019, a landmark reform of the pension system was approved. It is supposed to secure resources for further reforms. The next step is the tax reform, which was supposed to be discussed this year.A separate topic affecting the economic situation is the development of the Brazilian real exchange rate. Since January 2020, when the exchange rate was 5.541 crowns for 1 Brazilian real, it has fallen to the level of 4.372 CZK/BRL. This is a long-term decline that has been accelerated during the spread of covid-19. The weakening of the Brazilian currency does not only affect the koruna, but also other currencies, incl. US Dollar or Euro. The result is therefore an increase in the price of foreign products on the local market.At the moment, Brazil is waiting for the moment when the number of new infections starts to improve. Then it will be possible to start estimating what the economic losses will be compared to the current resources. Based on this information, the next schedule will be drawn up to return the country to normal, start production of local factories, resume suspended projects, etc. Together with these estimates, we will learn about the resumption of negotiations on economic reforms. It is possible to expect that, with the aim of supporting local producers, there will be an increase in state investments in already announced sectors. These are infrastructure, agricultural technologies, transition from water sources of electricity, IT and others.
- Searching and contacting business partners
Due to the limited possibilities of using company databases in Brazil, it is currently mainly possible to search in sources from organizers of industry events and sectoral business organizations. But if this information is not shared publicly, it is very difficult to obtain it from these institutions. PaulSourcing’s foreign office in Brazil (ZK Brazil) works with lists obtained in the past in addition to Internet sources.In the business sphere, the situation differs according to the location of the company, the field of activity, the size and the issued measures affecting the operation. Practically throughout Brazil, office professions are carried out from the home office. In this state, communication is possible primarily with already established contacts. These people may differ in their willingness to deal with business matters. If you don’t have your business partner’s mobile number or their WhatsApp contact, it’s difficult to start communication. - Logistics Transport of goods to Brazil and within the federation works. But a problem can arise during the handover, for which you need to have a pre-agreed procedure, when and how it will take place and who will carry it out. The movement of people is more complicated. Currently, EU citizens are not allowed to enter Brazil and air connections to the country are significantly limited. In addition, the movement of people within the country is also restricted.
- Recommendations If you already have your contact persons in Brazil, ZK Brazil recommends maintaining communication with them either on a work or personal level. This way, you can get first-hand information about the situation in the territory and the industrial sector from your business partners, and at the same time you don’t have to worry about not following up on previous cooperation after the situation has improved. If your business activities continue in an unchanged or limited form, do not forget about current events and at least formally ask about them. If business activities are suspended, it is better not to press on business related topics. According to the experience of ZK Brazil, communication with Brazilian partners of Czech companies is beginning to be limited to the health of family members and the impact of announced restrictions on personal life.If you are considering entering the Brazilian market or have already decided on it and you do not yet have established contacts, try to map the market from available sources and wait for the end of the situation with the information and contacts obtained. After the end, it is possible that even individual markets will change compared to the past. Companies affected by the consequences of the current situation are at risk of extinction, the changes may affect the organization of sector events, such as trade fairs or conferences, etc.
The Ten Commandments for Trading with Brazil
- Arrive punctually but tolerate delays It is said that Brazilians are only in a hurry for football or carnival. Therefore, arm yourself with patience and always have a large time reserve for all cases. Punctuality is always expected of you.
- Start informally As they kick the ball, they do business as easily and playfully and are immediate and very friendly from the first contact. Therefore, try to adapt to them. Take your time and take a lively interest in things that seem unrelated to business. For example, learn the names of their football players.
- Don’t underestimate local businessmen Don’t underestimate Brazilian businessmen. They are serious and distinguish quality.
- Speak Portuguese or English If you speak Portuguese, you have a major advantage. If not, English is much better accepted than Spanish.
- Take care of your relationships Take care of your personal relationships in the long term. After the initial meeting – for example at a trade fair – it is necessary to visit the partners at least once and invite them to tour your company.
- Your demeanor is also important. Conduct yourself in a pleasant and confident manner and pay attention to formal signs such as clothing and manner of expression. In addition to the content of the meeting, prepare a possible scenario and method of your own presentation.
- Trade while eating Negotiations often take place over lunch or dinner together. Do not decline the invitation.
- Gifts are appreciated Surprise your host with a little attention, they will appreciate it.
- Beware of the hierarchy in the company The hierarchy within the company plays an important role – even less important matters are often decided only by a narrow group of management, or the owner.
- Don’t criticize Brazil suffers from many problems (corruption, complex inefficient bureaucracy, etc.). It is good to prepare for these complications, but it is definitely not appropriate to criticize them in front of the Brazilians.