Brazil has been designated by UKTI and a range of other bodies as a high-growth market, and with good reason. The country boasts a population of approximately 185 million people, a GDP per head greater than India and China, and a broad, sophisticated industrial base as part of a still rapidly-growing economy. Brazilian consumers and businesses have developed high standards, both for quality and value for money, making the country a competitive but exciting market. Brazil is already the UK’s most important trading partner in Latin America, with bilateral trade approaching £5bn in 2010.

Key advantages
The ongoing development of Brazil’s economy from an already respectable level is an obvious attraction for potential exporters. A growing middle class wields real spending power and appreciates high-quality products or services, as do local companies. Today, Brazil is the world’s sixth-largest economy and by far the largest in South America, representing over 50 per cent of regional GDP. Along with its fellow BRIC countries of Russia, India and China, it has the potential to be one of the most dominant economies in the world by 2050.

The country also benefits from enviable stability, both in terms of its politics and its finances. Economic reform in the 1990s shored up budgets that, historically, had suffered from boom-and-bust, inflation and foreign debt. Meanwhile, a strong democratic process has seen consensus emerge around a mixed economy, resulting in privatisation opportunities while a social safety net ensures stability. “Brazil is a strong and healthy democracy. There is pressure from domestic and foreign businesses for more predictability for investors and a regulatory environment that is more friendly towards business. Many UK companies have done very well in the Brazilian market,” says John Doddrell, British Consul General and Director Trade and Investment, Brazil, for the UKTI Brazil team.

In itself, Brazil is a huge market for a company to tackle. Moreover, for firms hoping to achieve success in South America’s many growing economies, Brazil offers an enviable ‘incubation space’ where the rule of law, intellectual property rights and high industrial standards are maintained. This is particularly true in light of the country’s membership in Mercosul, a trading bloc which includes Argentina, Bolivia, Brazil, Chile, Paraguay, and Uruguay. Known as Mercosur in Spanish-speaking Latin America, the bloc operates a similar principal of tariff-free trade to that of the EU. Thus, in addition to the 200 million people in Brazil, the country also offers a convenient means to do business with over 250 million. “Brazil can be used as a base for the wider South American market and many companies do so. However, it is worth bearing in mind that Brazil is itself a huge country with many opportunities including those in second tier cities beyond Sao Paulo and Rio de Janeiro,” notes Doddrell.

The regions
It is important to realise that Brazil is a vast country, and its different regions have markedly different traits. If you decide 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 as a result of an initial enquiry from a Brazilian company. It is important to be familiar with the country’s five main economic centres.

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 rich industrial and agricultural region, accounting for 25 per cent of national production. UKTI’s team in São Paulo covers education and training, the 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 is the second-largest city in Brazil. The city has a vibrant tourism sector as well as being an increasingly important business destination. In particular, Rio is the main centre of Brazil’s oil and gas industry, while also being home to many of Brazil’s largest companies and many multinationals. Oil and gas, power and renewable energies, marine, infrastructure, sports infrastructure, defence and security are specialties of the Rio UKTI team.

The Federal Government is based in the city of Brasília. As one might expect, the majority of this city’s workers are employed by the state, although there is some light industry serving the needs of the local population. UKTI’s team here largely focuses on agriculture policy (which is related to biotechnology) and agribusiness.

One of Brazil’s lesser-known cities, Recife, is one of the most important metropolises in the North East region, which has its own strong sense of a separate economic, political and cultural identity. With a busy port, Recife has become Brazil’s centre of aquaculture, and the UKTI team here covers marine, aquaculture and fisheries.

To the south, Porto Alegre is often considered the hub of the Mercosul trading bloc. It benefits greatly from being a mere hour’s flight from the key business centres of São Paulo, Rio de Janeiro, Buenos Aires, Montevideo and Asunción. UKTI’s team here covers chemicals.

Economic overview
Brazil’s success story of recent years, including an average annual GDP growth of over 5 per cent, has been built on a stable footing, and achieved even as reforms improve competitiveness. According to the World Economic Forum (WEF), Brazil was the top country in upward evolution of competitiveness in 2009, gaining eight positions among other countries. While the country still has some room for improvement in this area – the 2011-12 report saw it post 53rd in the WEF’s rankings – it maintained a lead over India (56th) and Russia (66th).

The service sector accounts for 67 per cent of Brazilian GDP, followed by the industrial sector at 27.5 per cent, while a dynamic agricultural sector represents 5.5 per cent. An estimated labour force of 100.77 million people is divided between the service, industrial and agricultural sector at a rate of 71 per cent, 19 per cent and 10 per cent respectively.

As domestic production increased by 32.3 per cent in the past decade, agribusiness grew by 47 per cent. This impressive growth has come in the face of trade barriers, stimulated by Government measures such as the widespread use of ethanol in transport fuel. Also significant is Pronaf, a programme geared towards family agriculture guaranteeing financing for equipment and cultivation and encouraging the use of new technology. Over 800,000 rural citizens benefit from Government-sponsored credit, research and extension programmes. In foreign markets, Brazil accounts for 25 per cent of global exports of raw cane and refined sugar. It is also a key exporter of beef and chicken.

Brazil’s industrial sector ranges from automaking, steel and petrochemicals to computers, aircraft, and consumer durables. Proven mineral resources are extensive, with deposits of nickel, tin, chromite, uranium, bauxite, beryllium, copper, lead, tungsten, zinc, gold, and other minerals ripe for exploitation. Mining is an important part of the economy, as is oil and gas. Indeed, Brazil’s state-run oil and gas firm, Petrobras, has the largest five-year investment plan of any company in the world industry.

Brazil’s service industry is also diverse, with a financial sector attracting numerous new entrants. Following a 2008 merger between the São Paulo Stock Exchange (Bovespa) and the São Paulo-based Brazilian Mercantile and Futures Exchange (BM&F), the resulting national exchange (BM&FBOVESPA) is one of the largest stock markets in the world.

Entrepreneurship is a strong aspect of the Brazilian economy. According to a survey by Global Entrepreneurship Monitor, Brazil had 27 million adults aged between 18 and 64 either starting or owning a business in 2011. Small business plays a key role in the economy: according to Government agency IPEA, 37 million jobs in Brazil were associated with businesses of 10 employees or less.

Global Entrepreneurship Monitor conducted a further study in 2013 shedding more light on the Brazilian entrepreneurial sector. 50.4 per cent of the Brazilian initial entrepreneurs are men, 33.8 per cent are in the 35-44 age group, 36.9 per cent completed high school and 47.9 per cent earn between three and six times the Brazilian minimum wages. Only 1.7 per cent of entrepreneurs earn more than nine times the minimum wage in Brazil.

Challenges
For companies whose business involves intellectual property, there are issues of piracy to consider, particularly for goods such as books, CDs, textiles, cosmetics and spare parts. In general, Brazil has a sound intellectual property rights and patent system that does not discriminate unduly against foreign companies. However, any legal processes will be both protracted and costly. A new trademark and patent agreement law was enacted in Brazil in 1996 which follows international standards and general guidelines established by TRIPS (the Trade-Related Aspects of Intellectual Property Rights). It has helped many exporters, and would-be exporters, greatly.

Bribery and corruption does exist in Brazil, but progress has been made in tackling the issue. The country placed 69th out of 178 countries in Transparency International’s Corruption Perceptions Index for 2012, tied with South Africa and ahead of fellow BRIC markets China, India and Russia. Most international companies operating in Brazil and most of the large Brazilian companies and organisations now frown on any illegal practices. The majority of business deals are corruption free and while foreign businesses should be wary of illegal practices, seeking short cuts through bribery is neither defensible nor safe.

Local partners
Exporters to Brazil will usually need to employ an agent or distributor. Brazil’s legal concept of a sales agent is broad, and includes almost any independent agent who works as an intermediary in the sales of products or services. Given Brazil’s sheer geographical size, many companies employ several sales representatives. As a result, a number of rules have been established concerning how autonomous commercial representatives (“sales agents”) should conduct themselves. They have created a protective environment for sales representatives across Brazil.

After choosing an agent or distributor, you will want to ensure that your products receive a fair share of their attention. A few strategies can help here, most notably continual visits from senior management. Visiting the market shows interest in, and commitment to, the agent and the market, while providing you with an opportunity to improve your knowledge of Brazil and see how your products are faring. Distributors in Brazil often complain that their suppliers rarely visit the market, and this can hold some companies back.

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 after-sales training for the technical staff in the UK, are all useful. As with all commercial relationships, linking performance to incentives and agreeing milestone targets will help motivate your partner.

Employing an agent or distributor can have several advantages, offering local expertise with a greatly reduced set-up cost and timeframe. However, engaging a third party will raise the cost of your products in the market, while you also lose a certain amount of control over the sales and marketing strategy adopted. Moreover, certain large distributors may be working with many product lines, so your own products might not get the attention they need. If you want to consolidate on inroads made in the market, you may wish to open a representative office or some other form of permanent representation.

A permanent presence
There are two means of investment in Brazil – direct and indirect. Direct investments are made through a newly created corporate entity or by acquiring equity participation in existing Brazilian companies, while 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.

To set up a branch in Brazil a foreign company must submit an application to the Brazilian Government. This must be approved by a Presidential decree, which will then be published in the Official Gazette, and a copy registered at the appropriate commercial registry. Your Brazilian branch can only start its activities when all the formalities have been completed. The foreign company must also empower a resident representative to act on its behalf. This complex and time-consuming process will probably only be adopted if required by law– for example, for financial institutions and insurance companies.

Typically, foreign firms looking to build a permanent Brazilian presence will establish either as a limited liability company (the most common corporate entity) or as a corporation. If you are considering setting up or forming a company in Brazil, it is advisable to seek local legal advice or advice from someone familiar in the market.

An alternative to this process is a joint venture – an organisation jointly owned by a Brazilian and a foreign partner. For a long time, this was the only option available for foreign investment in Brazil, and remains the only permitted route to a permanent presence in some sectors. A joint venture with the right partner can be hugely beneficial. You will be able to take advantage of the Brazilian partner’s contacts and local knowledge, while they in turn can benefit from technology transfer or your company’s expertise.

As in many countries, Brazilian business people attach great importance to personal relationships in business, so expect to make a considerable time investment seeking out a suitable partner. It is often better to select a joint venture partner who complements you rather than a potential competitor, and both parties should plan for any planned exit from the outset – joint ventures are not usually permanent, so having a framework for dissolving the agreement amicably is important. Needless to say, considerable due diligence is required.

Joint ventures are usually classified under two types – contractual joint ventures and corporate joint ventures. If you enter a contractual joint venture, it is not necessary to set up a Brazilian company. Rather, the venture is a co-operation mechanism between the parties whereby the profit or loss distribution and the management of affairs is set out.

If you decide to adopt a corporate joint venture, you will need to incorporate a Brazilian company under the limited liability or corporation format. Although there is no specific law in Brazil relating to joint ventures, you will need to be aware of the laws on mergers and acquisitions.

Marketing
When marketing your product or service in Brazil, you will need to be aware that it is a completely new environment. This is most obvious when it comes to the language. It is important to note that Brazilian Portuguese is different to standard Portuguese – therefore, you will need to specify that any marketing materials must be translated to Brazilian Portuguese. Failing to do so will be seen to indicate a lack of knowledge – and a certain rudeness – by Brazilian businesses and customers.

The differences between Brazilian and European Portuguese are slight and are similar to those between British and American English. Making an effort to communicate verbally demonstrates a seriousness about entering the Brazilian market, and will most likely be met with a positive response. If you have no Portuguese language skills, Spanish or Italian can be useful to communicate basic messages. However, do not assume that Spanish will always be welcome – it is best to signal that you do not speak much Portuguese lest a conversation partner think that you don’t know the first language of Brazil. Sometimes, it is advisable to engage a local interpreter to accompany you, particularly at your first meeting with a potential partner.

In general, Brazilians communicate with a blunt style, often determined by the level of a relationship: the warmer it is, the blunter it gets. Communication is usually polite, but can be at breakneck speed, with physical contact, non-verbal gestures and interruptions. Do not be disturbed, therefore, if a conversation partner seems extremely animated. Also, Brazilians tend to appreciate depth, background and context. Consider offering more information than you normally would in your discussions.

Trade shows, exhibitions and advertising are good ways to attract potential customers, though you will of course need effective sales literature both in English and Brazilian Portuguese. Brazil’s media market is extremely advanced, so a specialist Brazilian consultancy in your local market communications would be a worthwhile investment.

In order to create a favourable impression of your company and your product in Brazil, it is essential to have a name that Brazilian consumers can remember. A Portuguese translation of your company name may not be half as memorable, and English names are very well accepted by Brazilians. Of course, it is important to take the time to get this right.

Certification and documentation
It is very important to comply with all aspects of Brazilian regulations on documentation, as failing to do so frequently causes problems between suppliers and buyers. A good partner or freight forwarder with a local office in Brazil can provide invaluable advice in this area.

In any case, you will need a commercial invoice and bill of lading or air way bill. Sanitary certificates will also be needed for the shipment of certain goods. These documents must show the import licence number issued by SECEX (the Brazilian Foreign Trade Secretariat), while the commercial invoice should be completed by the supplier in the country of origin and show full details of the goods.

For importing goods, you will generally need a Customs Import Declaration, Simplified Import Declaration, Declaration of Customs Value, Import Licence, Commercial Invoice, Pro Forma Invoice, Air Way bill, Bill of Lading, Certificate of Origin and a Packing List. Some goods may be subject to additional documentation, such as sanitary certificates, licences, permits and certificates of free sale.

While there are challenges to doing business in Brazil, it represents a huge opportunity, with significant growth achieved against an enviable backdrop of stability. With high standards, an appreciation of value and quality, and a business culture that is welcoming and accessible, this market is simply too strong and too vast for a potential exporter to ignore.

SECTOR PROFILE – MARINE
The Marine sector in Brazil is undergoing prosperous development, helped along by government policies implemented in the past decade.

Both leisure marine and shipbuilding sectors in Brazil are enjoying a considerable yearly growth, creating opportunities for UK companies to participate in the Brazilian supply chain. The Government has invested significantly in public policies and programmes aimed at transforming the shipbuilding sector into one of the most important industries in the Brazilian economy. Major government investments such as PAC (Accelerated Growth Programme), the demand for shuttle tankers and other types of vessels, as well as the increase in the annual Merchant Marine Fund (FMM) from £84 million in 2001 to £1.3 billion in 2012, helped stimulate growth.

Employment in the sector has increased from 1,910 jobs in 2000 to over 62,000 in 2012, with orders that year totalling 367 vessels including shuttle tankers, bulk carriers, container vessels, offshore support vessels, tug boats and barge convoys.

Most of the Brazilian shipyards are located in the state of Rio de Janeiro. The state Government is also developing a project for the installation of a shipbuilding supply chain in Duque de Caxias. Another shipbuilding cluster in Brazil is located in the city of Recife to the northeast of the country, while there are also nine new shipyards under construction in Brazil at the moment. Approximately 30 per cent of the equipment applied in the construction of each vessel is sourced abroad. Because of this growing industry, and the strong outlook for continued support, there is a huge potential for UK companies to export goods and services to be applied in ship construction.

The leisure marine industry has also enjoyed considerable growth of 10 per cent over the past decade, with estimates predicting continued growth over the next 10 years. The major local demand is for motorboats of between 16 and 40 feet in size. Growing Brazilian purchasing power is fostering the growth of the sector, with opportunities ranging from designs and composites over textiles and furnishing from abroad.

SECTOR PROFILE – ENGINEERING
A wide range of opportunities exist across Brazil’s engineering sector, particularly for machine tools. The country is the biggest machinery and equipment manufacturing country in Latin America and the 17th largest in the world. Having invested approximately R$1.4bn in this type of purchase during 2012, Brazil was the sixth largest importer of these products in the world.

Brazil’s manufacturing industry includes casting equipment, such as furnaces and kilns, while the mechanical capital goods segment increased by 7 per cent in 2012 to achieve a gross value of R$6.5bn. Surveys revealed that 77 per cent of all machine tools bought in Brazil in 2012 were imported.

Approximately 80 per cent of Brazil’s engineering companies are based in São Paulo, and the machinery and equipment industry is mainly concentrated in the Southeast and South of Brazil. Key opportunities exist in infrastructure and heavy equipment, machine tools, processing equipment, capital goods components and advanced materials and composites.