Ready, Set, Export! Considerations for Companies Exporting Products to Brazil
By: Trevor A. Mason
Brazil represents the largest economy in Latin America, second largest in the Western Hemisphere, and is a top ten economy, ranking as the ninth largest economy in the world.[1] Many of the world’s largest companies operate out of Brazil, including Shell, British Petroleum, and Experian.[2] Brazil has also recently been home to large economic events such as the World Cup and the Olympic Games.[3] Many strengths of the Brazilin market are the “strong and globally integrated business base;” “solid and modern banking system, with presence of world’s largest investment banks;” and “expanding labour force.”[4] Conversely, difficulties arise in being a successful exporter to Brazil as it is currently experiencing a recession that has caused its budget deficits to reach ten percent of the economic output, thus affecting business in Brazil.[5] Yet, this has not discouraged from Brazil still being a viable and vibrant country to business with an increase in consumer confidence and continued economic growth.[6]
With the great potential for successful business in Brazil, it does not come without its challenges. Brazil has been ranked 109th out of 190 countries in ease of doing business.[7] Consequently, there are challenges that are present for companies wishing to export into the country. The country is a developing nation, and thus, its regulations and laws are not as mature as other countries, making those who are not well connected locally to have difficulty exporting into the country.[8] This can be especially true given the Brazilian Government is the largest buyer of exports in the country, so those without connections and understanding of the infrastructure, laws, and regulations will see many challenges in conducting business in Brazil.[9] Corruption is also an issue to consider when doing business in Brazil. Organized crime is a large issue and Brazil has ranked 76 in the “Transparency International’s [C]orruption [P]erception [I]ndex” with many recent scandals and investigations, including the 2014 investigation known as “Car Wash” resulting in a request of “the return of £8.8 billion to government’s accounts.”[10] The government has worked to pass laws that combat bribery, including the Brazilian Transparency Law, the Brazilian Freedom of Information Law, and the Brazilian Anti-Corruption Law all based on the UK Bribery Act.[11]
If you can successfully navigate the various challenges of exporting goods to Brazil one can find much success in the export market. Surprisingly even with its growing economy and population, Brazil has a lower rate of import per GDP, providing difficulties for companies who wish to import goods.[12] Brazil does see roughly 20% of all its products with the highest increases in electronic devices, oil, and machines and equipment.[13] Many tax and regulatory consequences must be considered for potential exporters of these products. Brazil has been known for relatively high tariffs and tax burdens.[14] On average, Brazil’s import tariff is 10.73% for emerging markets.[15] Looking at the tariffs one must combat, three are prominent in Brazil, including the “Import Duty[], the Industrialized Product tax (IPI) and the Merchandise and Service Circulation tax (ICMS).”[16] The Import Duty and IPI are federal taxes, whereas, the ICMS is a state government related tax.[17] Exporters must also be aware of a tariff implemented by several South American companies, including Brazil known as the “Mercosul Common External Tariff (CET).”[18] Other requirements are also needed for companies to export into Brazil. Every exporter of goods needs to register with the “Foreign Trade Secretariat (SECEX),” a branch of Brazil’s Ministry of Economy.[19] Additionally, depending on the products being exported, a company may have to meet additional requirements or comply with the regulations of another government entity.[20] In some instances (such as pharmaceuticals and medical devices), the foreign company must have a local office or manufacturing space.[21] In other cases, exporters must meet labeling requirements based on the Brazilian Consumer Protection Code.[22]
Brazil, as a market for exporters is seen as an excellent place for foreign investment.[23] Even though it is slowly trying to recover its economy,[24] and has had issues with corruption and poor infrastructure,[25] Brazil can still be a place where investment can be profitable.[26] Thus, it would seem that its trade needs will expand as its economy continues to slowly recoup.[27] Deals such as the “free trade treaty” will increase Brazilian imports.[28] This leaves those who are knowledgeable about navigating the Brazilian regulatory networks. Additionally, those who form connections within the region with an opportunity for business success by having more resources to navigate the tariff and registration requirements. Success in the Brazilian market will spell success in the Latin American economy.
#BlogPost #Brazil #TrevorAMason #Exports #Trade #Business
[1] Projected GDP Ranking (2019-2024), Statistic Times (Nov. 13, 2019), http://statisticstimes.com/economy/projected-world-gdp-ranking.php; Brazil -Market Overview, export.gov (Sept. 5, 2019), https://www.export.gov/article?id=Brazil-Market-Overview.
[2] Doing Business in Brazil: Brazil Trade and Export Guide, GOV.UK, https://www.gov.uk/government/publications/exporting-to-brazil/exporting-to-brazil (last updated Jan. 26, 2017) [hereinafter Export Guide].
[3] Top Challenges of Doing Business in Brazil, TMF Group (Mar. 19, 2018), https://www.tmf-group.com/en/news-insights/articles/top-challenges/doing-business-in-brazil/ [hereinafter Top Challenges].
[4] Export Guide, supra note 2.
[5] See Top Challenges, supra note 3.
[6] See id.
[7] Brazil – Market Challenges, export.gov, https://www.export.gov/article?id=Brazil-Market-Challenges (last updated Sept. 15, 2019) [hereinafter Market Challenges]. This number is actually up from 2018 when Brail was ranked 125th. Id; Top Challenges, supra note 3.
[8] Market Challenges, supra note 7; Top Challenges, supra note 3.
[9] Top Challenges, supra note 3.
[10] Overseas Business Risk – Brazil, GOV.UK, https://www.gov.uk/government/publications/overseas-business-risk-brazil/overseas-business-risk-brazil (last visited Dec. 26, 2019) [hereinafter Business Risk]. See also Market Challenges, supra note 7; Top Challenges, supra note 3.
[11] See Business Risk, supra note 10.
[12] Ana Farah, Top 10 Brazilian Imports, The Brazilian Business, https://thebrazilbusiness.com/article/top-10-brazilian-imports (last updated Mar. 26, 2013).
[13] Id.
[14] Trade Barriers – Brazil, export.gov, https://www.export.gov/article?id=Brazil-Trade-Barriers (last updated Sept. 5, 2019).
[15] 8 Tips for Exporting to Brazil, connect americas, https://connectamericas.com/content/8-tips-exporting-brazil (last visited Dec. 28, 2019).
[16] Brazil – Import Tariffs, , export.gov, https://www.export.gov/article?id=Brazil-Import-Tariffs (last updated Sept. 5, 2019).
[17] Id.
[18] Id. Brazil’s version of the tax is named Nomenclatura Comum do Mercosul (NCM). Id.
[19] Brazil - Import Requirements and Documentation, export.gov, https://www.export.gov/article?id=Brazil-Import-Requirements-and-Documentation (last updated Sept. 5, 2019).
[20] Id.
[21] Id.
[22] Brazil - Labeling/Marking Requirements, export.gov, https://www.export.gov/article?id=Brazil-Labeling-Marking-Requirements (last updated Sept. 5, 2019) (“The Brazilian Customer Protection Code requires that product labeling provide the consumer with precise and easily readable information about the product’s quality and quantity, composition, price, guarantee, shelf life, origin and risks to the consumer’s health and safety. Portuguese translation of this information is required for all imported products. Labels should also include metric units or include a metric equivalent.”).
[23] See generally Doing Business in Brazil, pwc Brazil (2017), https://www.pwc.com.br/pt/publicacoes/servicos/assets/deals/2017/Doing_Deals_17.pdf.
[24] See Bryan Harris & Andres Schipani, Brazil Avoids Recession as 0.4% Growth Beats Expectations, Financial Times (Aug. 29, 2019), https://www.ft.com/content/4ec6483c-c358-11e9-a8e9-296ca66511c9.
[25] See Doing Business in Brazil, supra note 23, at 7–8.
[26] See Isabel Versiani, Brazil Raises 2019 Trade Surplus Forecast, but Warns Activity Will Slow, Reuters (July 1, 2019), https://www.reuters.com/article/us-brazil-trade/brazil-raises-2019-trade-surplus-forecast-but-warns-activity-will-slow-idUSKCN1TW3RL.
[27] Id.
[28] Id.