Brazil Market Entry

Brazil Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

According to cheeroutdoor.com, Brazil is one of the most complex markets in the world in terms of exporters.

Traditionally, there is a hidden protectionism that protects domestic production, but also already established relations with large foreign partners. With some exceptions, setting up successful sustainable exports to the BFR requires large investments and long-term preparation.

Regarding trade freedom, the respected Index of Economic Freedom 2021 (The Heiratge Foundation) reports that Brazil ranks 143rd in the world in the level of trade and business freedom. Within Latin America, freedom for trade in Brazil is ranked as high as 24th, even behind Nicaragua. In 2021, the state of freedom of trade and business in Brazil further deteriorated, especially in the areas of law enforcement, property rights and taxation.

A characteristic feature of exporting to Brazil is the complex customs procedure, which by law must be carried out by a licensed customs declarant (despachante aduaneiro) on behalf of the importer. Compared to other countries where clearance is calculated in hours, the customs procedure is calculated in much longer time units, and in the event that the importer is unable to provide all the required documents, it can drag on for many weeks. At the same time, the costs of customs and port fees are up to 50% higher than is usual in the world and, in the case of containers, are even multiples of the costs in European ports. However, the costs of other types of goods transport are even higher, whether it is road or air transport.

Imports are subject to the customs regime, which is given by the tariff schedule of the Mercosul integration grouping – Tarifa Externa Comum (TEC).

Forms and conditions of operation on the market

As in the case of many other distant (and not only geographically) countries, Brazil is not a country where you can expect to establish business contacts or implement business cases simply by sending an electronic offer and company presentation to selected companies from the field. If you are interested in the Brazilian market, you must expect a certain initial investment, long-term efforts and the need to be physically present on the market often.

Among the most suitable ways to establish initial contacts with the territory is without a doubt a visit to the specialized fairs, of which hundreds are held every year in Brazil, especially in São Paulo, and whose importance often goes beyond the country itself, as they are the largest events of their kind in the whole of South or even Latin America subcontinent. Personal participation enables not only the acquisition of basic information about the market and possible competition, but also very beneficial contact with the local business mentality and customs.

The most appropriate way to enter the market is through a local representative. The conditions for the management of sales representatives on the Brazilian market are regulated by Law No. 4886 from 1965 and its amendment, Law No. 8420 from 1992. The requirement for a local representative appears regularly in the competition conditions, his appointment and authorization must be documented in the offer act for the supplier. The activity of a representative familiar with local conditions is very important for supplementing information on the necessary technical equipment, adapting products to Brazilian standards and the homologation process, and explaining a number of legal, commercial and technical requirements of the tenders. Due to the complexity and lack of transparency of the legislation, a local representative is in some cases almost a necessity for the successful completion of customs procedures and the calculation of taxes related to imports, thus the final sales price. In addition, the presence of a quality representative in the territory is one of the prerequisites for obtaining quality information about the market, including maintaining constant contact with customers. At this point, it is appropriate to emphasize that without a physical presence in Brazil, without knowledge of the language and the local environment, it is almost impossible to complete any formalities and develop business activities in the country. At the same time, it is very important to be in frequent contact with the local representative.

Marketing and communication

When launching a product on the market, it is necessary to take into account the large differences between individual Brazilian regions, where each usually has a significantly different socio-economic and cultural profile. For example, to sell a product/service, it is necessary to apply a different strategy in cosmopolitan São Paulo (many times more types and amounts of media available, the possibility of using e.g. foreign music/global elements, etc.) than in the North or Northeast of the country, where it can be the key to success identification of the most important local radio station.

The media market in Brazil is quite conservative. When placing an advertisement, it is necessary to rely on advertising agencies. The largest media group Globo controls about 75% of the advertising market. Large-scale outdoor advertising is heavily regulated, and in some states of the federation even prohibited. Advertising in the media is not the most suitable promotional channel with regard to the size of the market and the financial possibilities of Czech companies.

In Brazil, as in many other countries, advertising on the Internet is increasingly popular, including the active involvement of advertisers on social networks. Mobile devices (especially phones) play a crucial role here, as in many cases they are the only devices that Brazilians use to connect to the Internet and social networks (they do not own PCs or laptops).

Product Branding and Product Launch Strategy: Brand is an important decision factor for the Brazilian consumer, especially with the rapidly growing middle class (over 100 million consumers). Most studies agree that the transfer of the “ready-made brand” has never worked very well in the case of Brazil. The product should therefore acquire a “Brazilian flavor” in terms of branding and marketing.

A proven recipe is the tradition of well-known brands enriched with local innovation – i.e. taking into account Brazilian characteristics such as family life, happiness, Brazilian nature or topography, optimism or a sense of pride in being Brazilian. However, it is necessary to pay attention to the stereotypes about Brazil adopted abroad (“the land of football, carnival and coffee”), which can have a rather counterproductive effect in the case of inappropriate marketing. Due to the cultural specificities of the BFR, the strongest means of marketing continues to be lobbying through an appropriate local representative who has adequate political and business contacts.

Issues of intellectual property protection

Brazil is a member of WIPO, a signatory to the TRIPS Agreement, and its intellectual and industrial property rights protection system can be considered standard. Nevertheless, violations of domestic legislation and the country’s international obligations are a standard phenomenon in this area. The sale and use of illegal software and the illegal sale of music recordings and films are very widespread, the offer of which is unusually rich on all major markets. There are also many cases of counterfeiting of global clothing brands. Litigation to prove non-respect of intellectual property would be so expensive in the BFR that this route cannot be recommended as a viable one. Only in the case of the richest companies. In connection with the protection of intellectual property rights, there have been no official complaints from Czech entities in recent years that would reflect damage to their interests.

Public procurement market

The Constitution, in Article 37, paragraph XXI, addresses the public procurement regime with a provision according to which all works, services, purchases and sales of the state, its institutions and their branches (at the federal, state or local level) must be carried out in the form of a public tender under the conditions, which will be equal for all registered parties. Each contract must also include the method of payment in the form as stated in the proposal of the registered party. In order to implement this provision of the Constitution, Federal Law No. 8666 on the Conduct of Public Tenders was approved in 1993, which further elaborates on the general conditions of tenders, their categories, management, decision-making and the conclusion of a contract with the winner of the tender. To register for the competition, it is advisable to use local representatives who have a detailed knowledge of the conditions of the competitions. Conditions for company registration, who are interested in participating in tenders regularly announced by the cities and states of the federation, are listed in the official journals of these states. Often, only Brazilian legal entities can participate in tenders, although in the long term, efforts can be made to equalize foreign companies with domestic ones (e.g. by incorporating the GPA within the WTO). From the point of view of the Czech Republic, this condition is met by a number of companies that are already established in Brazil (see chapter 4.4). Tenders issued by state enterprises and institutions tend to be very attractive from a commercial point of view. These are often supplies of goods both for the civil sector and for the rescue, repressive and protective forces of cities or individual states. Public contracts are published on the websites of individual state governments.

Payment terms, payment ethics and resolution of commercial disputes

The State Arbitration Act of 1992 regulates the way commercial disputes are settled and at the same time explains the court’s approach to legal decisions on arbitration issued abroad. In addition, domestic arbitration disputes are governed by the Civil Code. It is recommended to include in the commercial contract a provision for the resolution of a possible dispute before international courts of law or before a court in a third country. In general, it can be stated that litigation before Brazilian courts is very lengthy; it is not an exception that the first-instance judgment is issued, for example, even 10 years after the filing of the lawsuit. In addition to the usual risks, it is necessary to take into account the specific conditions of Brazil, especially its size and the different level of industrialization of the individual states of the federation. It is worthwhile to expect a significant interest burden, it is necessary to monitor the movement of the exchange rate of the domestic currency, etc. From the point of view of a foreign business entity, one of the biggest problems is the amount, complexity and lack of transparency of legislation regulating sub-issues. The state of unemployment, the level of education, the expertise of the workers and the ability to communicate mostly only in Portuguese are other significant, often limiting factors. Long payment periods, gradual repayments and constant supervision by the Central Bank, which oversees many operations, are among the factors that make it difficult for many exporters and importers to access the Brazilian market. Due to the frequent ignorance of the local environment, it is recommended to secure payment by letter of credit, which is, however, often very expensive, especially with long payment periods.

Visas, fees, specific conditions for traveling to the territory

The Ministry of Foreign Affairs of the Czech Republic recommends that Czech citizens, before traveling, check with the embassy of the country they are visiting whether the conditions for entry and stay have not changed.

A bilateral agreement between the Czech Republic and Brazil on the abolition of the visa requirement has been in force since 2005. Based on it, holders of Czech passports can enter the territory of Brazil and temporarily stay there for a period of up to 90 days, if the purpose of their stay is not to perform a gainful activity. To enter the country, the Brazilian authorities require a travel document valid for at least six months, in some cases they may also require the presentation of a return ticket, proof of sufficient funds (credit card, cash, bank statement), valid travel insurance, hotel reservation, etc. Brazilian authorities they do not require an international vaccination card for passengers arriving from European countries. However, they may require it for passengers arriving in the country from neighboring Latin American countries of the Amazon region.

Yellow fever vaccination is strongly recommended when traveling to the Amazon region and inland. Czech doctors also recommend vaccination against hepatitis (jaundice) type A and B. However, ordinary visitors to Brazil can encounter tropical diseases transmitted by mosquitoes for which there is no vaccination (dengue fever, zika, chikungunya) even in urban agglomerations. This situation prevails especially in the summer months, which in Brazilian conditions represents the period from December to March.

There are no restrictions on the import of money in Brazil, however amounts exceeding the equivalent of BRL 10,000 must be declared. In terms of customs regulations regarding imported personal goods, each traveler must declare only non-personal items valued at more than $500. Illegal export of plants and animals from Brazil is severely punished.

Brazil is a country with a relatively high level of crime, which is mainly concentrated in urban agglomerations and here especially in slums, the so-called favelas. A foreigner is easily distinguishable from the local population by his appearance and demeanor and becomes an easy target for street crime. It is therefore recommended to leave the travel document in the hotel and move around the city streets only with a copy of it and a limited amount of funds. In the event of a robbery, it is recommended to remain calm and not to put up any resistance.

Employment of citizens from the Czech Republic

Employment of citizens of the Czech Republic is possible if the Czech citizen receives a temporary or permanent work permit from the Brazilian Ministry of Labor (Ministério de Trabalho), which is also a condition for granting temporary or permanent residence. To obtain such a permit, it is advisable to use the services of a local intermediary (despachante).

For information regarding the requirements and other conditions of the procedure when applying for a visa or a residence permit for the purpose of employment in the territory of Brazil, you should contact the Embassy of the Federative Republic of Brazil in Prague.

Fairs and events

AGRISHOW, International Fair of Agricultural Technology Ribeirao Preto, SP, www.agrishow.com.br

Food store EXPOVINIS BRASIL, São Paulo International Wine Fair, SP, www.exponor.com.br

Defense and Security Technologies LAAD – Latin America Defense and Security, the largest trade fair for defense and security technologies in Latin America Rio de Janeiro, RJ, www.laadexpo.com

Hospitality EQUIPOTEL, International Fair of Products for Hotels, Apartments and Restaurants São Paulo, SP, www.equipotel.com.br

Engineering Mecânica, International Engineering Fair São Paulo, SP, www.mecanica.com.br

Glassworks GLASS SOUTH AMERICA, São Paulo International Glass Industry Fair, SP, www.nm-brasil.com.br

Construction FEICON BATIMAT, International Construction Industry Fair São Paulo, SP, www.feicon.com.br

EXPOLUX, São Paulo International Lighting Fair, SP, www.expolux.com.br

Healthcare, Pharmacy HOSPITALAR, International Fair of Products, Equipment, Services and Technologies for Hospitals, Laboratories and Pharmacies São Paulo, SP, www.hospitalar.com.br

FCE PHARMA, International Exhibition of Technologies for the Pharmaceutical Industry São Paulo, SP, www.nm-brasil.com.br

Environment FIMAI, International Fair of Environment and Sustainability São Paulo, SP, www.fimai.com.br

AMBIENTAL EXPO, International Fair of Equipment and Solutions for the Environment São Paulo, SP, www.ambientalexpo.com.br

Brazil Market Entry