There’s much more to Brazil than beaches and samba. This country of 203 million people is an important market for Canada, which saw bilateral trade with Brazil grow by more than 35 per cent since 2009 to $5.6 billion in 2014. Make Brazil part of your growth strategy this year.
Canadians export almost $2.2 billions’ worth of merchandise to Brazil.
Brazil is Canada’s 13th largest trading partner globally.
About 500 Canadian companies across a wide range of sectors are active in Brazil.
Start with these five market experts
"Brazil has one of the highest tax rates in the world, and the tax system is very complex. The best way to overcome that is to contact a good legal firm or tax firm. In most areas, Portuguese is spoken and you’re expected to service your product in the local language."
Brazil is currently grappling with high inflation and negative growth. Is this still a viable market for Canadian businesses?
Despite these issues there remains a significant need to improve the country’s infrastructure. A wave of new concessions is coming over the next two years in airports, roads, ports and railways. This means opportunities for companies in construction engineering and suppliers of specialized goods and services. In addition, Brazil expects to make significant investments in renewable energy, an area where Canada is strong.
What are some of the key challenges for Canadian companies that want to do business here?
Brazil has one of highest tax rates in the world, and the tax system is very complex. The best way to overcome that is to contact a good legal firm or tax firm. In most areas, Portuguese is spoken and you’re expected to service your product in the local language. This is where a local partner would be very valuable. Getting goods through customs is something of a nightmare, but it’s doable if you follow the procedures and work with a reliable and reputable broker.
Any tried-and-tested routes to finding the right partners and customers?
The first point of contact should be the Trade Commissioner Service. One thing I always suggest is to look at your own existing customer portfolio, because usually you would find customers that have operations or partners in Brazil. Also, consider attending a major exhibition or seminar in your field of relevance.
"If you partner with a local who is familiar with the rules, regulations and language, not only can they help, but they’re really necessary to ensure you have someone on your side who really knows the market."
Can you highlight specific locations in Brazil that make ideal points of entry for Canadian businesses?
The major point of entry for most Canadian companies remains the city and state of São Paulo, which represents about a third of Brazilian GDP and has a population of 44 million. But there are opportunities in other regions as well. For example, the city of Rio is a hub for energy and gas companies, while Belo Horizonte offers opportunities in mining.
Any recommended market entry strategies?
Brazil is a difficult market to enter. Most successful Canadian companies find a local representative or partner who can guide them. Bureaucracy can be quite heavy in Brazil, so if you partner with a local who is familiar with the rules, regulations and the language, not only can they help, but they’re really necessary to ensure you have someone on your side who really knows the market.
Any emerging niche industries where you see opportunities for Canadian businesses?
There’s a lot of growth in the education sector, and we’re seeing more Brazilians coming to study in Canada. There are also opportunities in education technology and distance learning. As the startup culture continues to grow rapidly in Brazil, we also see more opportunities in nanotechnology, biotechnology, ICT and media.
"It’s important to analyze how the structure of your corporation and the location you choose can affect your taxation rates. This is a key issue because taxes can be very high depending on the municipality and your corporate structure."
How easy it is to set up a business in Brazil?
In many countries, setting up a business operation can be very fast. In Brazil, we tell clients to expect the process to take 60 days. You need at least two shareholders or partners, and you have to collect many documents, which must be notarized and consularized. Even for clients that already have all their documents ready, it still takes a couple of weeks from the time you file your documents before you get registered as a business.
Is Brazil’s corporate tax regime also complicated?
Brazil is a country of continental proportions, and different municipalities have different taxation rates. It’s important to analyze how the structure of your corporation and the location you choose can affect your taxation rates. This is a key issue because taxes can be very high depending on the municipality and your corporate structure.
What should Canadian companies consider before hiring local employees?
Taxation for employing people is very high in Brazil, and the cost of hiring an employee is equivalent to about 100 per cent of that employee’s salary. Companies who come here thinking they’re going to have a certain number of employees quickly realize they can’t afford to hire that many. You need to think about how you can do things more efficiently with fewer employees.
"I would caution against entering into an exclusive agreement with one distributor. One reason for this is you don’t want to limit yourself. Brazil is a huge market, but when distributors talk about Brazil they’re usually thinking about Sao Paolo or Rio de Janeiro."
How can Canadian companies find good distributors in Brazil?
Make a list of the capabilities you want in a distributor, then make sure the distributors you are considering actually do have them. If they tell you they have a warehouse, don't take their word for it; take a look for yourself. Ask a lot of questions, like ‘what is their distribution structure,’ ‘which regions do they work in,’ ‘what types of promotions they do for their products,’ and ‘in what trade fairs they'll be showing your products?’ Ask for a list of all of their key managers and shareholders, along with contact information, as well as a list of the customers they deliver to.
Any red flags Canadians should watch out for?
I would caution against entering into an exclusive agreement with one distributor. One reason for this is you don't want to limit yourself. Brazil is a huge market, but when distributors talk about Brazil they’re usually thinking about Sao Paolo or Rio de Janeiro. There are other cities out there, such as those in the southern and northeast regions, which offer opportunities for exporters. Find distributors in those places too.
What advice would you offer Canadian companies that have found a distributor and are ready to export to Brazil?
Take great care with your paperwork because customs regulations are very strict in Brazil. Before you ship, send a copy of your pro forma invoice to your importer or distribution partner in Brazil and ask them to make sure everything checks out. Otherwise your shipment could be held up at customs.
"Most people think that in order to hire somebody in Brazil, you have to be incorporated in Brazil. Our company offers the possibility of having people there who work for them, but with us as the employer of record."
How are labour and employment regulated in Brazil?
All employment in Brazil is governed by Consolidação das Leis do Trabalho, which is referred to commonly as CLT. This law covers everything from benefits and retirement pay to taxes, retirement funds, termination, vacation and thirteenth salary (an equivalent to one month’s salary usually paid to the employee in December). It’s important to comply with CLT or you may end up in labour court, which, most of the time, rules in favour of the employee.
What often surprises foreign companies about employing people in Brazil?
All employees get four weeks off per year, and in December they get an extra month’s salary for vacation. This applies even to new employees. In Brazil, salaries can go up but they never go down. You can’t propose a pay cut for employees.
Is it necessary to establish a local subsidiary to hire people locally?
Most people think that in order to hire somebody in Brazil, you have to be incorporated in Brazil. Our company offers the possibility of having people there who work for them, but with us as the employer of record. To form a company in Brazil so you can hire two or three people costs too much, and the liabilities are huge. It’s better to wait until your business starts to grow before taking this step.