Brazil was open to imports in general in the era of president Fernando Collor in the 90’. Until then due to the military dictatorship’s policies, one could not see, for instance, a reasonably new foreign car in Brazil. If that policy condemned a whole generation of Brazilians to just dream about the latest in technical or fashion products, on the other hand it allowed several industries to flourish, chief among them the oil and automotive ones.
Currently, however, the Brazilian market is open to foreign capital with very few limitations. Foreigners cannot own more than certain extensions of land, for instance. Foreign cars are allowed to be imported and sold after a process of homologation similar to the one in, say, California. Similarly, most other products and services can be sold regardless of origin. The tariffs are so high, however, that most automotive companies decide to assemble their vehicles locally, avoiding them. And, since Brazil’s driving habits resemble Europe’s better than the U.S. ‘s, most global brand cars are either directly developed in Brazil or modeled after European models.
Brazil has several established foreign companies operating in Brazil and actually, the nation continues to be a haven for those established companies and a dream for other companies that would like to have a small part of this huge and attractive market as is Brazil. Brazilians drive GMs, Fords, Hondas, Toyotas, Fiats and Volkswagens. There are no Brazilian car makers. Brazilians eat food and drinks from Starbucks, McDonalds, Pizza Hut and Jack in the Box; buy good stuff in supermarket chains like the French leading Carrefour and the American Wal-Mart; stay in luxury hotels like Hilton and Sheraton.
The Spanish bank leader Santander was allowed to buy Brazilian bank Banespa years ago and became the third biggest privately-owned bank in the country, and Morgan Stanley, Goldman Sachs, JP Morgan, and Credit Suisse have strong presence in the country. Other international corporations such as Nike, Unilever and Nestlé, all dominate their businesses in Brazil and have all made a pretty good number of acquisitions. Brazil has very active capital markets where foreigners are the greatest part by far, composing more than two-thirds of all IPOs and offerings.
But for many foreigners doing business in Brazil is hard or better said, difficult. We can say that it is not “difficult”, but should be difficult compared to what you already know. Consider that you can’t use what you know from the U.S. market to enter the Brazilian market. The first thing to do is to learn your way in and the best thing to do is to find a native local company or professional that you can trust to start guiding you.
Brazil’s institutional environment is poor and it is part of the problem. The Brazilian government and Brazilians itself are trying to change it, but it takes time. For example, it can take months for you to create the simplest type of company; it is a multi-step process that requires the help of specialized assistants. It takes years to shut down the same company. Judges often pierce the corporate veil for irrelevant reasons, and go after your personal assets. Labor law is a nightmare.
There are millions of labor lawsuits in the courts; and over 90% of the cases are decided against the employer.Hiring and Firing is really hard here. Work-related legislation is really not friendly, for locals or foreigners alike.There are over 90 different taxes in Brazil; some apply over each other, and Tax legislation is so complex you can never be sure you’re doing the right thing.
Basically, the major problem these days and as it has always been, is a daring combination of red tape, excess taxation and plain old corruption. So, why do companies want to do business in Brazil at all? Because it’s a giant market and you can still make a lot of money.