A few months ago, I visited four countries, including Brazil, during an exploratory mission to South America. Here are my main observations.
Based on the evidence that I gathered during the course of my meetings, it is difficult for a Qu?bec SME to do business in Brazil, primarily because the country is highly protectionist, there is extensive corruption, the legal system is complex, taxes are very high, the infrastructure is inadequate, etc., etc. Given these challenges, it is preferable to establish a local presence rather than to export directly, particularly in light of the high tax rates. In fact, there are 3 levels of taxation in Brazil (municipal, provincial and federal). The World Bank corroborates this opinion, noting that the country ranks 126th out of 180 countries in terms of the ease of conducting business.
Despite all of this, Brazil remains a very dynamic economy, as evidenced by the following information:
- A rapidly expanding middle class: Thanks to a decline in the poverty rate, from almost 40% of the population in 2001 to approximately 25% in 2009, 31 million people entered the middle class, which now accounts for 52% of the total population.
- A world power: Brazil is the world?s 6th largest economy, and it ranks 5th in terms of population, 5th in land mass, 4th in aerospace manufacturing and 10th in oil reserves.
- Upcoming major events: The FIFA World Cup in 2014 and the Rio Olympic Games in 2016 will involve investments in excess of USD?25?billion. The infrastructures are already in place, but opportunities still exist, in the area of security for example.
- In 2011, the S?o Paulo metropolitan area had a population that was more than double the population of Qu?bec (19,889,559 compared to 7,903,001)
In conclusion, my observations indicate that, in order to be successful in Brazil, a Qu?bec SME must do the following:
- Invest a minimum of $250,000 to develop this market
- Be a seasoned exporter, which means not only having the human and material resources needed to carry out its project, but also having experience in international markets
- Plan to travel to Brazil at least four times during the first year in order to establish business relationships
- Establish a strong network of professionals, including lawyers, tax specialists, and accountants
Please do not hesitate to contact me if you are interested in this market.
Caroline Bouchard
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