… and a good time to grasp opportunities
Reading the press and watching TV news covering the current impeachment process of Dilma Roussef, you might think that Brazil is descending into chaos. But for Brazilian companies, and for 99% of the population, it’s very much business as usual. And for international companies, now is a great time to grasp the nettle and exploit this market.
I’ve just returned from meetings with several recent start-ups in Brazil, and can vouch for the continuing high level of enthusiastic confidence that they will achieve great economic success. Nobody is fazed by the political situation – almost everyone in business is looking forward to Dilma going, even if so many other untrustworthy politicians will remain in office, as it’s a first and big step towards improving the country.
It’s true that the economy has nose-dived in the last year, but this is more down to the depressed mining sector, that has become increasingly reliant on the Chinese market, which has largely dried up. The spark that came with the discovery of huge oil reserves under the sea off Rio has dampened more because of the fall in oil prices than the “car wash” corruption scandal at Petrobras.
Unfortunately, the corruption scandals have further discouraged foreign direct investment and business expansion in Brazil. The reality is that corruption is largely off the map for most businesses. I’ve set up, managed and grown several companies there since 2006, and have never in that time even seen suggestions of bribery or false accounting. That’s not to say it doesn’t exist – when it comes to government or very large corporate contracts, clearly it does. I can see how some Brazilian accounting practices, such as allowing small businesses to work on “Lucro Presumido” (presumed profit) could support it. However, I believe that international businesses starting up in Brazil can be confident that they won’t get involved in any way.
Confidence in Brazil has picked up a great deal in the last few months, as evidenced by the improvement both in the exchange rate and the stock exchange (see charts). The exchange rate is still around half that of 3 years ago, and looks to have stabilised.
Whilst this – in addition to tariff barriers – can make the Brazilian market unattractive for most exporters, it’s very good value now for setting up in-country operations such as Shared Service Centres, in/out-sourcing, and local manufacturing for the MERCOSUR countries.
The overwhelmingly young workforce is increasingly well-educated, and it’s easy to hire professionals in most sectors who have very good English. In my experience, productivity levels can be impressive. There are some interesting barriers to overcome. Brazilian employment laws are archaic and byzantine, all staff are “unionised” (but not in the sense understood in other countries), annual salary increases are mandated, the paperwork can be formidable. However, all these can be addressed in a straightforward way, with some professional help, and the advantages of having 3 or 4 professionals for the price of one definitely outweigh the disadvantages.
It’s also one of the most pleasant countries to live, work and do business. If the weather alone doesn’t lift one’s spirits, the enthusiasm and “can do” attitude of the Brazilian people will.
Brazil Stock Exchange Index
Brazilian Real Exchange Rate
by Oliver Dowson, CEO, ICC – International Corporate Creations
(Graphic Brazil Stock Exchange Index – courtesy Google)
(Graphic Real Exchange Rate – courtesy Yahoo)