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DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012
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DOWN UNDER IN BRAZIL: a perspective on Australian/Brazilian business relationships - 28 June 2012

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Minas International's Speaker Series presents: Down Under in Brazil: a perspective on Australian/Brazilian business relationships. …

Minas International's Speaker Series presents: Down Under in Brazil: a perspective on Australian/Brazilian business relationships.

Speaker: Craig McCloskey - General Manager South America - Coffey International

Published in: Business, Economy & Finance
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  • 1. MINAS INTERNATIONAL – SPEAKER SERIES PRESENTS…
  • 2. M I N A S I N T E R N AT I O N A L Globalizing LocallyMINAS INTERNATIONAL IS A NOT FOR PROFIT ORGANIZATION CONNECTING ENGLISH SPEAKERS LIVINGWORKING OR DOING BUSINESS IN MINAS GERAIS THROUGH NETWORKING AND MINAS CARE OURSUSTAINABLE COMMUNITY DEVELOPMENT PROGRAM.Minas International was founded in 2009 by Maxine T. McClellan, an American businesswoman. It was formedin response to the growing number of international businesses and professionals coming into and doingbusiness with the state of Minas Gerais. Minas, one of Brazil’s largest economies, had no organization in placeto support this rapidly globalizing community. Minas International’s purpose is to serve this space.The organization’s objectives are to provide an active forum for business networking, education, knowledgesharing and social engagement bringing together the global community and helping to facilitatecultural assimilation both for foreigners and Brazilians doing business in the global market.Through Minas Care, Minas International’s sustainable community development program, the organization isalso focused on giving back to the community. To this end, in 2011 the Minas Mentors program was launchedconnecting under-represented university students with business professionals for a one-to-one mentoringrelationship with the objective of helping to guide students’ transition from academics to business whileproviding feedback to universities on students’ preparedness for the working environment. To learn about Minas International please visit our website: www.minasinternational.com
  • 3. A BIG THANK YOU to CRAIG McClOSKEYfor generously giving his time and sharing hisexperience and insights about global business and hisperspectives on the Australian/Brazilian businessrelationships with the Minas International Community.
  • 4. COFFEY INTERNATIONAL LIMITED Photo by James Ball - www.dlscape.comBRAZIL – A COFFEY PERSPECTIVEMinas International June 2012Presented by:Craig McCloskey General Manager, South America
  • 5. Brazil – A Coffey Perspective • Coffey Brazil • Why Brazil has a bright future • Why Brazil is important to Australia • Australia – Brazil Relations • Australian Economy and Brazil • About Australia and Brazil • Integration – The Challenge
  • 6. Coffey Brazil – About Coffey • Coffey International Limted is made up of 3 divisions • Coffey Geosciences • Coffey International Development • Coffey Projects • 3,500+ staff, 80 offices worldwide • ASX listed (COF) www.coffey.com • Coffey Brazil is part of the Coffey Geosciences division • Integrating consulting services across Geotechnical, Environmental, Mining & Information (Testing) disciplines • 1,500+ staff, 60 offices worldwide • 300+ Specialist Mining Consultants Coffey Mining integrates specialist geosciences knowledge and engineering solutions to define, understand and manage areas of risk to improve our client’s business and operations.
  • 7. Our worldwide offices Coffey
  • 8. Coffey Brazil – The Mining Division of Geosciences• 300 + staff in offices in Australia, the • Our extensive commodity experience – Americas & Africa – Coal• Specialities – Iron ore – Geology – Base metals (lead, zinc, nickel, copper) – Resource evaluation – Precious metals (silver, gold) – Mining geotechnics – Diamonds – Mining engineering – Industrial minerals – Metallurgy – Tailings engineering – Backfill engineering – Risk advice & business improvement – Geomechanics & 3D numerical modelling – Instrumentation & monitoring
  • 9. Our worldwide offices Coffey Mining
  • 10. Why Brazil has a bright future • Coffey entered the Brazilian market in Dec 2007 • Brazil was seen as a strong, emerging economy • With a stable economic outlook • An open economy • A freely elected government • A regulated and secure legal environment • A stable and successful banking sector • Steady inflation • A market with strong growth prospects
  • 11. Why Brazil is important to Australia • Coffey’s Mining division was already assisting clients in Brazil • The mining sector globally was expanding to meet strong demand from China • Working in Brazil from an Australian base is not feasible • Market demands in Brazil to support growth are very strong • Demand for specialist skills and knowledge is very strong • The Australian market is relatively small compared to Brazil • Access to one of the largest emerging markets in the world is very important to Australia’s continued growth
  • 12. Australia - Brazil Relations • Culturally the two countries have many things in common • Agricultural and mining based economies • Sporting and outdoor activities focused cultures • Friendly and welcoming • Australians love the energy and warmth of the Brazilian people • Freely elected governments
  • 13. Australia - Brazil Relations • Culturally, there are some differences • English v Portuguese Language • Common Law v Civil Law legal systems • Open/de-regulated v Regulated economies • Four types of football v One type of football! • 21m people v 200m people • Low inflation v High inflation • Simple Tax System v Complex Tax System • De-regulated v Regulated Banking System
  • 14. Australia - Brazil Relations • Politically, Culturally & Economically • The differences most notable appear to be only a factor of time • Brazil has emerged as a stable and open economy • Since 1994 economic and social reform have been progressive • Australian companies like Coffey have noticed this trend • This alignment creates confidence in Australian companies • Political Challenges • Corruption • Balancing economic drivers with social responsibility • Cultural Challenges • Poverty and the impact on safety and crime • Timelines are more flexible than in the Western World • Economic Challenges • Reducing the level of poverty through education and training • Wealth gap
  • 15. Australian Economy & Brazil • Similarities • Export driven economies • Strong mineral resource sectors • Environmentally focused. Increasing focus in Brazil • Future Alignment • Emerging economy on the fast track to being a First World economy • Difference in Scale and Capability • Large agricultural sector. Rich fertile lands • Large manufacturing sector. Attracting new investment regularly • Diverse manufacturing sector – avionics, vehicles, machinery • Large oil & gas sector. Rich oil fields being exploited • Competitive • Lower cost of labor • Competitive foreign exchange rate
  • 16. About Australia • Population • 21 million • GDP • $41,200 ranked 18 World Index ref: Mundi Index CIA World Factbook 1.1.11 • $1,130bn ranked 13 in the world ref: World Bank • Government • Democracy, Federal, State & Local • Legislative Assembly & Senate (House of Review) • Legal System • Statute & Common Law • States & Territories • 6 States • 2 Territories • National Pastimes • BBQs • Soccer, Rugby Union, Rugby League, Australian Rules Football • Beaches, parties and many other sports and recreational events • National Anthem • Advance Australia Fair (Official) (Unofficial)
  • 17. Australia – Famous Destinations Map Courtesy of Lonely Planet
  • 18. About Brazil • Population • 197 million (5th largest in size and population in the world) • GDP • $10,800 pp ranked 101 World Index ref: Mundi Index CIA World Factbook 1.1.11 • $2,200bn ranked 6th in the world ref: World Bank • Government • Democratic Republic, Federal, State & Local • Executive, Legislative & Judicial • Legal System • Civil • States & Territories • 26 States • 1 Territory • National Pastimes • Churrascos, Parties • Soccer, Samba • Beaches, parties and many other sports and recreational events • National Anthem • http://www.youtube.com/watch?v=t15pOepsuRw
  • 19. Brazil – Major Cities Map Courtesy of Lonely Planet
  • 20. Integration – The Challenge • Relationships, personal and business • Bureaucracy not integrated • Taxes and procedural challenges • Doing business differs between small, medium, large and government • Language is a barrier • Opening a business do to more of the same is a difficult path • Brazil is striving for growth and recognition • Brazil is driven to overcome its social legacies • Great opportunity if you have the time, patience and are prepared to invest
  • 21. Integration – Relationships, Taxes and Bureacracy! • Relationships are very important in business in Brazil – Business in MG is strongly tied to long term relationships – This applies to other parts of the country too to varying degrees – Social interaction reinforces these bonds – Which forms a basis of trust between the parties • Bureaucracy is not integrated – Procedurally, steps to follow in business process are separate and not obvious initially – Processes between departments are not connected and duplication occurs – Steps within processes are divided between staff, possibly for reasons including: • Segregation of duties to minimise errors and corruption • Support employment and skill development to battle poverty • Lack of systems integration – Changing processes is not easy as authority is heirarchial and process driven – Changes outside of the norm are rare and finding the right person to authorise them (if they are prepared to take on the responsibility) is not easy – Refer BBC News – Brazil`s Business Labrynth of Bureaucracy by Luciani Gomes • Taxes and procedural challenges – Can consume a lot of time and effort depending on your business activity – They add considerably to the cost of transactions in terms of both: • Taxes paid, and • The cost of administration of these taxes – Failure to get this right can be expensive in terms of interest, penalties and time and cost associated with fixing the problems after the fact
  • 22. Integration – Taxes! • Taxation occurs at many levels including: • Revenue Taxes Brazil Aust • Social Integration Program (PIS) 1.65% 0% • Social Security Financing (Cofins) 7.60% 0% • Municipal Tax on Services (ISS - Belo) 2.00% 0% • Provisional Tax on Profits (IRPJ) 1.50% 0% • VAT (ICMS – Circulation of Goods & Services) 18.00% 10% • Importation of Services (CIDE, ISS, IRRF) 31.41% Luxury Only • Employment taxes (Social Taxes) 66.7% 19% • Monthly Staff Allowances (% of avg wage) 13.0% 0% • Company Tax Rate (IRPJ, CSLL) 25.0% 30% • Surtax (annual taxable income > R$240,000) 10.0% 0% • Capital Profits Tax 15.0% 25% • Financial Transactions Tax (IOF) 0.38% 0%
  • 23. Integration – Taxes! • Employment Taxes: • Monthly Salary Brazil Aust • Social Security (INSS) 20.0% 0.0% • Length of Service Guarantee Fund (FGTS) 8.0% 9.0% • Annual leave (incl leave loading) 11.1% 8.3% • 13th Salary 8.3% 0.0% • Worker’s Compensation 2.3% 2.0% • Termination Provision 2.3% 0.0% • INSS & FGTS on Provisions 7.7% 0.0% • Levies – education/land 7.0% 0.0% • Monthly Allowances (% of avg wage) 13.0% 0.0% • Meal, Transport , Medical, Life Insurance 79.7% 19.3%
  • 24. Integration – Language, Business & Government • Doing business differs between small, medium, large and government – Small business is more flexible just like in other modern societies in a B2B environment – Medium sized businesses are also more flexible however tend to have established procedures and customs and introducing new approaches from abroad is a challenge – Large businesses are process driven and changes are not easy to arrange. – Government is procedurally governed and changes are very time consuming and difficult – Understanding how businesses work is critically important to working with them effectively – Imposing your expectations on their business practices is expensive and time consuming – Systems in Brazil are not flexible in the short term. – Relationships with your client`s staff at all levels is important • Language is a barrier – Belo Horizonte is a regional city and MG is not a primary tourist destination – English is not widely spoken outside of some industries such as mining – Conversational English does not translate into business discussions – Spoken words are not easy to follow with different accents. – American accent is more common. Australian and British harder to follow – The Portuguese spoken in MG is more difficult to follow than other parts of Brazil – How you phrase a sentence can have a profound affect on the reader – Being direct can seem impatient or intolerant and put the reader off any follow up – Talking around a point is a more comfortable approach in business – Direct criticism is avoided almost always – A “No” is more often delivered as no response or we will get back to you later
  • 25. Integration – Language is a barrier! continued • All languages have dialets to some extent – Australian English • Good day = G’day • How are you going = ‘ow r ya goin’? • Data = Darta • Good Friend = Mate or Mayte – American English (more common in Brazil) • Good morning = Good mornin’ • How are you going = How are ya doin’? • Data = Dayda • Good Friend = Buddy – Mineiro Portuguese • I am going = Eu estou indo = toindo • What do you want = o que você quer = queceque • How are you = como você está = cetá? • Good Friend = Caro/a
  • 26. Integration – Opening for Business in Brazil • Opening a business do to more of the same is a difficult path – If you want to compete locally, directly, as a foreigner, this can be a difficult path – If you do not understand language, customs or relationships, it can be a long path – If you have something unique to offer, ensure you understand the relevant laws – If what you have is imported, import taxes can create a price barrier – If you you don`t have local relationships, creating them is a long term project – Establishing yourself in a new market always take time and requires investment – Establishing yourself in Brazil from abroad requires you to deal with: • Relationships, customs, taxes labrynth, procedural labrynths, bureacracy, price points, local providers operating informally, language barriers and funding entry into the market over an extended time period • Brazil is striving for growth and recognition – Education is a high priority – Status and recognition are important in a highly regulated environment – Fast tracking growth requires introducing technology, ideas and innovation to Brazil – Growth is being driven by exports and internal consumption – Internal consumption continues to improve with emerging middle class – And an improvement in overall employment, education, health and a reduction in crime – Working with foreign companies can be challenging and expensive due to price points – Foreign companies that help Brazil take two or more steps (or leaps) forward are valued – Foreign companies that are focused on providing more of the same can also add value by meeting strong demand however this can face issues such as tough, low priced competition – In a high growth market, there are significant opportunities for foreign companies to help
  • 27. Integration – Business versus Brazil’s Social Agenda • Brazil is driven to overcome its social legacies – Foreign companies arrive and cry foul over taxes, procedures and bureaucracy – Part of the challenge at times is to rationalise what is happening and why – A common reaction is one of frustration, disbelief and to complain – With millions of Brazilians living in poverty, complaining about it is unproductive – If we understand why, sometimes it is easier to get on with living with the reality. – Arriving from a wealthy, first world country brings with it very different expectations. – Some thoughts on this issue include: • From 2003 to 2009, approx 22 million Brazilians were lifted out of poverty (World Bank) • The basic wage in Brazil is around $300/mth or $10/day • There are arguably still 30-40 million Brazilians below the poverty line • Bureaucracy creates jobs. High taxes are used to pay for these jobs. • Inefficiency and barriers to entry (taxes, bureaucracy) are not stopping investment in Brazil • Brazil recovered from a long history of corruption and hyperinflation less than 20 years ago • A lot of procedures today are legacies of the days of corruption and hyperinflation • Raising so many people out of poverty is not a small task in a geographically large and diverse country • If Brazil is less than 20 years old in its modern, emerging market status, more time to emerge is reasonable • We know Brazil wants to develop. This is the opportunity for us all to be a part of this growth • It is a long term opportunity with the potential for excellent long term gains for all concerned
  • 28. Integration – Time, Patience and Commitment• Great opportunity if you have the time, patience and are prepared to invest – How easy is it to do business in Brazil? • In 2012, the World Bank ranked Brazil 126 out of 183 on the Ease of Doing Business index • Uganda is at 123, Greece at 100 • Australia – 15, UK – 7, USA – 4 – What does this mean day to day in business? • Time passes differently in Brazil (we are not talking about Einstein`s Theory here) • Bureacracy will cause delays so allow for this in your plans • Business will be done based on relationships. They may take longer to develop • Contracts are required for almost everything and signatures verified, taking time • Taxes are complex and process driven. Audits can identify issues many years later • Employees will move from job to job for money more easily (CAGED 2012 32% turnover) – Cadastro Geral de Empregados e Desempregados – CAGED - Brazil • However they value career development and good work relations – What does this mean for the investor? • You need good advice before you invest • Experienced advisors on Brazil • Experienced personnel to support operations • Consider timelines and related costs could be longer and higher than other countries • Ensure your stakeholders understand these things before setting expectations
  • 29. Integration – Commitment continued• There are many organisations working to expand relations – The Australian Trade Commission (Austrade) • Department of Foreign Affairs and Trade • http://www.austrade.gov.au/ • The Australian Trade Commission – Austrade – is the Australian Government’s trade and investment development agency. • Through a network of offices in over 50 countries, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally – The Australian Latin American Business Council (ALABC) • Association • http://www.alabc.com.au/ • The Australia-Latin America Business Council (ALABC) promotes, encourages and facilitates commerce, trade and investment between Australia and the countries of Latin America – The Australia-Brazil Chamber of Commerce (ABCC) • Association • http://australiabrazil.com.au • Promote bilateral trade between Australia and Brazil • Increase awareness of opportunities in the Australia-Brazil business relationship • Provide a network for existing players and newcomers to Australia-Brazil markets to share information and experience and develop business contacts • Generate awareness of the capabilities and experience of our members • Provide a forum for lobbying when necessary – The Council on Australian Latin American Relations (COLOAR) • Australian Government Council • http://www.dfat.gov.au/coalar/index.html • enhanced and strengthened links between Australia and Latin America in the priority areas of business, education, sustainability, tourism and cultural promotion; • a closer engagement between corporate Australia with Latin America • an increased awareness and understanding of Australia in Latin America, and of Latin America in Australia
  • 30. Integration – Commitment continued• There are many universities scholarship programs – Brazilian Science without Borders Undergraduate Program • Federal Government of Brazil and the Insititute of International Education (IIE) • http://www.iie.org/en/Programs/Brazil-Science-Without-Borders • The Brazilian governments Science without Borders program provides scholarships to Brazilian undergraduate students in mostly STEM fields (Science, Technology, Engineering and Math) for one year of study at colleges and universities in the United States. Students will return to complete their degrees in Brazil. • Advancing the Brazilian Governments goal of 100,000 scholarships for the best students from Brazil to study abroad at the world’s best universities • Founded in 1919, the Institute of International Education (IIE) is a private nonprofit leader in the international exchange of people and ideas. In collaboration with governments, foundations and other sponsors, IIE creates programs of study and training for students, educators and professionals from all sectors. These programs include the flagship Fulbright Program and Gilman Scholarships administered for the U.S. Department of State. IIE also conducts policy research, provides resources on international exchange opportunities and offers support to scholars in danger. – Federal Univeristy of Minas Gerais (UFMG) • A Coffey employee has just left for a 12 month scholarship to a university in Adelaide, South Australia under a UFMG sponsored program
  • 31. In Summary • Great opportunity • Great people • Welcoming, friendly, sociable • Educated society wanting to learn more and do more • Economically stable and growing country • Brazilians are motivated to grow and succeed • Close family ties • Love international experience but like to return home • Complex country in which to do business • Failure to negotiate the tax and procedural requirements a pitfall • Business relies on strong interpersonal relationships • Importation complex and expensive • Social imperatives drive issues that affect business from abroad • If you can overcome the above, the future is bright • A short term focus is unlikely to meet expectations • Business practices are more informal locally compared to foreign operations • Meetings require more time to deal with soft issues before business issues • If you are prepared to invest in time, to learn, be open minded and be prepared for some challenges along the way, Brazil offers a bright future.
  • 32. Thankyou!

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