Doing business-in-brazil - EDC Canada

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Doing business-in-brazil - EDC Canada

  1. 1. g CONTENTS u NEXTDoing business inBrazilA Guide for Canadian Exporters and Investors
  2. 2. g CONTENTS BACK t u NEXT About the Guide Doing Business in Brazil is designed to help Canadian companies learn about the Brazilian marketplace and how they can do business there. If you’ve never operated abroad but believe your company could do well in foreign markets, this guide can help you decide how – or even whether – Brazil would be a suitable destination. Or, if you’re already doing business abroad and see Brazil as a place to find new opportunities, the guide will help you get started in this vibrant economy. This Guide is a compilation of publicly available information. It is not intended to provide specific advice and should not be relied on as such. This Guide is intended as an overview only. No action or decision should be taken without detailed independent research and professional advice concerning the specific subject matter of such action or decision. While EDC has made reasonable commercial efforts to ensure that the information contained in this Guide was accurate as of Winter 2012, EDC does not represent or warrant the accurateness, timeliness or completeness of the information contained in the Guide. This Guide or any part of it may become obsolete at any time. It is the user’s responsibility to verify any information contained in this Guide before relying on such information. EDC is not liable in any manner whatsoever for any loss or damage caused by or resulting from any inaccuracies, errors or omissions in the information contained in this Guide. This Guide does not constitute legal or tax advice. For legal or tax advice, please consult a qualified professional.2 EDC | Doing Business in Brazil
  3. 3. g CONTENTS BACK t u NEXT About Export Development Canada Who are we? Partnership preferred philosophy Export Development Canada (EDC) is Canada’s When we work on a transaction, we prefer to do it in export credit agency. Our job is to support and develop partnership with the private sector. We let the private Canada’s export trade by helping Canadian companies sector player set the terms and we add capacity and respond to international business opportunities. We share the risk. are a self-financing, Crown corporation that operates at arm’s length from the government. To contact EDC… What do we do? EDC Head Office We provide insurance and financial services, bonding Export Development Canada products and small business solutions to Canadian 150 Slater St. exporters and investors and their international buyers. Ottawa ON K1A 1K3 We also support Canadian direct investment abroad Tel.: 613-598-2500 and investment into Canada. Much of our business Fax: 613-237-2690 is carried out in partnership with other financial institutions and through collaboration with the EDC in Canada government of Canada. Please refer to our Contact Us web page. How we operate We are financially self-sufficient and operate much like a commercial institution. We collect interest on our loans and premiums on our insurance products. We also have a treasury department that sells bonds and raises money in global capital markets. We are committed to the principles of corporate social responsibility. Our rigorous due diligence requirements ensure that all the projects and transactions we support are financially, environmentally and socially responsible. We believe that adopting and embracing these principles is good for business.3 EDC | Doing Business in Brazil
  4. 4. BACK t u NEXT Doing business in Brazil A Guide for Canadian Exporters and InvestorsCONTENTSAbout the Guide ......................................................... 2 Investing in Brazil .................................................... 15 The Legal Perspective ............................................ 24 Brazil’s investment climate ................................................. 16 Dispute settlement ............................................................. 25About Export Development Canada .................. 3 Foreign exchange controls .................................................. 16 Intellectual property protection ........................................... 25 Investment incentives ......................................................... 16 Corruption ......................................................................... 26Understanding Brazil ................................................ 5 The Manaus Free Trade Zone ............................................... 16Brazil’s economic environment .............................................. 6 Labour ............................................................................... 17 Delivering Your Exports ......................................... 27The Canada-Brazil trade relationship ..................................... 6 Corporate social responsibility ............................................ 17 Transportation .................................................................... 28Resources for Canadian exporters and investors .................... 7 Political risk ........................................................................ 17 Using freight forwarders ..................................................... 28 General resources ........................................................... 7 Customs and customs clearance .......................................... 28 Brazil-specific resources .................................................. 7 Establishing Your Presence in Brazil ................ 18 Documentation ............................................................. 28Tips for doing business in Brazil ............................................ 7 Establishing a Brazilian company ........................................ 19 Labelling and marking .................................................. 28 Sociedade limitada ....................................................... 19 Customs tariffs and fees ............................................... 29Brazil’s Major Opportunity Sectors .................. 10 Sociedade anônima ...................................................... 19 Temporary admission of goods ...................................... 29Major opportunity sectors ................................................... 11 Setting up a company ................................................... 19 Standards and conformity ................................................... 29 Aerospace .................................................................... 11 Joint ventures ............................................................... 20 Energy ......................................................................... 11 Partnerships ................................................................. 20 Getting Paid ................................................................ 30 Environmental technologies .......................................... 11 Sales representatives .................................................... 20 Forms of payment ............................................................... 31 Information and communications technologies .............. 12 Acquisitions and mergers .................................................... 20 Documentary letters of credit ........................................ 31 Transportation infrastructure ......................................... 12 Brazilian accounting standards ........................................... 20 Unsecured open account ............................................... 31 Medical equipment ....................................................... 13 Open account with receivables insurance ...................... 31 Mining ......................................................................... 13 Finance and Tax Systems ...................................... 21 Checking your buyer .......................................................... 31 Oil and gas ................................................................... 14 The financial system ........................................................... 22 Insuring against payment risk ............................................. 32 Safety and security ....................................................... 14 Trade and investment financing .......................................... 22 Accounts Receivable Insurance ...................................... 32 Selling to the government ............................................. 14 Financing for your buyer ............................................... 22 Single Buyer Insurance .................................................. 32 Bonding and guarantees ............................................... 22 Contract Frustration Insurance ...................................... 32 Paying taxes ....................................................................... 22 Corporate tax ............................................................... 23 Key Contacts .............................................................. 33 Excise taxes .................................................................. 23 Social contributions ...................................................... 234 EDC | Doing Business in Brazil
  5. 5. g CONTENTS BACK t u NEXTUnderstanding Brazil The Federal Republic of Brazil occupies about half of the land area of South America. With a population estimated at close to 200 million, it is the world’s fifth-largest country and the largest economy in Latin America. Brazil is divided into 26 states and a Federal District, grouped into five regions for administrative and political purposes: the North, the Northeast, the Central West, the Southeast and the South. As the country’s name suggests, it is a federal republic with a democratic government composed of an executive branch (headed by a President), a bicameral legislative branch (made up of a House of Representatives and a Federal Senate) and a judicial branch. The country has been politically stable since its current constitution was adopted in 1988, even though the multiplicity of political parties – there are more than 20 – means that coalition governments are normal. The four major parties are the Workers’ Party (PT), the Brazilian Democratic Movement Party (PMDB), the Brazilian Social Democracy Party (PSDB) and the Democrats (DEM).5 EDC | Doing Business in Brazil
  6. 6. g CONTENTS BACK t u NEXTUnderstanding BrazilBrazil’s economic environment Brazil is a member of the Southern Common Market or Mercosur, which was formed in 1991 and includes On the investment side, about 500 Canadian companies are currently operating in Brazil, and theUntil the 1990s, Brazil’s government exerted a great Argentina, Paraguay, Uruguay and Venezuela. The country was the 11th-largest recipient of Canadiandeal of control over the economy, with state-owned Mercosur bloc represents a combined market of well foreign direct investment (FDI) in 2010.businesses operating in many key industries such as over 270 million consumers and a collective GDPmining, steel, aerospace, finance, power, and oil and of $2.9 trillion.1 It provides for a common external Because the Government of Canada has chosengas. Since then, however, a succession of governments import tax rate for imports from non-member Brazil as a priority market, Canada–Brazil relationshas privatized or partially privatized many of these countries – imports from members are generally are becoming steadily closer. The Canada-Brazilenterprises. Partly as a result of these measures, tax exempt – and allows the free movement of Framework Agreement for Cooperation on Science,Brazil now boasts an expanding, diversified modern goods and people among member countries.2 Technology and Innovation, for example, willeconomy with highly developed agricultural, resource, encourage Canadian and Brazilian partners frommanufacturing, and service sectors. Brazil is also a member of the World Trade Organization industry, academia and government to collaborate and has trade agreements with various other countries. on joint R&D projects, scientific conferencesThe country’s economic growth remained strong from and workshops.the early 1990s until 2008, when the global financialcrash undermined external demand for Brazil’s com­‑ The Canada-Brazil trade Associated with this Framework Agreement is themodity products. By late 2009, however, the economywas recovering and, in 2010, GDP growth reached relationship Joint Action Plan on Science and Technology, which will draw on Canadian and Brazilian expertise to In 2011, Canadian exporters shipped C$2.7 billion7.5 per cent, the highest since 1985. Although global foster advances in areas such as ocean technology, worth of goods to Brazilian destinations, making theeconomic stagnation cut this rate to 2.7 per cent in clean technology, green energy, life sciences and country our 11th-largest trading partner. Our major2011, Brazil nevertheless overtook the United Kingdom information and communications technologies. domestic exports were fertilizers (C$714 million),to become the world’s seventh-largest economy. fuels and oils (C$686 million), machinery (C$295Brazil’s socio-economic future looks generally positive. million), paper and paper products (C$240 million)Urban unemployment in late 2011 was at a historic and electrical equipment (C$140 million).low of 4.7 per cent and the country’s traditionally highlevel of income inequality declined for the 12th yearin a row. Brazil’s high interest rates have also makeit an attractive destination for foreign investors, Export Development Canada in Brazilalthough the government has recently enacted laws EDC has maintained an active presence in Brazil since 2000. In 2011, EDC assistedto decrease these rates and sovereign bond issues 323 Canadian companies with their Brazilian trade and investment, for a total businessare attracting record low spreads. volume of C$2.8 billion.1 All dollar figures are in U.S. currency unless otherwise indicated.2 Both Argentina and Brazil are currently disregarding this agreement with respect to certain key goods.6 EDC | Doing Business in Brazil
  7. 7. g CONTENTS BACK t u NEXTUnderstanding BrazilResources for Canadian The Virtual Trade Commissioner, also available ›› The World Bank Group’s Ease of Doing though the TCS, is a personalized, web-based Business in Brazil ranks the relative difficultyexporters and investors resource that will give you market information and of operating in Brazil, from starting a company leads specific to your business interests. You can to enforcing contracts.General resourcesThe following general resources deal with international register for the Virtual Trade Commissioner when you visit the TCS web site. ›› ApexBrasil, the Brazilian Trade and Investment Promotion Agency, provides a variety of servicestrade in a Canadian context. ›› EDC is Canada’s export credit agency. Its job for foreign and Brazilian companies.›› EDC’s Introduction to Exporting: How to Sell to is to support and develop Canada’s export ›› BrasilGlobalNet, a complement to ApexBrasil, International Markets is a comprehensive guide trade by helping Canadian companies respond has a wealth of information provided by the to foreign trade and investment. It can help you to international business opportunities. EDC’s Department of Trade and Investment Promotion. determine whether your company is ready to do business abroad, find ways to identify and enter About Exporting page leads to a wealth of ›› The TCS web site has a section dedicated to Brazil. export-oriented resources and information. new markets, learn how to overcome barriers and risks, and much more. ›› The Canada Business Network is a collaborative Tips for doing business in Brazil network of federal and provincial government›› Foreign Affairs and International Trade Canada services that helps Canadian entrepreneurs and ›› Brazilians place great importance on personal (DFAIT) provides information about foreign and family relationships, and this emphasis exporters build their companies. extends to business dealings in a way that isn’t affairs, foreign policy, the Canadian economy, international trade, travel assistance and ›› CanadExport is a free, online publication common in Canada. Establishing a personal side maintained by DFAIT. It provides news about to your business relationship – frequently through passport services. trade opportunities, export programs, trade fairs,›› The Canadian Trade Commissioner Service business missions and more. social occasions – is part of building mutual trust, and without that trust it will be much harder to (TCS) is part of DFAIT. It has Trade Commissioners in regional offices across Canada and in more ›› Industry Canada offers market reports as well as negotiate a sale. Most Brazilians, consequently, the useful Trade Data Online research tool, which will want to get to know you on a personal basis than 150 cities worldwide. provides both historical and current data related before they do business with you.The TCS provides a broad range of services to to Canada’s exports and imports. ›› For the above reasons, business negotiationsCanadian businesses in Canada and abroad. Trade in Brazil are strongly influenced by personalCommissioners can help you prepare for international Brazil-specific resources contacts and connections. Brazilian businessmarkets, assess market potential, find qualified contacts The following resources are specific to Brazil and people prefer a steady working relationship withand advise on market access problems. The TCS also to trade with Brazil. their counterparts and may feel insulted if you oroffers market research and country-specific trade your representatives visit them infrequently andand economic reports. ›› EDC’s Country Info page for Brazil provides a hurriedly. They also won’t like changes in your variety of resources related to the country. Refer negotiating team while negotiations are in progress. particularly to the guides from Ernst & Young, In addition, the emphasis on the personal means Price Waterhouse Coopers and Deloitte. that important business deals are normally concluded ›› The Brazil-Canada Chamber of Commerce face to face and not by phone, mail or email. supports the development of business links between the two countries.7 EDC | Doing Business in Brazil
  8. 8. g CONTENTS BACK t u NEXTUnderstanding Brazil›› Brazilian business people are sensitive to rank. ›› Personal distance in Brazil is closer than in Canada, If you intend to negotiate or meet with senior so your Brazilian counterparts may stand very decision makers in Brazil, send representatives close to you while speaking. Brazilians frequently with an equivalent level of authority. interrupt each other during a conversation, but›› Brazilians have a relaxed attitude to time, so this is a sign of interest and is not considered rude. business negotiations will progress more slowly in ›› During a first visit to a company, it is customary Brazil than in Canada. A meeting can be delayed to give a gift, usually promotional items without or cancelled without warning and your schedule great material value. Expensive gifts can be should be set up to accommodate this. misunderstood as bribes and are unwelcome. You, however, should always be punctual and be ›› You should be prepared to explain your strategy for careful not to display frustration or impatience providing timely and local service to your Brazilian with delays. Because it’s vital not to rush business customer, especially if you are supplying to more dealings, you shouldn’t insist on final decisions remote locations. Being able to provide spare until your Brazilian counterparts are clearly ready parts, technical assistance and on-site after-sales to make them. service (in Portuguese) are highly valued.›› When you meet your Brazilian counterparts for ›› Brazilians want to see that you are committed to the first time, they will expect you to address them the Brazilian market and to your relationship with by their titles and surnames. Brazilians often them. Visiting them regularly or establishing a address and refer to their colleagues only by family local presence should be part of your long-term name, but you should not do this until your strategy for the market. relationship has reached a more personal level. ›› Portuguese (not Spanish) is Brazil’s official In general, you should act formally until it is clear language, and proficiency in English varies widely. that a less formal approach will be welcomed. While business people of the younger generation›› Handshakes are the most common form of often have some ability in a foreign language – greeting between business colleagues. In informal usually English – a large proportion of senior situations, men and women may greet each other decision makers do not. Outside the larger cities it with one or two kisses on the cheek or may is even more difficult to find business people who briefly embrace. are fluent in other languages, so you should find›› Clothing for business occasions is expected to a reputable translator who can accompany you to meetings. Note also that your product literature be formal and conservative. This preference will and business cards should be in Portuguese. persist even after you have gotten to know your business colleagues and the atmosphere has ›› Business hours (including government office become more relaxed. hours) start at 8 a.m. or 9 a.m. and end at 5 p.m. or 6 p.m., with a one-hour lunch break at noon.8 EDC | Doing Business in Brazil
  9. 9. g CONTENTS BACK t u NEXT TRINIDAD AND TOBAGO GUYANA VENEZUELA Ri French oO rin SURINAME Guiana Oiapoque NORTH oc o Boa Vista (FRANCE) AT L A N T I C COLUMBIA OCEAN AMAPA Macapa Equator Rio Neg ro Belem Ama zon Sao Luis Quick Facts Am Manaus Santarem Parnaiba az s ajo on Altamira Careiro Fortaleza p Ta Population: 199.3 million (2012 est.) o Itaituba CEARA Ri AMAZONAS ira RIO GRANDE Benjamin a de Maraba MARANHAO DO NORTE M Teresina Official language: Portuguese Constant Ri o PARA Carajas Natal Joao us ingu Araguaina ur Pessoa Major imports (2011): fuels and oils, machinery, electrical Ri oP Picos PARAIBA oT Rio X Cruzeiro do Sul Humaita Ri PIAUI ele equipment, vehicles and vehicle parts, chemicals, plastics, tins Boca do Salgueiro s Cachimbo Pi n Acre Porto PERNAMBUCO Recife re ACRE Toca iron and steel s Rio Branco Velho ALAGOAS JuazeiroRio Guajara-Mirim Palmas Maceio Uc Assis Brasil BRAZIL TOCANTINS Major Canadian exports (2011): fertilizers, fuels and oils, ruena Aracaju aya RONDONIA Rio SERGIPE li machinery, paper and paper products, electrical equipment, Rio Ju BAHIA PERU MATO aia Barreiras Rio Mamore GROSSO chemicals, plastics, instruments, metals, ores ragu eni co Salvador cis Rio B Vitoria da Rio A ran GOIAS Largest import partners (2011): U.S. 15.1%, China 14.5%, oF Conquista Ilheus Cuiaba Brasilia Sa Lago BOLIVIA Argentina 7.5%, Germany 6.7%, Japan 4.5% Rio Titacaca Rondonopolis DISTRITO Caceres Goiania FEDERAL aiba MINAS GERAIS Currency: Brazilian real (BRL) aran Rio P Corumba Campo Santa Fe Uberlandia Belo ESPIRITO Time difference: UTC-3 (Brazil has four time zones; Brasilia Rio Grande Horizonte Grande do Sul SANTO is two hours ahead of Ottawa during EST.) ay Rio Paragu MATO GROSSO Panorama SAO Vitoria DO SUL PAULO Business hours: between 8 a.m. to 9 a.m. and 5 p.m. to Ponta Sao RIO DE JANEIRO 6 p.m., with a one-hour lunch break at noon Pora Paulo CHILE PARAGUAY PARANA Santos Rio de Janeiro Government office hours: between 8 a.m. to 9 a.m. and Curitiba 5 p.m. to 6 p.m., with a one-hour lunch break at noon SOUTH SOUTH a Sao Francisco do Sul an SANTAPACIFIC AT L A N T I C r Rio Pa CATARINA Florianopolis OCEAN OCEAN ana RIO GRANDE ARGENTINA DO SUL Porto Alegre Rio Par Santa Maria URUGUAY Rio Grande9 EDC | Doing Business in Brazil
  10. 10. g CONTENTS BACK t u NEXTBrazil’s MajorOpportunity Sectors Brazil provides many excellent opportunities for Canadian companies because of its size, its diverse and sophisticated economy, its role in global value chains and the number of multinational companies operating there. In recognition of Brazil’s increasing economic importance to Canada, EDC has established representative offices in Rio de Janeiro and São Paulo. Canadian companies that have done well in Brazil emphasize that a long-term commitment to the market is essential to success. Most Canadian exporters will need to spend three to five years on market development and relationship building before they begin to see any significant returns on their efforts. Often the best approach to an initial market entry is to find a good local partner or, depending on your type of business, to look into the possibility of a joint venture or the acquisition of a local company. If you prefer not to work through a partnership, some kind of local representation will always be an advantage. While some Brazilian companies acquire goods directly from foreign manufacturers, most prefer to import such merchandise through Brazilian agents or distributors.10 EDC | Doing Business in Brazil
  11. 11. g CONTENTS BACK t u NEXTBrazil’s Major Opportunity SectorsMajor opportunity sectors Some of the other major organizations connected to the aerospace sector are: $15 billion in developing smart grids to increase the efficiency and reliability of its power system. To keepThe major opportunities in the country lie in the up with its population and economic growth overfollowing sectors: ›› Aerospace Industries Association of Brazil the next 10 years, Brazil will also have to increase its ›› Ministry of Development, Industry and Foreign electricity generation capacity by 6,000 MW per year.Aerospace Trade (Portuguese only) The major opportunities in the sector are relatedBrazil’s aerospace market is expanding, andits need for imported airplane and helicopter ›› National Civil Aviation Agency (Portuguese only) to providing new generation facilities to meet theparts and components is growing along with it. expected growth in consumption. The construction Energy of transmission lines and the privatization of existingEmbraer, formerly the country’s state-ownedaerospace conglomerate, was privatized in 1994 Brazil is the western hemisphere’s third-largest generating and distribution installations also offerand manufactures airliners, military aircraft, producer and consumer of electricity after the possibilities. Canadian expertise in providing isolatedbusiness jets and agricultural aircraft. United States and Canada, and is the largest electricity communities and rural areas with decentralized energy consumer in South America. In 2011, the market systems can also be attractive to Brazil’s power sector.Brazil is investing billions to improve 14 airports in for Brazil’s power generation, transmission, andpreparation for the 2014 World Cup. This presents distribution equipment needs totalled about Eletrobras is the country’s largest state-owned poweropportunities for Canadian manufacturers of products $7.1 billion, with imports accounting for about company (52 per cent of its stock is held by thesuch as baggage handling systems and equipment, $500 million of this sum. federal government) and is also the biggest powercheck-in equipment, X-ray machines and other safety company in Latin America. Other major organizationsand security products. In addition, Brazil has recently About 75 per cent of the power consumed in Brazil connected to the Brazilian energy sector are: derives from hydroelectric sources. State-ownedgranted permission for the construction and operationof private, non-commercial airports. companies control approximately 85 per cent of ›› Brazilian Electricity Regulatory Agency power generation, while the private sector has ›› Ministry of Mines and Energy (Portuguese only) around 80 per cent of the distribution utilities. It is estimated that Brazil will need to invest about ›› Energy Research Company (part of the Ministry of Mines and Energy, and responsible for the country’s overall energy planning; in Portuguese only) Trade fairs and conferences Environmental technologies Attending trade fairs and conferences is a good way of promoting your company and your The water and wastewater subsector shows a growing products in the Brazilian market, and also of learning about the dynamics of Brazil’s industrial demand for technologies such advanced filtration, sectors. The city of São Paulo hosts around 300 trade fairs per year, and other cities are home loss prevention, intelligent valves, water distribution to major shows as well. and reuse, water-saving devices, rainwater systems and membrane filtration. Currently, 48 per cent of Brazilian cities have inadequate water and sewage treatment facilities or even none at all. With a few exceptions, this sector is still mostly state-owned. Some of its companies are modern and sophisticated and often give concessions for the construction and operation of parts of their facilities.11 EDC | Doing Business in Brazil
  12. 12. g CONTENTS BACK t u NEXTBrazil’s Major Opportunity SectorsBrazil is also expanding its investments in solid waste technologies, broadband networks and digital-cities Some of the major organizations connected totreatment technologies, waste-to-energy projects for initiatives by 2015. the Brazilian ICT sector are:landfills, landfill replacement and the introductionof selective waste collection. There are additional Mobile broadband growth has been especially ›› Brazilian Electrical and Electronic Industriesopportunities in air pollution control, soil remediation, strong, with more than four million subscribers as Associationclean process technologies, environmental information of 2011, and cellular phone services based on Long Term Evolution (LTE) technologies entered the ›› Telebrasil (Portuguese only)systems and renewable energy. market in late 2012. Brazilians are heavy mobile ›› National Telecommunications AgencySome of the major organizations connected to the phone users; there are 250 million phones in use, ›› ABTA (pay-TV association; Portuguese only)Brazilian environmental sector are: or more than one per person. Even so, smart phone penetration is currently only 2 per cent. Transportation infrastructure›› Brazilian Environmental Institute (Portuguese only) Brazil’s transportation infrastructure, especially the›› Environmental Authority of the State of São Paulo Opportunity areas for Canadian companies include 3G network maintenance, LTE and WiMax services non-air segment of the network, needs substantial (Portuguese only) upgrading to reduce bottlenecks and increase and applications, broadband infrastructure, application›› Association of City Cleaning and Waste Treatment software and wireless communication networks. The efficiency.3 The government’s long-term transport Companies plans, first laid down in 2008, proposed investments broadband market subsector will be looking for cable›› Brazilian Association of Solid Waste Treatment modems, home networking platforms, IP telephones, of more than $200 billion between then and 2023 to extend highways, build ports, improve the connections Companies IPTV software and video-on-demand services. among the country’s regions and provide north-south Brazil issued 4G broadcast licences in June, stipulating ferry linkages.Information and communications that at least 60 per cent of the installed hardware musttechnologies be Brazilian. Operators have committed to minimum By 2015, the Brazilian federal government expects toBrazil is one of the world’s largest emerging investments in their 4G networks to cover the host invest $40 billion in expanding the railway networkinformation and communications technologies cities for the Confederations Cup in 2013 and for from 28,000 km to 35,000 km. By 2023, total rail(ICT) markets and the largest in Latin America. the World Cup in 2014. Increasing mobile 4G data investment could reach $73 billion.The country’s total annual expenditures on ICT are support is expected to drive the development of Given the logistics potential of Brazil’s 40,000 km ofexpected to reach $134 billion by the end of 2014; of high-speed, mobile video-based applications such as navigable waterways and lakes, water transport is alsothis, about 70 per cent will go to telecom equipment 3D video services for TVs, laptops, tablets and smart underdeveloped. Better waterway access, terminalspurchases, 13 per cent to information technology phones, as well as for cloud-based services. and storage facilities are all needed. The estimatedservices and 12 per cent to hardware acquisitions. All telecom products to be sold in Brazil must be yearly investment in this subsector is projected toRecent developments include the mergers of some certified by a Brazilian-authorized certification body reach $4.6 billion by 2022.mobile carriers and the launch of the country’snational broadband infrastructure plan. and must be homologated (type approved) by the The Brazilian Industry Federation also expects that National Telecommunications Agency (ANATEL). more than $75 billion will be invested in facilities forDemand for broadband services is expected to Homologation can take 90 days. Note that if theincrease rapidly over the next few years as Brazil’s the 2014 FIFA World Cup and the 2016 Olympics, both foreign manufacturer’s distributor applies for of which will be hosted by Brazil. This includes substan-economic and consumer outlooks continue to and receives the approval, the distributor ownsbrighten; about $8 billion will be invested in mobile tial sums for improving urban transit systems in the the registration. 12 cities where the 2014 and 2016 events will be held.3 As just one example, fewer than 10 per cent of Brazil’s 1.98 million km of roads are currently paved.12 EDC | Doing Business in Brazil
  13. 13. g CONTENTS BACK t u NEXTBrazil’s Major Opportunity SectorsIn August 2012, President Dilma Rousseff unveiled her Medical equipment Brazil extracts enormous quantities of iron ore, whichadministration’s Investment in Logistics Program (PIL) Social and economic advances in Brazil have led it sells primarily to China, but is also diversifying intofor upgrading Brazil’s transportation and logistics to better medical and health care for the country’s non-ferrous metals such as copper, nickel, gold,infrastructure. The first phase will focus on road and population. Governments have not only been aluminum, zinc, lead, manganese and bauxite. It alsorail infrastructure, with approximately $66 billion in building new medical facilities but have also started has 94 per cent of the world’s reserves of niobium,public funds being invested over a 25-year period. Most new health care programs, which have helped the a strategic metal used in critical industries in theof the funds will be disbursed between 2013 and 2018. country become South America’s largest medical aerospace, automotive, nuclear power, defence, equipment market. electronics, and oil and gas sectors.The federal government is already investing ininfrastructure upgrades through its Accelerated Brazil both imports and exports medical, dental, There are several multinationals in Brazil that meetGrowth Program (PAC), begun in 2007. The program radiological, diagnostic and laboratory equipment. most of the mining industry’s equipment needs, soprovides incentives for private investment in Brazil’s The country has few manufacturers of advanced exporting finished equipment to the country is not atransportation and logistics infrastructure by offering medical technology, however, and about 80 per cent competitive approach. Canadian companies can findvarious means of private sector involvement, such as of Brazil’s needs in this subsector are imported. With opportunities, however, in supplying components forconcessions and public-private partnerships. the continuing expansion of the public and private earth-moving machines, belt conveyors, crushers, health care systems, this need is only likely to grow. For grinders, laboratory instruments, drill bits, geologicalRoughly half of the projects that will benefit from surveying equipment and specialized engineeringpublic investment involve upgrades to the country’s Canadian exporters, this translates into a promising market for advanced medical equipment, disposables, services, particularly when products of the requiredexisting brownfield infrastructure networks. Investment quality or sophistication are not available within Brazil.will be accompanied by regulatory overhaul to ensure diagnostic devices, implants and components.that the planning and integration of these networks Some of the major organizations connected to the A new mining bill was recently tabled for considerationis properly carried out. The goal is to achieve greater Brazilian medical equipment sector are: in the Brazilian senate. It proposes replacing theefficiency in transporting goods from commodity National Department for Mineral Production withsources – such as the soy fields of western Brazil and ›› Brazilian Ministry of Health (Portuguese only) an independent, national regulatory agency forthe iron ore mines of the north – to ports from whichthese commodities can be exported to foreign markets. ›› PSI Brazilian Health Devices Brazil’s mining industry. ›› Brazilian Association of Equipment, Products and Some of the major organizations connected to theSome of the major organizations connected to the Medical Supplies Importers (Portuguese only) Brazilian mining sector are:Brazilian transportation infrastructure sector are: Mining ›› Ministry of Mines and Energy (Portuguese only)›› National Association of Public Transportation Brazil is the world’s fifth-largest mineral producer ›› Brazilian Geological Survey (Portuguese only)›› National Association of Urban Transportation and is one of the world’s biggest markets for mining ›› Brazilian Mining Institute (Portuguese only) Companies (Portuguese only) equipment. Vale S.A., the largest Brazilian mining ›› Professional Geologists Association company, is also the world’s second-largest mining (Portuguese only)›› Rail Transportation Association of Brazil firm by market capitalization. ›› Brazilian Association of Machinery and (Portuguese only) Equipment Manufacturers (Portuguese only)13 EDC | Doing Business in Brazil
  14. 14. g CONTENTS BACK t u NEXTBrazil’s Major Opportunity SectorsOil and gas ›› Brazilian Petroleum, Gas and Biofuel Institute and reducing its long-held dependence on foreignAs of late 2011, Brazil was the world’s 13th-largest oil (Portuguese only) suppliers. Research and development, technologyproducer and ranked 15th in proven oil reserves,4 ›› National Petroleum Industry Organization transfer and innovation will be of crucial importance throughout this process.but recent offshore exploration has revealed verylarge undersea deposits that could increase these Brasil Energia magazine has a listing of Brazilian and multinational oil and gas companies (in English; by The umbrella group for the sector is the Brazilianreserves from their present 15 billion barrels to Association of Electronic Security Companies30 billion barrels5 (most of Brazil’s oil, in fact, comes subscription only.) (Portuguese only).from deep offshore fields). The state-owned oil andgas company, Petrobras – the world’s fifth-largest Safety and securityenergy company – controls almost 95 per cent of Selling to the government Brazil’s market for safety and security equipment wasnational production. worth $29 billion in 2010 and is showing an annual Foreign companies bidding on government growth rate of around 15 per cent, making it the world’s procurement contracts must do so through aThe country plans immense investments in both fifth-largest security market. It is estimated that security Brazilian representative, so you will need a localexisting and new fields. According to the Brazilian for the 2014 World Cup and the 2016 Olympics will partner to enter this segment of the market. SimplyPetroleum Institute, long-term equipment and service require additional spending of about $3 billion. establishing your own company in Brazil isn’tprocurement and operational expenses throughout enough, in particular for local tenders, since thisthe entire industry could exceed $1 trillion by 2020. Planned Brazilian military acquisitions include affiliate won’t be considered “local” for procurementMultinationals such as FMC Technologies, Cooper Embraer’s KC-390 heavy-lift aircraft ($1.3 billion); purposes unless it has a majority of Brazilian capitalCameron, Marine/Oceaneering, National Oilwell 36 fighter jets ($10 billion, but recently delayed); participation and Brazilian operational control.Varco, Weatherford, GE Vetco Grey, ABB and the ProSuper Shipbuilding Program; the ProsubAker Kvaerner have plants and service facilities Submarine Program; and the Sisfron border Brazilian federal law lays out the procurementin Brazil and hold a significant market share in monitoring program ($6 billion). process that the federal and state governments musttheir respective subsectors. follow when purchasing supplies and services. This Half of all the security products used in Brazil process uses public tenders, which can be open toThese companies will require equipment and are imported. This may provide opportunities for international bids, to ensure competitiveness. Theservices that include pipeline alloy coatings, turbo Canadian firms in several subsectors, including procurement law states that price is the primarycompressors, mooring cables and mooring systems, financial institutions, port and airport security, vehicle (though not necessarily the only) factor whendrilling pipelines, well control systems, oil and gas surveillance and alarms, and security systems for private choosing a supplier.metering systems, offshore drill rigs, drill bits, steam homes and small businesses. Products in demandgenerators and electrical cabling. include access control equipment, CCTV systems, alarm The Brazilian government is not allowed to distinguish systems, surveillance technology, drug and explosive between domestic and foreign-owned companiesSome of the major organizations connected to the detectors, metal detectors, fire prevention and detec- during the tendering process, provided the bidderBrazilian oil and gas sector are: tion systems, biometrics and home security equipment. is incorporated in the country. When the purchasing decision is made, however, there is a “Buy Brazil Act”›› Ministry of Mines and Energy (Portuguese only) While Brazil seeks to assert its role both regionally that allows preferential treatment for domestic suppliers›› Petrobras and internationally, its National Defence Strategy over foreign firms in selected sectors, even if the›› National Petroleum, Natural Gas and Biofuel aims to develop a modernized industrial defence Brazilian company’s prices are up to 25 per cent higher (this is partly why would-be Canadian bidders Agency (Portuguese only) base that includes expanding its export capacity need to partner with a local firm).4 According to the CIA World Factbook, September 2012.5 According to a January 2012 estimate by Brazil’s National Petroleum, Natural Gas and Biofuel Agency.14 EDC | Doing Business in Brazil
  15. 15. g CONTENTS BACK t u NEXTInvesting in Brazil Brazil is already the largest FDI recipient in South America and has ambitious long-term plans to invest billions in its infrastructure and its oil, gas and power sectors. Its domestic financial resources, however, cannot meet the cost of achieving these goals, so the country will need to attract substantial FDI over the long term.15 EDC | Doing Business in Brazil
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