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Doing Business in Brazil

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Doing Business in Brazil by Frederic Larmuseau, SVP of North America and former General Manager of Brazil, Reckitt Benckiser featured at the 2nd International Conference: Brazil: A pathway into the future from the Emerging Markets Institute at Cornell University's Samuel Curtis Johnson Graduate School of Management and Better Brazil

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Doing Business in Brazil

  1. 1. Doing business in BrazilThe good, the bad + how to deal with itFrederic LarmuseauReckitt Benckiser
  2. 2. RB : A Consumer Goods Leader In Health, Hygiene And Home Dettol & Lysol global #1 germ kill Veet global #1 depilatory Clearasil a leader in clear skin treatment Strepsils global #1 medicated sore throat Mucinex global #2 cough relief Nurofen local leader analgesics Durex global # 1 sexual wellbeing Gaviscon local leader stomach remedies Finish global #1 automatic dishwashing Vanish global #1 fabric treatment Scholl global #1 foot care Calgon global #1 water softener Woolite global #2 garment care Bang with Lysol & Dettol global #1 multipurpose cleaners Harpic with Lysol global #1 toilet care Air Wick global #2 air care Mortein global #2 pest control
  3. 3. Latam 2010 Plan - Sept 09
  4. 4. Enormous scale 5th largest country in the world Larger than total Europe / 15x the size of France World’s largest arable area (12% of global arable space)Latam 2010 Plan - Sept 09
  5. 5. ‘’Can Do’’ mentality Very passionate workforce ‘’Tomorrow will be better than yesterday’’ Middle management people will go through the fire for good leadersLatam 2010 Plan - Sept 09
  6. 6. Rising middle class with desire to consume Middle class growing >50% over last 5 years, now >50% of households They consume: Brazil #3 market globally in personal care (growing +20% yoy) and soft drinks Car and mobile market growing amongst the fastest globallyLatam 2010 Plan - Sept 09
  7. 7. World Cup and Olympics are bringing further momentum Much needed work on infrastructure finally starting Government taking bigger steps towards combatting corruption, crime, illegal business practices
  8. 8. Brazil = Belindia (Belgium + India) Highest Social Level Lowest Social Level Where they live Where they buy What they buyLatam 2010 Plan - Sept 09
  9. 9. Logistical Challenges : no solution in view 21 Da ys – Tr uc k + Bo at
  10. 10. Extremely complex tax situation 85 different taxes (73 Federal, 6 State and 6 Municipal) Average of 2.600 hours per year spent by Companies to fulfill tax demands 4.155.915 rules enacted since the 1988 Federal ConstitutionLatam 2010 Plan - Sept 09
  11. 11. Lawyers rule ! 1 lawyer for every 265 Brazilians 25 million new lawsuits every year – one every 1.6 seconds 85 million lawsuits currently ongoing, for a country of 200 million peopleLatam 2010 Plan - Sept 09
  12. 12. Benchmark - # of Lawsuits in Brazil Company Lawsuits Oi (telecom) 172.000 Telefonica (telecom) 60.000 Embratel (telecom) 36.611 Light (energy) 30.000 Vale (mining) 23.418 INBEV (FMCG) 18.447 Unilever (FMCG) 7.000 Shell (Oil) 4.935 BAT (FMCG) 4.287 Sony (Electronic) 3.000 Colgate (FMCG) 1.020 P&G (FMCG 910 Kraft (FMCG) 850 Reckitt Benckiser (FMCG) 315Source - Legal Departments Forum / 2011
  13. 13. Battle for talent Brazil labour lawsuit champion Talent scarcity, especially white collar / English speaking 2.5 million new labour lawsuits every years (vs 75,000 in US, 2,500 in Japan) More than US$ 7 billion compensation paid to employees per year Starting a lawsuit is easy, fast and free without risk to employeesLatam 2010 Plan - Sept 09
  14. 14. Enormous public sector Government keeping a close eye, especially on non-Brazilian companies Processes are ‘slow’ : imports, registrations (longer than FDA!), permits Tough standards : registrations (company, product: 10,000 pages per product, no monographs, fully price controlled), regulations, compliance tracking (factories closed on the spot if issue), personal accountability, local content advertising Somehow easier on Brazilian companiesLatam 2010 Plan - Sept 09
  15. 15. Easy of Doing Business Index Starting a Protecting Enforcing Economy Ranking Dealing w/ Permits Paying Taxes Business Investors Contracts Singapore 1 4 3 2 4 12 Hong Kong 2 5 1 3 3 5 New Zealand 3 1 2 1 36 10 United States 4 13 17 5 72 7 Denmark 5 31 10 29 14 32 Norway 6 41 60 24 27 4 UK 7 19 22 10 24 21 Korea 8 24 26 79 38 2 Iceland 9 37 34 46 35 3 Ireland 10 13 27 5 5 62 China 91 151 179 97 122 16 Russia 120 111 178 111 105 13 Brazil 126 120 127 79 150 118 India 132 166 181 46 147 182 From a list of 183 countries
  16. 16. How to operate within this environment ? Get expert involvement before / from the start : worth the investment Legal Tax Environmental topics General Consulting Build network with industry associations, authorities and government Associations really open doors : connect before you “need” them Same with authorities / government : being informed during processes allows for fast reaction / avoids refilings etc. “Foreign = Cool” on personal level
  17. 17. How to operate within this environment ? Consider local acquisitions / joint ventures / partnerships Having a Brazilian ‘’leg’’ speeds up many things related to authorities (imports, licences etc) Brings valuable insights on the right Go-To-Market (indirect trade) Closing legal / labour issues fast, pays out Early settlements always offer the best ROI ; on labour issues, even settling at time of dismissal saves a lot of time and money Ensure strict controls at all points in time Still part of developing markets, so if controls lower, some people will take their chances Don’t get stressed, learn from the Brazilians how to find a solution (they are the kings of “jeitinho’’) and how they truly enjoy life !

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