By: Chancellor, Thursday April 30th,2015 02:12
Doing Business in Brazil: Opportunites Abound
Brazil remains a hotbed of opportunity for those interesting in doing
business internationally -- finding growth beyond the slow-growth U.S. borders.
It's full of multiple business opportunities, and one can navigate the
country's Portuguese language with some trusted guides. From agriculture to
transportation and services, the areas one can get involved with in Brazil's
economic growth seem endless.
The country is known for its beautiful landscape and beautiful people. But
what business types love most is that Brazil's growth rate is higher than G-7
countries, an investment grade rating, a GDP near $2 trillion, and a market
base of 190 million residents, not to mention, says one expert, a strong
manufacturing base -- making Brazil a good opportunity for small and mid-sized
companies wanting to expand internationally.
Brazil business is well-developed in areas of agricultural, mining,
manufacturing, and service industries. Also, Brazil has been expanding into
world markets and now export several products, including airplanes, vehicles,
coffee, and more. Brazil has been trying to reduce its dependence on foreign
oil, making the country a leader in producing hydroelectric power, which has
created multiple spin-off industries and opportunities, for example.
Other areas of rapid growth in addition to agriculture, involving coffee and
soybeans and more, includes manufacturing -- as almost a third of Brazil's GDP
is accounted for with the manufacturing of automobiles, computers, aircraft,
and other durable goods.
Any investor thinking in doing business in Brazil needs to have key information
regarding: (a) how to enter the market, (b) sources of funding, (c) investment
incentives, (d) taxes, (e) labor, and (f) international trade, said Luis
Fernando Lopez Cobo, in a special for the Miami Herald.
Cobo said the the main ways to enter Brazil's market is through a sales
representative or distribution network, setting up a subsidiary or a branch, or
acquiring an existing company in the country.
Funding can be an issue if one wants to set up a company in Brazil, since
credit is quite expensive.
According to the Brazilian Central Bank, the median interest rate for a
working capital loan from a commercial bank is about 28% per year and the
median for a capital expenditures loan is around 23% per year, Cobo said.
Larger companies, though, might tap the public markets through issuance of
stock and/or bonds and notes. Other traditional forms of financing are
available as well. For long-term financing, Brazilian firms use the Brazilian
Development bank (BNDES).
Labor costs in Brazil are rising, as labor inflation, said Cobo, is among
the highest in Latin America. The country also has many labor charges in
addition to base salaries. Local tax and finance experts as consultants can
help navigate that issue. Also, anyone doing business in Brazil will need a
good accounting to navigate the country's tax system, which is rather complex.
The reward, however, is high for those willing to jump in. Return rates on
investment are higher than they are in the U.S., and Brazil isn't just hot at
the moment -- most economists agree that growth in the Latin American country
has miles to go.