By Liz Lacerda, Foreign Correspondent
Executive Board Member of the Foreign Correspondents’ Association – Australia & South Pacific (FCA)
Brazil is the largest economy in South America and it is ranked ninth in the world, according to the International Monetary Fund (IMF). With its GDP of US$1.93 trillion and US$9160 per capita, Brazil is already one of Australia’s largest trading partners in Latin America. However, before doing business in Brazil, Australian companies must consider the following factors to reduce the risk and increase the chances of success.
The online systems have improved dramatically and the amount of time spent to start a business has reduced significantly. As a consequence, Brazil went up 16 positions in the World Bank “Ease of Doing Business” Report 2019. Brazil ranks 109thcompared to 125thin 2018, a position still unsatisfactory in a study comprising 190 countries. Construction permits, buying/selling/registering property or enforcing contracts can be lengthy processes. The wide range of regulatory agencies might also delay businesses initiatives.
For investors, the Brazilian’ taxation system is a puzzle impossible to solve without professional assistance, as there are 3 different levels of taxation: federal, state and municipal taxes. Each sphere of government has its own rules & regulations, which might shift from time to time, and reporting dates. Companies can spend almost 2000 hours per year paying taxes to Federal, State and Council.
Employment in Brazil is regulated by the government and non-compliance can lead to fines. The main source of legislation is the “Consolidation of Labour Laws”, approved in 1943. In 2017, after 74 years, the law became more flexible to allow casual, contract and temporary workers, for example. However, an employee can still cost a company double of their salary in taxes, compulsory duties and benefits such as health insurance. Unions are also quite strong, and businesses should be aware about how they operate.
Corruption, credit and infrastructure can also be issues for businesses planning to settle in Brazil. The country highly relies on road transport, so logistics cost need to be analysed with care, especially in the North & Northeast states and some Central areas with subpar infrastructure. On top of that, only 5% of the Brazilian population speaks English – 1% fluently – according to the British Council.
Although that is not a guarantee of success, companies moving into the country may consider joint ventures or partnership with local companies. It might seem difficult to start the business, but Brazil has a lot of potential for Australian investors.