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How to do business in Brazil

Market entry – Brazil regional options

Once you have decided that entering the Brazilian market is right for your company, you will need to identify which part of the country you will start in – unless, of course, you are doing business in Brazil as a result of an initial enquiry from a Brazilian company.

Questions to ask yourself

  • Where is there greatest demand for my product?

  • Where is there greatest growth potential?

  • How easy will it be to market, distribute and sell my product in the states I am looking at?

  • What is the local/state authority’s attitude to international trade?

  • Do they welcome it or do they have a reputation for bureaucracy and obstructiveness?

  • Who are my competitors?

The key factors to consider when drawing-up a Business Plan for tackling Brazil include managing distribution and sales channels, labelling and documentation conformity, realistic pricing and marketing options and ensuring protection of intellectual property rights.

As mentioned above, consider approaching Brazil’s markets on a regional basis. Issues relating to law, taxation, product quality and government procurement are certainly national. However, what is more relevant to business is the identification of sources of raw materials, supply chain and clients that can be most efficiently joined through a company’s manufacturing and sales bases and networks.

For companies who are able to define a client base, either consumer or corporate, within a region, it is important to note that marketing activity to raise client awareness may be localised. Successful brand recognition in one region does not automatically lead to recognition outside that area. As some of Brazil’s regions may be similar in size both by population and land mass to the UK, this leads to the potential of a more manageable market entry strategy, particularly for SMEs.

Individual regions therefore offer a defined geographical perspective of what can otherwise be a vast and intimidating market. Most major cities are within the constraints of a single region and so their politically-driven economic direction can be more easily determined. As areas of large population, the size of the client base for either consumer or corporate markets supports a sustainable business model – infrastructure, physical and business services are relatively well established.

For all these reasons, for companies making a market entry and even for companies who may already have a presence in another region of Brazil, adopting a regional perspective can offer structure to the modelling of their development strategy.

UK Trade & Investment has teams in five of the main commercial centres in Brazil, structured on a sectoral basis:

São Paulo
The city of São Paulo is one of the largest metropolitan areas in the world and the recognised business centre of Brazil. The interior of São Paulo state is also a very rich industrial and agricultural region, accounting for 25% of the nation's industrial production. The UK Trade & Investment team in São Paulo is the co-ordinating office in Brazil and the first point of contact for all customer enquiries.

The team in São Paulo covers: education and training, creative and media industries, food and drink, ICT and software, security, aerospace, automotive, engineering, environment, water and construction, financial and legal services, innovation, life sciences, mining and mass transport.

Rio de Janeiro
Rio is the second-largest city in Brazil. Aside from tourism, Rio has a vibrant business district and is home to the dominant oil and gas industry and many of Brazil's largest companies and many multi-nationals.

UK Trade & Investment’s team in Rio de Janeiro covers: oil and gas, power and renewable energies, major sporting events and marine.

Brasília
The economy of Brasília is driven by the federal government, which employs most of the city’s workers. Aside from some light industry serving the needs of the city, there is little industry in Brasília.

The team in Brasília covers: agriculture and agritech, security.

Recife
Recife is one of the most important cities in the North East region, with a strong sense of a separate economic, political and cultural identity. Recife has a busy port and is the centre of aquaculture.

The team in Recife covers: aquaculture and fisheries.

Porto Alegre
Porto Alegre, in the south of the country, considers itself the hub for Mercosul as it is only an hour’s flight from all the major Mercosul business centres (São Paulo, Rio de Janeiro, Buenos Aires, Montevideo and Asunción).

The team in Porto Alegre covers: chemicals and agribusiness.

Please see the Resources section at the end of this guide for details of the teams above.

 

Mercosul

Brazil is a huge market in its own right. However, it should also be viewed in the context of Mercosul (Mercosur in Spanish-speaking Latin America), the South American trading bloc that operates a similar principal of tariff-free trade to that of the EU between its member states. Mercosul encompasses Brazil – its largest and most influential member – and neighbours Argentina, Uruguay, Paraguay and Venezuela. So in addition to the 190 million people in Brazil, there is a regional market of over 250 million!

You can find out more information by visiting:

www.mercosur.int

(in Spanish and Portuguese only)

http://ec.europa.eu/atoz_en.htm

 

Agents and distributors

To export successfully to Brazil you will probably need to employ an agent or distributor. An agent is a company’s direct representative in a market and is paid commission, while a distributor sells products on to customers after buying them from the manufacturer – their income comes from the margin they can make on resale.

The Brazilian legal concept of a sales agent is rather broad, including almost any independent agent who works as an intermediary in the sales of products or services. Given the size of the country, many companies employ sales representatives so that they can take best advantage of Brazil’s vast market potential. As a result, a number of rules have been established regulating the activities of autonomous commercial representatives (“sales agents”) and creating an extremely protective environment for sales representatives in Brazil.

Employing an agent or distributor can have several advantages and can greatly reduce the set-up costs and time taken to enter the market. By employing an agent or distributor, you gain the experience of a seasoned local who will have expert local knowledge and contacts, and you will have someone on the ground to look after your interests.

However, there are some drawbacks to this approach. Employing a third party will raise the cost of your products in the market and you will also lose some control over sales and/or marketing. Using a distributor may also increase the risk of your product being copied or counterfeited. Some of the larger agents and distributors may manage so many product lines that not enough attention is given to yours. Consequently, as sales develop, you may wish to open a representative office or some other form of permanent representation.

To manage agents and distributors properly you will need to identify the agent or distributor that is right for you. The information in the box below provides a checklist of issues you should take into account when looking for a suitable agent or distributor. 

Once you have chosen an agent or distributor you will want to ensure that your products receive a fair share (or more than a fair share) of the agent’s attention. This can be achieved as follows:

  • Visiting as regularly as possible at senior management level – this shows interest in, and commitment to, the agent and the market. This will also provide you with an opportunity to learn about conditions in the market and see how your products are faring. This is particularly important in Brazil, where it is beneficial to develop personal relationships to do business. Distributors in Brazil often complain that their suppliers rarely visit the market. This can be one of the reasons why UK suppliers fail to achieve their full market potential in Brazil.

  • Working closely with your agents and distributors to show them how they can profit from your products.

  • Helping to prepare marketing and sales plans for the agent.

  • Providing regular training for the sales staff, and after-sales training for the technical staff in the UK.

  • Linking performance to incentives and agreeing milestone targets.

 

Finding the right agent or distributor

The checklist below details things you should bear in mind when looking for a suitable agent or distributor:

Background

  • Size of agency

  • History of agency

  • Other companies they act for

  • What is the core business of the agent or distributor?

  • Does the agent or distributor carry products that will compete with yours?

  • Does the agent or distributor have qualified staff who can offer the necessary technical support, without which clients will not buy the products?

  • Experience

  • Number of sales people, their length of service and qualifications

  • Success record

  • Banking and trade references

Distribution

  • Geographical coverage

  • Types of outlets covered

  • Transportation

  • Warehousing

Are they right for your product?

  • Knowledge of local market conditions

  • Marketing competence

  • Degree of English-language skills throughout the organisation

  • Their interest in and enthusiasm for new products – and yours in particular

  • After-sales service levels

  • Required skills of salespeople

  • Personal relationships – this is very important in Brazil

 

 

Source - UKTI


 

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