How American Companies can Efficiently Export to Brazil; A 4-Step Process

The U.S. Government is heavily encouraging American companies to invest in the Brazilian trading market. (U.S. COMMERCIAL, 2019) NAX CORPORATION proposes to connect American firms with the Brazilian market by offering effective solutions for the challenges previously described in our last article (https://www.linkedin.com/pulse/how-can-american-companies-efficiently-navigate-vieira-barros/).

To be successful in Brazil, a trading company must be able to:

1.   estimate the real market size for its goods;

2.   understand how competitors work in the country;

3.   have Tax Benefits; and

4.   understand Brazil’s customs bureaucracy to operate efficiently and maximize profits.

We will explain next how NAX CORPORATION can help American companies with each one of the four steps.

Steps 1 and 2: Estimating the real market size of the targeted trading goods & Understanding how competitors work in Brazil.

NAX CORPORATION has authorized access to information on all goods declared to Brazil’s Customs. Using this data, we can offer to American Companies several indicators:

·        MARKET SIZE (monthly data): Number of items imported in the last 2 years. Using this indicator, a company can safely estimate its potential market share in Brazil and project earnings. 

·        COMPETITORS (monthly data): Our clients will understand how their direct competitors operating in Brazil and will be able to make an informed decision about the feasibility of entering the market. 

o  Prices declared to Brazil’s Customs: With this accurate information about competitors, companies can create a data-informed strategy to project profit margin;

o  Origin of products: To know which country goods were made is crucial to understand cost structures and other attributes of competitors in the Brazilian market;

o  Acquisition of products: Knowing where goods were purchased is important to understand the shipping and logistic costs;

o  Description of products: Understanding the detailed characteristics of items, as declared to customs, helps to clearly identify similarities and differences among products;

o  INCOTERM: This information allows to understand whether or not prices declared already included freight, insurance or any other additional costs;

o  Destination port: Brazil is a continental country and understanding where goods enter its territory is important to formulate logistic strategies;

o  Analysis: Using the previous information, companies will be positioned to better understand how their products will perform in the Brazilian market. It is also possible to identify the presence of smugglers and evaders and report them, if the case, to Brazil’s Customs before initiating a business to avoid preventable losses.

Step 3: Having Tax Benefits in Brazil.

The American tax structure is easier to understand than Brazilian’s because there are fewer taxes. Importers in Brazil pay taxes twice: to import and then to sell the products in the country. To initially import a product, companies usually pay a minimum of 6 taxes. Then, to resell the same product they need to pay 6 additional taxes. Having Tax Benefits can drive costs down by eliminating some importing taxes and by receiving discounts at the selling phase through exception laws to the standard taxation regulations. 

Using Tax Benefits, NAX CORPORATION will help companies simplify and accelerate the importing process by paying 4 instead of 6 taxes, decreasing expenditures by 22% to 40%. Then, at the selling phase companies are eligible for a discount, which can reduce tax costs up to 9%. Without Tax Benefits, companies do not have a reduction on the number of taxes paid to import, neither discounted selling taxes. Instead, the fiscal incentive available to importers is the so called “tax credits”. 

Tax credits can be described as a reimbursement offered by the Brazilian government at the end of the two phases (importing and selling products) when a company has paid more taxes than it should (something that can neither be anticipated nor avoided). Instead of paying back in cash, the government offers tax credits. The downside of accumulating tax credits is that they are extremely difficult to be converted in real cash, although they appear as profit at the company’s balance book. Having Tax Benefits will keep a company away from accumulating tax credits and, therefore, will increase its liquid revenue in Brazil.

Any company doing business in Brazil is eligible to request Tax Benefits, but most are unaware of this advantage. NAX CORPORATION’s founder has documented long-term experience in helping foreign companies to easily apply for and get Tax Benefits. 

Step 4: Understanding Brazil’s customs bureaucracy to operate efficiently and maximize profits. 

NAX CORPORATION will offer a simplified explanation and step-by-step guidance about bureaucracy in Brazil. American companies of any size will quickly understand what is necessary to thrive at this market and by using our guidance, they will excel in exporting to and selling goods in Brazil in a timely fashion. For instance, an importer recently reached out to NAX CORPORATION to get help releasing a cargo already retained in a Brazilian port for two months. With our guidance to overcome custom’s bureaucracy, the cargo was released in 7 days.

In summary, NAX CORPORATION provides a successful formula for companies to operate efficiently in Brazil. Our simple four steps (or our “recipe for success”) are solidly grounded in Brazilian laws. Using our consultancy services, American companies of any size (including the small ones) will learn how Brazil’s trading market operates and will be able to establish business directly with Brazilian companies, without using distributors. With a comprehensive landscape analysis of the market, they plan to target, our clients will make data-driven decisions avoiding losses and maximizing profits.  

References:

U.S. COMMERCIAL, July 26th, 2019: Email from U.S. COMMERCIAL – Trade.gov showing opportunities to invest in Brazil.