How can American companies efficiently navigate the challenges of engaging in business with Brazil?
Brazil has an estimated population of more than 208 million people. (LEGADO BRASIL, 2017) It is “the largest country in Latin America, the second-largest economy in the Western hemisphere behind the United States, and the ninth-largest economy in the world”. (U.S. COMMERCIAL, 2019) Despite being a large and important country in the world, Brazil’s economy is not currently growing as much as that of other developing countries. Brazil’s economy has historically focused on commodities. However, due to new technologies and challenges from internal and international trade, the country needs to recover the lost time (ABC, 2019) by increasing purchases of manufactured goods from other markets. Only 12.6% of Brazil’s GDP comes from the industry. (GLOBO, 2019) The country has unmet needs for goods and can benefit from partnerships with developed countries.
During an economic crisis between 2014 and 2016 Brazil had an estimated BRL 486 billion loss, which represented 8.2% of its Gross Domestic Product (GDP). (EXAME, 2019) By the first quarter of 2019, the country had recovered only BRL 148 billion from the referred loss. There is another BRL 338 billion (nearly USD 68.1 billion) to recover before reaching the pre-crisis GDP level, which represents a great market opportunity. (EXAME, 2019) In 2018, Brazil’s GDP was estimated in BRL 6.8 trillion and has been projected to grow 2% in 2020 and around 2.5% in both 2021 and 2022. Using these estimates, the projected growth of 7% in the next triennial would generate an additional market of BRL 487 billion (the equivalent to USD 98.2 billion based on an exchange rate of BRL 4.96/USD 1 (BACEN, 2020)) in the country. To recover economically, Brazil needs to invest in infrastructure and to create trade opportunities with other countries, including the United States.
While Brazil is in recovering mode and searching for new economic investments, the U.S. is living a trade war against China. (BBC, 2019) This war is creating new tariffs for American companies and they need to expand into new markets to offset losses. As explained above, Brazil represents an excellent economic opportunity for American companies. Moreover, there are key factors to consider in the context of the trade war with China: 1) American companies exporting to China need new markets to maintain or increase their sales and 2) American companies producing goods in China are looking for alternative manufacturing plants. Brazil has a real need for importing and producing goods and American companies must explore this business opportunity.
Nonetheless, Brazil faces a challenge for attracting new investors. The country is known for its bureaucracy and high taxes. Therefore, American companies are skeptical to invest in Brazil and uncertain about profitable returns on their investments. (TCU, 2019) Furthermore, small and medium American companies usually lack experience trading with Brazil and not rarely hire consultants without empirical experience in the Brazilian import/export market. Several multinational corporations (MNC) already in the Brazilian and American markets, such as Deloitte and KPMG, offer consulting in taxation and customs services and could serve those companies. However, MNC have complex organizational structures and higher operational costs making affordability of their services a challenge to small/medium-sized companies.
An effective and trustworthy solution, especially for small/medium-sized but also more affordable to large American firms, is to hire a company that can facilitate the business relationship between the U.S. and Brazil. To overcome trading barriers, both countries can greatly benefit from a “mediator” and cost-effective company: a company that understands how to work agilely (timely transactions), efficiently (low taxes) and safely (abiding by the laws) in Brazil and at the same time understands the American trading system.
NAX CORPORATION is a firm led by Alexandre Barros, an entrepreneur with proofed experience in customs transactions and owner of its own import firm (SAVIE MERCAN) in Brazil. NAX CORPORATION can be this “mediator”, helping American companies to increase their sales while also supporting Brazil to expand its market.
References:
LEGADO BRASIL, 2017: http://legado.brasil.gov.br/noticias/cidadania-e-inclusao/2018/08/populacao-brasileira-ultrapassa-208-milhoes-de-pessoas-revela-ibge
U.S. COMMERCIAL, July 26th, 2019: Email from U.S. COMMERCIAL – Trade.gov showing opportunities to invest in Brazil.
ABC, July 18th, 2019: http://www.abc.org.br/2019/07/18/para-o-pais-voltar-a-crescer-e-preciso-investimento-em-ciencia-e-tecnologia-diz-senador/
EXAME, August 29th, 2019: https://exame.abril.com.br/economia/pib-do-brasil-so-recuperou-30-do-que-foi-perdido-na-crise-economica/
IBGE, accessed on September 9th, 2019: https://www.ibge.gov.br/explica/pib.php
BACEN, 2020: https://www.bcb.gov.br/content/focus/focusmarketreadout/R20200409.pdf
GLOBO, July 15th, 2019: https://oglobo.globo.com/economia/brasil-tem-terceira-maior-desindustrializacao-entre-30-paises-desde-1970-recuperacao-esta-distante-23779863
TCU, accessed in September 9th, 2019: https://portal.tcu.gov.br/desenvolvimento-nacional/desenvolvimento-economico.htm
BBC, September 2th, 2019: https://www.bbc.com/news/business-45899310