Are you afraid of the Boogeyman in Brazil? - Doing business in Brazil

 

We are all afraid of the Boogeyman in one way or another. It’s the uncertainty of what is waiting for us that scares us.

 

The Boogeyman - Doing business in Brazil

But if we know that the Boogeyman weighs 88kg, has a height of 1,6m, hates garlic and sunlight and only eats once a day, somehow it´s not that scary anymore. 

With regards to you starting up or investing in Brazil we at AA RISK want to take that fear of the uncertainty away, quantify for you the risk, and take you to see the Boogeyman (the market) as soon as possible. That’s what we are here for.

 The Brazilian Boogeyman:

Boom Cycles

When I moved to Brazil in 2007 at the auge of the global commodity boom for Brazil there was no Boogeyman. Almost everything you did was positive. That didn´t mean that there were no issues or negatives to consider, its just that the growth cycle far outweighed these factors temporarily.

 

Brazil Economic Crises

The world suffered an economic crisis in 2008-2009. For Brazil that crises only really arrived in 2013 as cheap credit became available, and local consumption was still huge on the back of that boom cycle.  In 2014 the government built or reformed 12 stadiums for the World Cup with 8 now practically abandoned. Then Brazil had the Olympics in 2016 with the Olympic village and Olympic stadiums all practically abandoned now also. A very wise Brazilian politician used to say ´´steal but at least build´´. And both of these events ended up triggering an economic crisis in Brazil that is still raging into and post COVID.

 

The Boogeyman Factors for Brazil

1-Portuguese

For a lot of foreigners, the expectation to have to communicate in Portuguese can be daunting. However, most companies now have English as a requirement to know or for work. There is still a small gap in technical terms or in the depth of the topic that can lead to misunderstandings.

2-Bureaucracy

Brazil has improved significantly in this respect. If we had to estimate lets say that up to early 2000s it was 8/10 bad. Mid 2010 to 2018 7/10 bad. But its now about 6/10 compared lets say to a USA at 3/10. The trick here is always to understand the right sequence in which to do things. And in real terms what is necessary to do first. We believe you need to get to the marketplace first then structure back from there.

3-Latin America Corruption

Corruption across LATAM is still an issue. In business dealings you need to protect your interests and investment. A lot of companies arrive paying well in Dollars to leave 3-5 years later with no returns and a big labor liability bill to pay. So lets say that on a personal level people are very friendly but ethically you will still find that number 1 comes first then doing the right thing. A lot of the time in Brazil corruption means on a personal level people not being transparent or passing incorrect information. Right down to a Curriculum Vitae that if you read you will be convinced they are the next Elon Musk.

Speaking of which we recently did some work on the Tesla name. Tesla.com.br was bought as a domain in Brazil in 2017. By a IT company that used to be called by another name. They shut down the previous IT company and name and now operate under the Tesla Communications and Technology name. If you buy a famous domain and that company decides to setup in your country. You will be forced to sell the domain to that company that operates notoriously under that name. But if your business is also called that name. Well, now we are talking another situation in order for you to setup in Brazil under your notorious company name and use the local domain.  Whereas to buy a domain in a forced sale might be US$1000. To now buy the rights back to use the Tesla name in Brazil and especially as they are both ´´technology´´ companies is going to probably cost millions of dollars. Please note we are not saying this company has done anything wrong. We are just saying that the Tesla name is now not available in Brazil to Elon Musk without a significant investment. 

4-Dollar exchange Rate

A lot of companies invest during the boom cycles or when the economy of that country is doing well with significant demand already happening. The problem with that is you are buying at the high Dollar exchange rate. When one of our partners´s Alex arrived in Brazil the rate was RS$2.50 to the US$1. Its currently at about R$5,50 to US$1. Any sell off or dividends or company profit distribution will be affected massively cashing out now. Especially on the back end of the economic crises. So, we recommend buying in when the rate is favorable to the Dollar investment. Which is now.

 

 In Brief

AA Risk was setup to take this Boogeyman fear away from looking at or doing business in Brazil. Come talk to us. We look forward to taking you to the market.

Ah, you are waiting for the Embassy and that lawyer to get back to you first? AA Risk believes that Google talks and Market Research reports walk. And we have excellent legal partners to cover you for any eventuality. Come and talk to us.