Doing Business Brazil 2017

Brazilian scenario is extremely simple. It is the worst recession of the history of Brazil. The GDP Growth was -3.8% in 2015 and -3.6% in 2016, and the GDP growth for 2017 is now estimated around 0.5%. The country has more than 13 million unemployed (data from February), the real number is much bigger. So, nowadays, it is a challenge doing business in Brazil.

The good news is that maybe we are at the turning point and some market niches are starting to show some reaction, as usual, independent of government policies or politics.

Unemployment should not diminish or revert the trend at short term because consumption is still in very low. Consumers and business owners are with a very low confidence, regarding short term scenarios related with politics and economics.

It is amazing what the labor party did, in around 13 years, with the Brazilian economy and the country's image. It will take decades to recover the damage made by corruption and incompetence in public administration and finances.

The good news is that Brazil will never, ever, will go the path of Venezuela. Brazilian people are waking up and seeing the fake discourses of populism, coupled with strong actions of justice which are, with international cooperation from United States and Switzerland justice departments, recuperating billions of dollars stolen from this country, as well arresting politicians, CEOs, lobbyists and everyone implicated with corruption.

It will not solve the problem, as it didn’t in Italy, but surely it will make a better place to live and develop business.

Despite the grey scenario, Brazil is a large country with a large economy that cannot be ignored, coupled that the older people, around fifty and sixty, had already passed through hyperinflation, half dozen economic plans and changes of currency, other impeachment, and so on, which make them extremely resilient and with an amazing capacity of reaction. They only need to see a minimum possibility of stability and future that they will make the turn around and develop, again, their business and create jobs.

There are some challenges that should be solved before we go to the next stage of recovery, which will take another decade to restore the levels of 2004 or 2006.

Education, healthcare and infrastructure are in a chaos that must have the focus and solutions, in next years.

Public finances from States are broken, so they will not have the possibility of investment in basic services, they will need to develop public and private partnerships. It is an opportunity.

Bank interest rate is one of the biggest worldwide which makes impossible to people to pay their debts. That need to changes, some kind of business, like bitcoin, associations, cooperatives, bank of people, and so on, need to break the cartel and domination of half a dozen of institutions that, locally, define the rules of the game. International competition, new players need to come here the change banking environment. The interest of credit cards is around 480% per year. It is a legal assault. So, it is an opportunity to new players, virtual banks, and so on.

Public healthcare is at chaos, new systems of healthcare will have good opportunities in the next years.

There are thousands of excellent professionals related with technology that are unemployed, business models that could use them for offshore services or projects abroad maybe a good opportunity.

Brazil is a strong producer of commodities, commerce and industrial plants to process and create value added products maybe another opportunity. As States and Municipalities are broken they will offer especial conditions to businesses that will develop their operation in the region. It is another possible opportunity.

Business environment, taxes and rules of employment are extremely complex in Brazil, which are one of the reasons of facilitation for corruption. A set of projects are in the congress to change and simplify those matters, and they probably will be approved this year. It is the focus of the current government and maybe the only one.

In 2018, there will be elections for president and state governors, which means that any scenario or investment need to be focused or forecasted for after 2018.

Last observation, Brazil is an amazing country, nice people, nice environment, but with hard business environment. Don’t confuse the nice welcome with the effectiveness of business. There are local manners, behaviors, cultural aspects that need to be known. Choose wisely your local partner, associated, counselor, lawyer. Take the needed time, it will define your success.

Doing business locally is very different from developing business in USA or Europe, despite that others say that it isn’t. Brazilian people are extremely friendly but businesses, here, are developed more by personal interaction and trust than by pragmatic approach as it is, for example, in Germany or USA.

Despite the unfortunate days that the country is passing through, it is a great country with many competent and honest people that you need to find and met, with a lot of opportunities, not for tomorrow but to the day after, which means to say that investing in a foreign country needed to be thought as medium and long term, anything less than 5 or 10 years, it is not for here!

by Mario Luis Tavares Ferreira