Brasil beckons for agile Kiwi companies
An emerging middle class, the aviation and high tech industries present opportunities for New Zealand companies who want to expand.
Wednesday, October 19 2011 || Comment || BY Linda (Jing) Chen, Sharlene-Tapa Mosen, Jovana Marinovic, Graham Ramsey
This makes the Samba, the traditional light-footed Brasilian dance, a fitting metaphor, a group of Massey University MBA students discovered during a recent visit to Sao Paulo and Rio de Janeiro.
Brasil is the powerhouse of the South American economy, and a member of the BRIC nations (Brasil, Russia, India, and China). It has a number of advantages over the other BRIC countries, and is regarded by some as being the “best” of the BRIC nations. It is a democracy, in a politically stable region and not beset with concerns of insurgents, ethnic or religious conflicts. It has had consistent government and monetary policy settings for the past two decades, has a diverse range of exports and has been implementing positive social reform. So successful has Brasil’s economic development been that since 2004, an extraordinary 36 million residents have exited the lowest rungs of socio-economic ladder and entered the middle classes, representing a huge increase in the demand for goods and services.
Like New Zealand, Brasil is a significant agricultural exporter. It is the world’s largest exporter of beef, poultry, coffee, sugar, orange juice, alcohol and tobacco, despite having much arable land left underdeveloped, and even allowing for land set aside to preserve the Amazon rainforest.
As with many other emerging countries, Brasil has targeted high value science and technology industries, a strategy which, at least in Brasil’s instance, has been highly effective. With an advanced technology-driven aerospace industry, Brasil is recognised as a leader in large aircraft manufacturing technology, comparable with US' Boeing and Airbus France. Other industries, including communications, nuclear power, semiconductor, software and pharmaceuticals, are progressing rapidly - some are already industry leaders. Having overcome technological barriers, Brasil is positioned to access an estimated 6.5 billion barrels of oil in deep water ocean oil fields. Such is their expertise in the field of offshore drilling Brasilian oil company Petrobas recently began oil exploration off New Zealand’s east coast.
Brasil’s national competitiveness is derived from its abundant natural resources, advanced technology, low dependence on foreign trade, low levels of foreign and domestic debt, sufficient foreign exchange reserves, plentiful food and a move towards a fair society. In this context, the international community awarded Brasil the rights to hold the 2014 Football World Cup and the 2016 Olympic Games.
New Zealand companies considering doing business in Brasil must take care to understand the culture. Portuguese is the official language, although most senior managers speak English. The Brasilian people are warm and welcoming and this is also evident in the way in which Brasilians undertake business. The approach is based on relationships and is one of the most important elements in Brazilian business culture. Nurturing close personal relationships and building trust is significantly important and increases the chances of successfully doing business in Brasil. Of note is the strong importance placed on family relations in Brasil, a number of family members may be found working for the same company.
Diversity is a synonym for Brasil, and accurately describes the Brazilian business arena. Often it seems as if there are two countries in one: one that is the seventh largest economy in the world and another that struggles to get basic life necessities. The outlook of the locals of Rio and Sao Paulo is poles apart, with the locals of Rio de Janeiro emphasising fun over work and the residents of Sao Paulo vice versa. For those who enjoy both working and playing hard, spending your weekends in Rio de Janeiro and weeks in Sao Paulo would give the best of both worlds. For the more business focused, establish your base of operations as close to your target customers as possible, this is a large country filled with large cities and travelling can be time consuming.
There are a number of practical considerations for New Zealand businesses looking to do business in Brasil. It can take six months or more to incorporate a company. Taxation is extremely complicated with considerable differences between states making the entire system horrendous and requiring prospective businesses to seek expert advice. Additionally, delays in clearing goods through port customs can be a problem for companies seeking to export to Brasil.
There are currently no direct flights between New Zealand and Brasil; connecting flights are typically via Santiago or Buenos Aires in Argentina. Rumours that Air New Zealand intends to offer direct flights into Sao Paulo, creating a direct link between Australasia (some would include Asia) and Brazil, will remain just that until after the arrival of the much delayed 787 Dreamliner in 2014.
While these factors may put off some New Zealand businesses, the scale of the opportunities in Brasil, with its population of 190 million, is immense. The emerging middle class, with their new found wealth, have many unmet demands. Similarly, the growth and development of business creates opportunity for the input of intellectual capital and the supply of goods and services.
In summary, some of the must haves for doing business in Brasil are: flexibility, adaptability, and patience. Not much different than doing business somewhere else some may say, but in the Brasilian way this means adding a samba beat to everyday life. That little bit of unknown and uncertainty may be the reason why this country is constantly on their tip toes in the last decade making others wonder what their hidden recipe is.
Linda (Jing) Chen, Sharlene - Tapa Mosen, Jovana Marinovic & Graham Ramsey are currently completing their Executive MBA through Massey University and recently returned from an overseas study tour to Brasil.
