DEFINING A BRAZIL ENTRY STRATEGY
In general, the market opportunities for oil/offshore/maritime related goods and services are excellent in Brazil as it will be perceived throught this report. Market and regulatory issues specific to Brazil often dictate a different strategic angle than what would seem obvious in other markets.
Business set-up
The ideal business setup will of course vary, and a thorough pre-entry analysis is
indispensable.
Such research should be adapted in line with the main available setup options:
1. Serving the Brazilian market from home country
2. Selling through a Brazilian agent/representative
3. Establishing a Brazilian entity
a) Establishing a fully owned subsidiary
b) Establishing a joint venture with a Brazilian company
c) Acquiring an existing Brazilian company
1. Serving the Brazilian Market from Headquarters – Home country
It is possible to serve the Brazilian market from overseas but in practice, it is very
difficult to successfully develop sales in Brazil without a continuous physical presence.
Even frequent visits to Brazil will generally not be sufficient to pick up opportunities,
keep, maintain and build relations with customers, or handle the necessary on-the-ground coordination.
In addition, invoicing from outside of Brazil generally adds up to 25% in extra taxes . Furthermore, the main purchaser in the Brazilian market, Petrobras, demands that all its certified suppliers for supplies to Brazil also must have a legal representative in Brazil.
2. Selling through a Brazilian Agent/Representative
A number of foreign valve companies commercialize their products (and in some cases also services) through a Brazilian agent or representative. This can work out well for suppliers that manage to become an important part of the portfolio of a focused and efficient agent.
Advantages:
Lower investment costs
The agent already has an established industry network, can follow up on opportunities and is familiar with Brazilian regulations, requirements and business practices.
Disadvantages:
Many agents carry a (too) high number of representations, and principles limiting the attention they are able to give to your products/services.
Coordination and reporting issues.
Invoicing from outside of Brazil generally adds at least 25% in extra taxes
3. Establishing an Entity in Brazil
Establishing own operations in Brazil is increasingly becoming a business necessity, for various reasons:
A continuous presence is necessary to maintain and develop client elationships.
An agent might not be able to give enough attention to your company.
Increased political pressure for local content (a part of the product must be produced in Brazil) makes it an advantage, and in some cases a requirement, for foreign suppliers to have production or assembly functions in Brazil.
Invoicing from Brazil saves at least 25% in taxes levied on invoices from abroad.
In order to qualify most goods/services for the Petrobras Master Vendor List, a legally established local presence is necessary and in some cases a requirement.
The main establishment options are:
a) Establishing a fully owned subsidiary (most common)
b) Establishing a joint venture with a Brazilian company
c) Acquiring an existing Brazilian company.
Options b) and c) may pose additional sets of challenges, and should always be based on a solid due diligence process. The increased attention needed for coordination and control should not be underestimated. Because of the managerial and cultural challenges involved, it is necessary to put in place specialized transition management until operations and procedures are aligned.
Foreign companies are often offered to buy an existing, sleeping company in order to get started more quickly. However, the bureaucracy around necessary alterations of bylaws and registrations generally makes this just as time consuming and costly as starting a new company from scratch. In practice, this normally saves neither time nor money, and can add potential risks.
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