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Brazil is one of the world’s emerging economic superpowers. Amongst the world’s ten largest economies, it is growing in influence and presenting diverse opportunities, including for New Zealand businesses.
In June, the Ministry of Foreign Affairs and Trade (MFAT), New Zealand Trade and Enterprise (NZTE) and the Latin America-New Zealand Business Council brought together Kiwi businesses already operating in Brazil and others interested in moving into the market in the next few years. Their discussion revolved around “doing business in Brazil” – especially the opportunities that exist and the challenges that must be overcome.
New Zealand’s Ambassador to Brazil, Mark Trainor, explains that Brazil is a trillion dollar economy. “There is a huge domestic market. The economy is diversified and has a number of highly sophisticated sectors.
“The opportunity in Brazil is to transfer the competencies that New Zealand has and work with a southern hemisphere country which has enormous productive capacity, and has something like 14 percent of the world’s fresh water reserves. What’s more, Brazil is a large country, with enormous amounts of currently unused or underused land.
“Putting all those things together, I think it does make quite a compelling proposition for investment,” Mark Trainor says.
The New Zealand Government’s investment promotion work in Brazil is led by NZTE. Jessica Acherboim, NZTE’s Regional Manager for Brazil, says because distance and import taxes make trade in goods a challenging proposition, investment is often the most effective way for New Zealand companies to access the Brazilian market.
There are five major reasons to invest in Brazil, Jessica Acherboim says: its strategic location, the sustained growth it has enjoyed (outside of the brief, shallow recession sparked by the global economic crisis), technology and innovation opportunities; the natural resources available; and governmental priorities that make it an attractive investment environment.
Craig Bell, who has invested in Leite Verde, a New Zealand-style pastoral production farm in Brazil, describes the country as “New Zealand thirty years ago but on a continental scale”. Just as many investment opportunities were created by the deregulation of the New Zealand economy in the 1980s, Brazil is more or less going through the same process now, Bell says. “It’s just that there’s 30 times the scope to do things in Brazil than there was in New Zealand at the time. So, there are wonderful opportunities.”
He says Leite Verde produces forty times more milk per hectare than the average Brazilian dairy farm. The same competitive advantage applies in downstream processing of dairy products of meat products. “I think New Zealand has got some competencies in those areas that Brazilians are still trying to catch up with.”
Christchurch-based Tait Communications sells high-tech radio equipment in Brazil. Tait’s Business Development Manager for South America, Hamish Wiig, says gathering market intelligence is crucial in a competitive market. “We have to face some extremely fierce competition from multinationals with a lot more resource than we do,” Hamish Wiig says. “So we have to be nimble, we have to be flexible. We have to try things.”
New Zealanders doing business in Brazil must also be conscious of linguistic and cultural differences, Jessica Acherboim says. “Brazilians are very friendly and warm people and we need to approach them informally even in a business context – whereas, the Anglo Saxon cultures tend to go straight to the point. Communication skills are very important.”
Stephen O’Sullivan, a New Zealand lawyer who has worked in Brazil since the mid-1990s, says New Zealand companies tend to be very dynamic and entrepreneurial and are able to adapt to situations relatively quickly. Being well informed and well advised is important from the outset.
Part of being well informed is having the right local partner or advisor. Hamish Wiig explains one of the key challenges for Tait Communications was finding the right representative in Brazil - someone with a strong reputation, a lot of experience in the marketplace, and a strong company brand. “They were critical in helping us to get a foot in the door, getting a reference in the market if you like, and then growing from there.”
Fisher & Paykel Healthcare’s International Sales Manager, David Milburn, says it took years for the company to really crack the Brazilian market. Its Brazilian operation only really took off after it opened an office in Sao Paulo. “That’s enabled us to grow our business in the past four years considerably.”
Stephen O’Sullivan says it often makes sense to set up a company in Brazil. “The thrust of the tax legislation and the regulatory requirements taken together seem to direct foreign companies towards setting up something in Brazil simply because that is the more efficient structure. That will require you to have someone resident in Brazil who is going to be literally managing that business. It cannot be done remotely.
“Compared to doing business in New Zealand, Brazil is more complex. It’s really that you have to know what the challenges are. Then you are reasonably well placed to deal with them and to develop a business in a way which complies with the regulatory regime.”
Craig Bell says setting up a dairy farm requires a number of different permits from state bodies. “You’ve got to be tapped into the networks and you’ve got to really manage that process really well. So, be prepared to put a lot more resources into the compliance/permits side of your business.”
“The investment coming into Brazil has also been extremely healthy,” Stephen O’Sullivan says. He believes the Brazilian economy has responded relatively well to the global economic crisis. “The domestic economy is one of the major buffers to a more deep recession because internal consumption seems to remain rather healthy.”
Assistance and advice is available to New Zealand businesses thinking about moving into Brazil through MFAT and NZTE. There is a New Zealand Embassy in Brasilia led by Ambassador Mark Trainor and a Consulate-General in Sao Paulo, where the NZTE office is led by Jessica Acherboim.
“NZTE Sao Paulo can help assist and support your company to enter this challenging market with less risks and seeking to optimise your profits,” Jessica Acherboim says. “In this work, we can also help you in identifying the best partner because it is easier for us, as Brazilians, to identify who is who.”
Mark Trainor says the New Zealand Government in Brazil is working to increase understanding of the opportunities in Brazil and the way in which we, in New Zealand, need to approach the Brazilian market in a careful, well prepared way, so that companies can secure valuable gains out of this market.
The views expressed in this article, and the accompanying video clips, are those of the individuals quoted, not the Ministry of Foreign Affairs and Trade.
For more information on assistance available to New Zealand businesses interested in Brazil, please contact Jessica Acherboim on Jessica.Acherboim@nzte.govt.nz. Ambassador Mark Trainor can be contacted at Mark.Trainor@mfat.govt.nz.
MFAT and NZTE are supporting a Latin America-New Zealand Business Council-organised “Brazil Business Forum”, being held in Auckland, Christchurch and Wellington from 17-19 November. Brochures about these events are available in PDF format:
