Business Environment in Brazil - Essay Example

? Going Abroad: BRAZIL Brazil is an amazing place to do business, but there is a lot to learn about it. It is a very different country than the United States, with a different way of doing things and a different culture. The country has a long history of independence but was formerly a Portuguese colony. There are many things to learn and think about before arriving in the country. Among the most important of these are the economic and political context. Brazil is a fast-growing country in the midst of major reforms. A lot is changing quickly. But there is more to Brazil than its economy and politics. Brazil's culture must be properly understood. Non-verbal communication cues and the daily lives of Brazilians are important considerations when starting up a business in the country. Religious and educational issues are important to take into account. Before going to Brazil it is vital to learn about the social, political, economic, and cultural context in order to maximize returns. Going abroad is always a challenge. It is especially difficult if you have the goal of starting a business or bringing a business opportunity to a foreign country and you will be required to stay they for some time. The culture is different, the people expect different things, and you must deal with your own reservations and culture shock. Doing all of this in Brazil would be a challenging exercise. Brazil is not the most difficult country in the world, but it does pose a number of problems for an American seeking to open a logging subsidiary. In this course of this essay, some of Brazil's unique political, cultural, social, and economic factors will be explored. Brazil is a country on the move. Everyone agrees that one of the great accomplishments of globalization is the development a number of second tier, successful economies. These are often called BRIC countries—Brazil, Russia, India, and China—and Brazil is clearly a charter member. It has experienced major changes in the last few years. It is true that while China and India have been talked about a lot in economic circles in the last few years, Brazil has been somewhat under the radar. This is unfortunate because Brazil has a very dynamic economy and it is very quickly increasing in importance. This is important to know if you intend to open a business in Brazil. For the purposes of this assignment, I am intending to open a logging business in Brazil. I will need to present a lot of information about the Brazilian economy and the logging industry in order to feel that my investment in Brazil will be profitable and sustainable. I will also need to know a lot about the people of Brazil and how to interact with them. Their culture and language is very different. It is vital to understand these differences if I hope to be successful. To begin with, Brazil is by far the largest country in South America, both in geographical size and in population. It is nearly half of all of South America, with very diverse physical characteristics, and a population of nearly 200 million (Page, 1995). It is a democracy, but it is a young democracy, with institutions that are still developing and are still slightly vulnerable. Recent elections have been fair and peaceful. The main language in Brazil is Portuguese (not Spanish) and there are colonial ties to Portugal. The population is very diverse, with native people mixed with African people, mixed with European peoples. The main religion is Catholicism. The political system is similar to that in the United States. The President is elected and is head of government and head of state and appoints his cabinet. The current President is Dilma Rousseff, the first woman (Sanchez, 2010). She is a leftist, but she is also friendly to business. Her predecessor oversaw a great deal of economic growth in the new millennium while also adding more labour and environmental protections. Brazil is open for business and is happy to accept foreign investors. Legal system To begin with, the legal system in Brazil is based on civil law. It is different than in America. This system is not the most efficient and this is an important factor to take into account when opening a business in Brazil. It can take years to resolve suits and enforce contracts. The tax system can also be difficult to navigate and find one's way around in. According to a study it usually takes the typical Brazilian company around 2,600 hours each year to comply with the tax rules (Economist, 2009). This is a big disincentive to investing money in Brazil. It will be hard and unpleasant to work within this regime. It will be necessary to have to spend extra money to find good accountants and lawyers to help out. However, it is likely that reform is just around the corner. Politics and Economics Even if it is getting easier, starting a business in Brazil can be hard. One recent report by the World Bank, has this to say about the differences between different Brazilian cities: The report said complying with business regulations is easiest in Brasilia, followed by Manaus, while the city of Fortaleza was "most onerous" in following such regulations. In another category, the report said Sao Paulo ranked first in Brazil for the ease of enforcing a contract, requiring about 18 months.  In contrast, enforcing a contract takes more than four years in the city of Campo Grande, according to the report. The report also studied how the Brazilian cities compare with other cities globally on the ease of starting a business.  Belo Horizonte is the Brazilian city with the fastest time to start a business, ranking 30th worldwide in this category, the report said (Green, 2006). It is obvious that there is a lot of variation and inconsistency in each part of Brazil. It will be vital to base a business in a part of the country with a good business climate. There I can expect to get a quick reply to requests for property registration and various licenses. I will also be able to have contracts properly enforced. Part of a successful strategy will be to do a lot of research to find out what city is best for business and has the speediest resolution standards: that’s the one I intend to set up shop in. Because Brazil is the home to the Amazon and a great deal of other forests, the logging industry is extremely important to the country. Brazilians passionately love the Amazon and it will be vital for my logging country to respect their feelings and do business in a sustainable and environmentally friendly way. Environmentalism is increasingly important in Brazil. In the recent words of their former President: Brazil’s ethanol and biodiesel programmes are a benchmark for alternative and renewable fuel sources. Partnerships are being established with developing countries seeking to follow Brazil’s achievements—a 675m-tonne reduction of greenhouse-gas emissions, a million new jobs and a drastic reduction in dependence on imported fossil fuels coming from a dangerously small number of producer countries. All of this has been accomplished without compromising food security, which, on the contrary, has benefited from rising agricultural output (Lula da Silva, 2008). Indeed, almost eighty percent of Brazil’s energy needs are met with renewable energy. This emphasis and culture of environmentalism will be an important one to respect. I don’t want to be seen as the ugly foreigner whose mills and trucks are polluting beautiful Brazil. Indeed, as a foreigner I may be held to an even higher standard. It will be important to live up to this. A further important consideration is how Brazil is weathering the current global economic crisis. This might not be the best time to invest in developing countries: many of their institutions are not as robust as those in the United States or United Kingdom and may be even more vulnerable to crisis. At first it appeared Brazil would not be badly affected by the crisis and President Lula seemed to suggest it would not reach Brazil’s border. However, this past October problems began to occur. By November 2008, The Economist newspaper was reporting that: Figures from the central bank show that credit lines to finance trade, normally considered low-risk, are running at about half the level of mid-September. There are reports that farmers are finding it hard to find credit to buy fertilisers and pesticides, which could affect next year’s harvest. Furthermore, consumer credit is becoming scarcer as banks anticipate a rise in bad loans. The monthly payments demanded for everything from cars to football boots are rising. The government is no longer saying that Brazil will be untouched by the rich world’s recession (Economist, 2008). Since then things have gotten better, but in a country with a mediocre business climate, these new economic problems may be enough to turn me off completely from moving my logging business to Brazil. I will have to continue to closely monitor the situation via the Internet and pay attention to how Brazil continues to deal with the crisis before making up mind. There are many more factors to consider when starting a business in Brazil. There are a number of cultural and social issues I will need to think about long and hard. Non-Verbal Communication One is non-verbal communication. So much of what we do and say is not communicate through words. If I miss out on this, I will have a hard time adjusting to Brazil. It is importnat to understand that Brazilians talk very closely to one another. If a person backs away, that is considered rude. They stand close to each other to indicate friendship. They are often very physical, hugging and kissing one another. Men kiss women on one cheek when they greet each other. These are important cues which I will need to understand. A lot of these issues also play out in the social structure (Victor, 1999). Brazil is one of the most unequal countries in the world. There is a huge gap between rich and poor. When talking to a rich or powerful person, it is important not to look them in the eyes (unless you are equals). The same stands for young people talking to older ones. These are non-verbal forms of behaviour that helps to facilitate communication. Daily Life and Social Structure Daily life in Brazil is interesting. People are colourful and friendly (Page, 1995). Families are important. People greet each other passionately in the street. Recreation is important. Soccer is the main sport and everyone loves it. It is important to participate in these aspects of the culture. Religion also plays a key role in daily life. Most Brazilians are Catholics and they go to church a lot. Saints are an important part of daily life as are the church's teachings. They should be respected. South America has a history of being dominated by outside forces—in particular the Spanish and Portuguese—and they also have a religious history of being strongly influenced by the Catholic Church, which was in itself rigidly hierarchical (Page, 1995). They were often told how to behave and what to do, and had little chance to express themselves individually through the political process. Authority and faith in the strongman are an important if unfortunate aspect of South American culture. Many Brazilians live in a rigid hierarchical society and are generally collectivistic (Victor, 1999). They can, however, be very individualistic outside of their work time. They enjoy leisure and it is important to find time for work as well as for family. When it comes to problem solving, many Brazilians are often seen as emotional and individualistic, even sometimes a little bit irrational. They tend to look at the world in a more intuitive manner. There is a reason, for example, that the tango was invented in South America: it is a very emotional, irrational, and intuitive dance. Brazilians are also considered to be quite an informal people (Munck, 2000). They don’t like doing a lot of complex paper work and certification, and it is clear to anyone who has ever gone to Carnivale in Rio that they know how to party! Men and Women Men and women have different roles. Gender equity is several years behind the United States. Men are often in charge and women more subservient. Women are expected to be feminine and wear make-up. Aside from the above cultural characteristics something else that is quite representative is machismo or a type of stylized and assertive masculinity. Brazilians are definitely a machismo and assertive bunch. Women get less respect (although this is changing) (Cormier). Throughout the continent, men have a lot of the power and have elaborate ways of styling themselves and of demanding respect from society. There are complex rituals in the old-boy networks. Young men drive around in scooter gangs and have various catcalls with significance to other young men. This is however changing as Dilma Rousseff has just been elected as the first female president of Brazil. Education Education is important to the Brazilian business elite and many have attended good schools abroad (Victor, 1999). However, primary education is limited with only around half of Brazilian children attending school. It is not held in the same esteem as it is in the United States for the average person. Business custom Business customs are somewhat similar. It is important to speak Portuguese. It is also important to understand that much business is done through family connections. Nepotism is not seen in a negative light (Victor, 1999). Because of the importance of family it can be very useful to find out about family networks and see if there is a way to make connections in this manner. Food Brazilians love food and love to eat. Much of the food will be somewhat familiar. But the traditional food involving beans and corn may be a bit different (Mothershead, 1982). Overall this will not be a major source of culture shock. Mass communication Newspapers and internet connections are present throughout Brazil. Television is popular. The press is free. There is no big difference with the United States in terms of mass communication. Healthcare Healthcare in the cities of Brazil is reasonable. Because Brazil is a large country there are remote places where access to healthcare may be limited (Page, 1995). It is important to be properly insured in advance. Exercise a lot and eat properly. Attitude to Foreigners Brazilians are generally friendly people, but they may harbour some anti-American views. They are a former colony of Portugal. Due to their increasing economic clout they may harbour some negative views of foreigners, but this should be a big problem. Action Plan The biggest problems will involve language and non-verbal communication. I need an action plan. My action plan will involve practising how to use non-verbal communication like a Brazilian. I will also work hard to study the language of Portuguese every day for one hour in advance of my trip there. Although I may not be fluent, Brazilians will probably appreciate that I have made the effort. It is important to set goals and understand that even though these goals may be unachievable, they are important to pursue. I will also practice standing close to people when speaking to them in order to simulate Brazilian non-verbal communication. Conclusion Brazil is a tempting but somewhat difficult country to bring a business to. It has lots of permanent pluses and several temporary minuses. It is a huge market which is developing quickly and is becoming very dynamic, but it still have a lot of the way to go. It is a country with loads of potential, but potential which will probably be better explored about five years from now. Nevertheless, it is important that I fully understand the social, political, cultural, and economic background of amazing country before I set foot in it. It is not possible to simply land at an airport and begin to do business. A successful business enterprise abroad begins with a lot of research into the country itself. Understanding the people and how they live and interact is a key to success. What motivates them? What do they dream of doing? How do they communicate? Without understanding this context any business in Brazil is bound to fail. Works consulted Barzilai, Gad. (2003). Communities and Law: Politics and Cultures of Legal Identities University of Michigan Press. Cormier, Bill. (2007, January 31). “Move over, Machismo: Women take over defense posts in South America.” Chicago Sun-Times.. http://www.highbeam.com/doc/1P2-3715581.html The Economist. (2009, January 8). “Lula’s Last Lap.” http://www.economist.com/world/americas/displaystory.cfm?story_id=12891019&CFID=40887215&CFTOKEN=40130005 The Economist. “The Credit Crisis Reaches Brazil Inc.” November 6, 2008. http://www.economist.com/world/americas/displaystory.cfm?story_id=12562273 Green, Eric. (2006, July 31) “Brazil Reforming Business Climate.” America.gov. http://www.america.gov/st/washfile-english/2006/July/200607311718471xeneerg0.3501093.html Lula da Silva, Luiz Inacio. (2008, November 8). “Putting the B in BRIC.” The Economist. http://www.economist.com/theworldin/displaystory.cfm?story_id=12494572 Munck, Ronaldo and Anny Brooksbank Jones. (2000). Cultural Politics in Latin America. London: Macmillan. Mothershead, A. B. (1982). Dining customs around the world. Garret Park, MD: Garret Park Press. Page, Joseph A. (1995). The Brazilians. Reading, MA: Addison-Wesley. Sanchez, Marcela. (2010, Jan. 5). “The End of Lula's Era.” Latin American Herald Tribune. http://www.laht.com/article.asp?ArticleId=382908&CategoryId=14090 Victor, David A. (1999). “Doing Business In Brazil.” Encyclopedia of Business, 2nd ed. http://www.referenceforbusiness.com/encyclopedia/Assem-Braz/Brazil-Doing-Business-in.html#ixzz1ACQt4I5c Read More