Investing in Brazil: Finding the Right Local Partner

Due to the shrinking trend of orders from Europe and the United States, emerging markets in South America have become the focus of Chinese export and foreign trade companies in recent years. Founded in 1976, the Brazilian Intelbras company with a history of more than 30 years is the largest manufacturer of communication products in South America and the largest manufacturer of telephones and telephone exchanges in Brazil. Its chief representative in China, Mr. Mateus Conde de F. Cima, introduced the development status of the South American market to the entrepreneurs present at the Shenzhen Station of the "Smart & Win Future Export Forum".

Meteus Conde de F.Cima: The development prospects of the Brazilian market are very good, this is because there are two relatively large events, we all know the 2014 World Cup and the 2016 Olympic Games. In addition, the problem facing our country is that inflation and interest rates are relatively high, and I know this is the same problem that China faces.

Another point is that our manufacturing industry is a relatively struggling industry. In the past two years, it has been in a period of recovery after a recession. One reason is that it is not competitive, because our tax burden is relatively high. Manufacturing has incentives to encourage employment in the local market. We believe that our retail industry, financial services, communications and trade industries will have relatively good development next year.

Let's take a look at the current performance of the Brazilian currency. Now the Brazilian currency is in a relatively turbulent stage. During the past period, the real has depreciated against the US dollar by 14% in the past year and 33% in the past 24 months. The same is true for the renminbi, which has depreciated by 15% in the past year, 27% in the past 24 months, and will be higher now. That is to say, the devaluation of currency is very important for the company's operation. We can't rely on the Brazilian currency to do our business. It is understandable that if the same thing is ten yuan RMB, the cost we pay now is more than two yuan. It was more than 20% higher a month ago, so the direct cost will increase by more than 25%, which will lead to an increase in the overall cost.

Now China and Brazil are the largest trading partners, both in terms of imports and exports. The trade volume reached US$34 billion in 2012. Brazil's exports to China increased by 85% in the first six months of this year. China is now the main Buy basic raw materials and food products from Brazil.

The Brazilian economy currently ranks seventh and is expected to become the fifth largest economy in the world by 2020. One Now let's look at Brazil's taxation and control. Brazil is a relatively protectionist country. China is also a bit protectionist, but China is mainly in strategic industries, and Brazil is in manufacturing, so the import tax rate has been rising. , Brazil encourages the local manufacturing market, hopes to reduce the unemployment rate, and encourages the establishment of local R&D institutions.

The tax system in Brazil is very complicated, so we would not recommend that you invest directly in Brazil. It is better to use a partner. Because of the complexity of the tax system, many companies are unsuccessful in Brazil. But there are also many successful companies. Large companies like Huawei employ local teams in Brazil. This is a model of success, but there are not many such successes.

The second half introduces what's happening in Brazil right now, trends and challenges. First of all, Brazilians are now very indebted. Coupled with high tax rates and high inflation, the debt situation is getting worse. Another big problem is inflation and outdated logistics infrastructure. Brazilians are aware of this problem, but they have not been able to solve it, unlike China with such a strong government that can solve this problem. There is also a serious problem of bureaucratic corruption. We just arrested a party leader there a few weeks ago, which I personally think is a good thing to take some action against corruption. There is also a high degree of protectionism.

Now let's take a look at a previous magazine, The Economist. The picture in the upper right corner is the cover picture in 2009. At that time, the world had a lot of expectations for Brazil, because we had the World Cup and the Olympics. The title says "Brazil is about to set sail." The world has a lot of expectations for it. It was originally expected that the growth of GDP would reach 3% last year, but it turned out to be 1%. This year, our GDP is expected to be 3%-4%. % cannot be reached. The Economist's September headline changed to "Did Brazil screw it up?" because we had so many expectations for Brazil, so many opportunities we seemed to miss, and now our taxes It is also the heaviest country in the world, with government debt accounting for 60%-70% of GDP. Although we are the third largest food exporter in the world, many of our exports are raw materials and no value-added products. What I just said is mainly to emphasize the opportunities we face, the expectations of the world for me, and our own expectations. It does not mean that these opportunities are not important, but that it is not so fast to realize these opportunities and realize these expectations. We need to carefully consider how we should Do. Another point is that we are the most taxed country in the world.

I will briefly summarize what I have said before. If you want to invest in Brazil, you must first find a very strong local partner. They have experience, they understand the local culture, local language and our bureaucracy; the other is to have business The regional coverage plan, because Brazil is still very large; and Brazil's tax system is relatively complex, if you do not understand the market, do not invest lightly; and investment must be long-term, not too short-sighted; I have listed "relationships" here, The relationship is very important. The relationship here is different from the relationship in China. It is the relationship in Brazil, but it is also very important. There are also products. The products are high-quality, good-looking and reasonably priced.