Arguably the new government of Michel Temer may be no more acceptable. Fewer than ten per cent of Brazilians say they trust him, his cabinet appointments have been misogynistic and the appointment of creationist evangelicals to key posts is raising eyebrows. But for Brazilian companies, and for 99 per cent of the population, it’s very much business as usual.
Ive just returned from meetings with several recent startups in Brazil and can vouch for the continuing high level of enthusiastic confidence and am confident that such firms will achieve great economic success. Nobody is fazed by the political situation ? even if so many other untrustworthy politicians remain in office, Dilmas departure is seen as a first and big step towards improving the country.
Its true that the economy has nose-dived in the last year, but this is more down to the depressed mining sector that has become increasingly reliant on the Chinese market, which has largely dried up. The spark that came with the discovery of huge oil reserves under the sea off Rio has dampened more due to the fall in oil prices than the “car wash” corruption scandal at Petrobras.
Unfortunately, the scandals have further discouraged foreign direct investment and business expansion in Brazil. However, the reality is that corruption is off the map for most businesses. Ive set up, managed and grown several companies there since 2006, and have never in that time seen suggestions of bribery or false accounting. Thats not to say it doesnt exist ? when it comes to government or very large corporate contracts, it clearly does. I can see how some Brazilian accounting practices, such as allowing small businesses to work on “Lucro Presumido” (presumed profit) could support it. But I believe that international businesses starting up in Brazil can be confident that they won’t get involved in any way.
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Confidence in Brazil has picked up a great deal in the early part of 2016, when the impeachment was anticipated, as evidenced by the improvement both in the exchange rate and the stock exchange. In the last month since the new government of Michel Temer was formed, the stats have stayed more or less static, with no further improvement as yet ? the markets are clearly waiting to see some tangible results. The exchange rate is still around half that of three years ago and looks to have stabilised. Now a new Central Bank president, Ilan Goldfajn, has been appointed it can be expected to improve, certainly in the short term, as he brings a good track record and expectations are very high.
Whilst this in addition to tariff barriers ? can make the Brazilian market unattractive for most exporters, it’s very good value now for setting up in-country operations such as Shared Service Centres, in/out-sourcing, and local manufacturing for the MERCOSUR countries. And the overwhelmingly young workforce is increasingly well-educated, and it’s easy to hire professionals in most sectors who have very good English.
In my experience productivity levels can be impressive. There are some interesting barriers to overcome: Brazilian employment laws are archaic and byzantine, all staff are “unionised”, annual salary increases are mandated, the paperwork can be formidable. All of these can be addressed in a straightforward way, with some professional help, and the advantages of having three or four professionals for the price of one definitely outweigh the disadvantages.
Its also one of the most pleasant countries to live, work and do business. If the weather alone doesnt lift ones spirits, the enthusiasm and can do attitude of the Brazilian people will.
Oliver Dowson is founder of ICC (International Corporate Creations).
Meanwhile, with the seventh largest economy in the world, Brazil is an exciting market for UK businesses ” as Mauricio Munguia, head of Latin America desk at Santander UK, explains.