Brazil - Market ChallengesBrazil - Market Challenges
Doing business in Brazil requires intimate knowledge of the local environment, including both the direct as well as the indirect costs of doing business in Brazil (referred to as “Custo Brasil”).
Such costs are often related to distribution, government procedures, employee benefits, complex labor code, environmental laws, and a complex tax structure.
Logistics pose a particular challenge, given the lack of sufficient infrastructure. According to the World Economic Forum, Brazil ranks 107th out of 144 countries in the level of infrastructure development.
In addition to high tariffs, U.S. companies need to navigate a complex legal system and customs procedures.The Government of Brazil (GOB) is the nation’s largest buyer of goods and services. Navigating the government procurement process, however, is challenging.
Brazil is not a member of the WTO Government Procurement Agreement, and offers “margins of preference” to domestic firms bidding on government contracts. As such, U.S. exporters may find themselves at a competitive disadvantage if they do not have a significant in-country presence – whether via established partnerships with Brazilian entities or some type of Brazilian subsidiary – as well as the patience and financial resources to respond to legal challenges and bureaucratic issues. Since 2014, the criminal investigation, “Operation Carwash” (Lava Jato), has uncovered a complex web of public sector corruption, contract fraud, money laundering, and tax evasion stemming from systematic overcharging for government contracts. The ongoing investigation has led to the arrests of many executives, including executives from Brazil’s largest construction companies, money launderers, current and former politicians, and political party operatives.
The investigation, which began in Brazil, was extended to neighboring countries in the region and to the Department of Justice in the U.S. At least one key Brazilian construction company was issued a severe penalty in the last year.
Brazil has laws, regulations, and penalties to combat corruption, and the government is working to improve their effectiveness. Several bills to revise the country's regulation of the lobbying/government relations industry are pending before Congress. Bribery is illegal and a bribe by a local company to a foreign official can result in criminal penalties for individuals and administrative penalties, including fines and potential disqualification from government contracts, for companies.
Brazil Trade Development and Promotion