The B of BRICs, just like the R, the I and the C, is not an easy market to crack. Anyone who’s tried it will know that. We have advised many clients about the difficulties of trading with Brazil. Bureaucracy, protectionism, corruption, payment. We discuss Brazil also in our ebook about Latin America, and we always say that it is a great market with lots of potential – if you have the resources for it.
SMEs in the UK are every day reminded of the huge potential of the Brazilian market but I insist, Brazil isn’t for everyone. Before you embark on your own journey to Neymar’s land, let us save you a headache or two. Take your time, make sure you have the resources to invest in Brazil. It doesn’t happen overnight. Actually, it won’t even happen within a year or two. Experienced exporters tell me of a 5-10 year strategy and remind me of the thousands of pounds spent “just trying”. And there’s no other way. We can research Brazil for you for years, we can find you partners to work with and we can support you in every way we can, but you’ve got to know, before we even start, what you’re really going to put yourself through.
Yesterday I read in Folha (one of Brazil’s best-known newspapers) that American retailer Gant is leaving Brazil. I’m sure they’ve tried. But costs were just too much. Brazil is expensive and can price you out quickly also because of its protectionism. Brazilians will raise import duties and add a set of never-ending taxes and charges to protect their industry. That’s the same topic we advised a wine exporter about this week. Brazil will also exhaust you with its world-famous bureaucracy. Gant had enough. And so did Ralph Lauren a while ago. Gant Brazil (owned half by a Swiss group and half by a Portuguese group) opened three stores in 2008 and in 2010 announced it would open 20 more from 2013. It just didn’t happen. The Folha article also mentions the fact that seasonal collections had problems getting to point of sale on time because of the administrative, bureaucratic and customs burdens mentioned before.
Pricing is key and you need a strong pricing strategy for Brazil. As the Folha article explains, Gant garments in Brazil cost 120% more than in the US or Europe. This reminds me of something else: make sure you understand how your consumers shop. Gant is probably loved by the Brazilian upper-middle class but they have the opportunity to buy it in Europe or the US. I’ve seen Brazilians happily buying Tommy Hilfiger clothes are the Duty Free Shop here at Montevideo airport and also shopping in Punta del Este and Santiago de Chile (apart from London and Miami, of course!)…
Brazil is tricky, to say the least. But remember, whatever the British press leads you to believe, Latin America is not just about Brazil… we leave you with a short video to get you inspired to look elsewhere, while you study whether or not Brazil is for you…
As you note here, all who wish to work with Brazil should fully realize its long-term potential for their products only may be realized after appropriate due diligence is completed and a lot of hard work is invested in the market. I think most astute international marketers will continue to focus heavily (primarily) on Brazil simply due to its potential for sizable return on investment. Challenges concerning protectionism and corruption in Latin America certainly are not exclusively limited to Brazil, but they, in my view, invariably get unfairly amplified Way too many companies and non-Brazilians incessantly and conveniently blame their products failings on “Brazil” when they should be more closely looking at who and how their plans for the market were initially conceived. If one focuses on the product to be imported, and then appropriately determines there’s Brazilian demand for that product at a fair price (due diligence), the logistics and tax concerns are all challenges which many successful enterprises will continue to profitably overcome.
Hi Joe, thanks for your comments. I completely agree that blaming all failures on “Brazil” is not fair, but this is another brand that has surely done its due dilligence and failed to stay any longer, probably because of the cost burden. What I find is that even when you find out your taxes, regulations, etc, they don’t always apply as researched AND they change at short notice and often. This is the case of many SMEs exporting from the UK and finding out when their load is half-way on the Atlantic that they needed something they hadn’t been told about, or that there is a new tax (from yesterday) that they hadn’t accounted for. This is the case, too, for Brazil’s smaller Mercosur partners (I live in Uruguay and I know for sure this is the case for many of our exporters). This is not only Brazil, of course, but it is a lot less likely to happen in Chile or Uruguay, for example. We don’t say you should abandon Brazil, completely the contrary: but only go for it if you are sure you can handle it! Definitely more predictable than Argentina, though!
Excellent report once again Gabriela.
Here in Spain Brazil became a must for exporters a while ago too; but just because we are closer to them than British it doesn´t mean we get treated any differently.
A great reminder about where the real opportunities to enter the Latin American markets lay.