Brazil is experiencing a new stimulating moment for foreign investors, especially for Italian SMEs. Dr. Graziano Messana, founder of GM Venture, a consulting and management company in Brazil, comments on how to do business in the country and not make mistakes, allowing the development and success of the Brazilian branch investment.
Brazil is a country as large as a continent that can represent an endless panorama of opportunities for Italian SMEs. Find out more about why Brazil is an important market for Italian SMEs here.
Brazil is certainly a major market for Italian SMEs but not all of them are able to seize this opportunity. It often happens to find companies that export to various countries, even in North America, but not in Brazil. How does this happen?
In Brazil, there are about a thousand Italian companies. Apart from the big industrial groups and the big fashion brands, almost all present, the rest are branches of small and medium companies. Some arrived following the establishment of large companies/clients since they had to continue to guarantee their supplies. The luckiest have joined real clusters created in the neighbourhood of large companies.
Other SMEs have come because they have identified, thanks to participation in a trade fair or because they have independently documented, a huge market with endless opportunities.
To give some examples Brazil is the fourth country in the world as consumption in beauty products, fifth consumer of home appliances, the third consumer of digital technologies with 50 million online buyers, a big buyer of 3F (furniture, fashion, food) in which Italy has a strong tradition. Renewable energy sources and the internet of things market that draws various transversal industrial segments.
Some companies have turned to a final public, so-called B2C, intercepting an active population of 200 million people, large segments of a consumer that sometimes, even with a low income, makes impulsive purchases as happens in the field of mobile phones or of fashion. But most of these branches are companies that supply goods and services to other Brazilian companies, so-called B2B.
This is the statistical data on the thousands of Italian companies but what is widely believed is that Brazil, also this statistically proven in the world bench guides and ranking of doing business, is one of the countries with more bureaucracies and barriers to entry.
Reason for which, despite the cultural proximity and this huge market, many companies desist after investigating a bit ‘about the bureaucracy of this country or even worse after venturing to commit a series of errors and consequently also losing resources without results.
The errors that – on the basis of my direct experience – most often SMEs commit are summarized as follows:
1) the presumption of trying to replicate in Brazil a model that maybe works to export or sell in other countries;
2) the idea that a Made in Italy arrives too expensive in Brazil, so we stop at the first estimate of a logistics company deducing misleading considerations;
3) the lack of information due to the fact that Brazil is understood as a very close country culturally (and in fact, there are 6 million descendants of Italians in São Paulo) and therefore the rules of business can be underestimated. different, especially when one thinks of high-interest rates and the instability of exchange as well as the phenomenon of imitations.
Personally I also find curious how often Italian entrepreneurs know how to defend well when moving to China by documenting with consultants, arm themselves to the teeth for fear that they are swept up industrial processes or making payments in advance for fear of staying with the match in hand.
Instead – if you think of Brazil – the climate is very festive, almost relaxed, and often conduct business in a more superficial way but this behaviour, sometimes trusting a little too much of the premises, can cost you, dear.
I believe that the cultural proximity and also the fact that Brazilians really appreciate Italian quality could be more exploited. Suffice it to say that the Germans are present here in Brazil with 1,600 branches, while France already has about 600 branches but is more aggressive when it comes to acquisitions. Both of these countries do not have our cultural neighbourhoods.
To deal with the errors most frequently committed, I believe that with greater information, companies that face this market can easily understand, documenting in advance, how to manage the critical issues that may arise. Operating with on-site commercial branches considerably reduces the tax burden often considered to be erroneously prohibitive. Tax credits can be obtained immediately due by eliminating the use of intermediaries and supporting a business model based on the strategic use of working capital, with a significant advantage over local competitors. All while keeping away from unexpected changes in exchange rates. Today, access to information is even easier than in the past, so it is only necessary to make use of reliable sources and to document oneself.
These are issues that we face daily in our work and now after more than 12 years of operation based in Brazil, I can say that this is a strategy that allowed the many Italian SMEs that we followed to enter and succeed in the Brazilian market. Just as we experienced moments of euphoria and moments of crisis in a country that, despite being so large, comes in and out of the turbulence very quickly. Those interested in doing business in this continental country should not do this by looking in the short term but in the medium term otherwise, it is better to give up.
From the end of last year, roughly, Brazil is experiencing a stimulating moment for foreign investors and this is very positive for us.
I hope that Italian SMEs can seize this moment and be able to reap valuable economic benefits by earning more and more space.
If you want to open a business in Brazil, check out three simple steps to do it, here.