Brazil: A giant not to be overlooked

Considering doing business in Brazil? Then check out the webinar Hot spot: How to break into the Latin America market. Now available on-demand, it explores the opportunities in three key regional markets, with a particular focus on Brazil. In addition to myself, you’ll gain insight from EDC co-panelists: Monica Busch, the Senior Regional Manager for South America; Justin Taylor, a Senior Risk Management Analyst with their Corporate Responsibility team; and Andrea Gardella, a Senior Economist in their Economic & Political Intelligence Centre who covers South America.

One reason to consider Brazil for your exports is that it’s a big, active market. Brazil is the undisputed economic powerhouse of South America. With a GDP that tops $2 trillion, it ranks eighth in the world in terms of economic size. Its relatively young population of 208 million boasts a steadily growing middle class. Brazil is Canada’s largest trading partner in the region, with some $6.4 billion in bilateral trade. Investment between both countries is both impressive and indicative of a closely woven relationship: CDIA in Brazil sits at $11.6 billion and Brazilian direct investment in Canada is well over $18 billion. What’s more, it’s one of five countries with which Canada has a Science, Technology and Innovation Agreement.

While the numbers are impressive, Brazil is not without its challenges. Neither the quality nor quantity of infrastructure initiatives have kept pace with the country’s overall growth. A burdensome tax code, myriad labour regulations, and complex custom’s procedures add both time and costs to business dealings here. Public security continues to be a leading concern in the country, and will test the resolve of the newly-elected president as he takes office in January 2019.

Uppermost in the minds of many is the Lava Jato corruption scandal, which took a heavy toll on confidence in Brazil. But the country’s solid institutional framework led to the development of significant new anti-corruption laws governing state-owned entities, and the reformation of procurement and compliance practices. As a result, enhanced corporate practices now govern all industries and will lead to a more ethical and sustainable business environment now and in the future.

Regardless of Brazil’s strides to combat corruption, it’s imperative that Canadian companies choosing to do business here have a strong anti-corruption program in place. It’s essential not only to protect yourself from corruption risks, but from the reputational risks that can result from the mere accusation of corruption. As panelist Justin Taylor warned during the webinar, if you’re providing inputs to a supply chain that sells to a government entity, you need to make sure that each and every buyer and partner you work with has been well vetted. There are ample database and software solutions available that can help you identify and review corporate track record issues. In doubt, you can always reach out to our team of Trade Commissioners and EDC practitioners on the ground for their insight and support. 

Economic recovery is on the horizon, and it’s expected to spur growth in investments in strategic sectors such as oil and gas, infrastructure, power, and agribusiness, as well as in new innovative technologies to modernize Brazil’s manufacturing capabilities. Given our geographic similarities, it’s no wonder a number of their sectors are well aligned with ours. Both nations are made up of enormous landmasses, have been gifted with plentiful natural resources, and are in need of efficient, far-reaching transportation networks. 

Here are some key opportunities:

• Brazil is home to the largest ICT market in Latin America, with more mobile lines than people. With the largest banks in Latin America and a high concentration of financial services in Brazil, opportunities are strong in the fintech sector.
• There’s ample potential in advanced manufacturing and artificial intelligence, especially applied to all production and manufacturing sectors. 
• Demand for cleantech and energy solutions is high, especially in the areas of water and wastewater management, carbon capture and storage, and smart-grid technologies, but also when applied to create more sustainable and responsible extractive and infrastructure sectors.
• The extractives markets in Brazil are amongst the most dynamic in the world, with plenty of opportunities in oil and gas, from exploration and production to refining, distribution, and transportation. Brazil also has large mineral resources, including rare metals, and a large concentration of key players in the market, with numerous opportunities for R&D partnerships. 
• The aerospace industry is fueled by Embraer and the need to expand regional aviation networks. 
• Defence and security solutions will continue to be in demand as the government tackles its public safety challenges. 
• With a universal healthcare system offering full coverage for the entire population, Brazil’s life science sector has demonstrated a strong preference for and adoption rate of Canadian health services. There is also plenty of opportunities in diagnostics solutions, especially with private healthcare providers and diagnostics centres, always on the lookout for what are the best existing technologies to maintain their competitive edge.

It’s worth noting that Canada is in the midst of negotiating an inclusive and progressive free-trade agreement with Brazil and the other members of Mercosur. In the meantime, be sure to check out the Canada Tariff Finder to understand which tariffs might affect your sector.

While there are ample opportunities in this market, never forget that Brazil rewards those who wait. Patience is the watchword, as the country operates in cycles. While you should remain focused on Brand Canada and the competitive advantages that you own, you must also be prepared to invest in alternative business models. Choose your local partners carefully, and build a strong network of associates. If you’re not sure how to go about doing that, you can turn to the Trade Commissioner Service (TCS) for help.

The TCS has more than 35 trade commissioners working out of six offices throughout Brazil. But if you’re considering doing business here—or anywhere else in the world, for that matter—you should start by contacting a Trade Commissioner in the Canadian regional office nearest you. Not only will they help you assess your international market potential, they’ll actually help you prepare to do business in Brazil. You’ll find out about strategic trade missions that will help you better understand the market and give you the opportunity to meet potential partners. 

Once you’re ready to export, your TCS contact in Canada will introduce you to sector-specific trade commissioners in Brazil. These trade commissioners are well-versed in local business practices, and can provide you with a list of vetted contacts so you can build your own network. Some of those contacts include sales agents and distributors, lawyers, translators, local government contacts, and even potential customers. What’s more, these same trade commissioners can also help you resolve business problems, should they arise.

If you’re looking to expand into Brazil but could use some financial assistance, be sure to apply for the CanExport program. It can reimburse up to 50% of eligible expenses related to your export development activities such as travel, participation to conferences, translation, expert legal, tax and business advice, certification and IP protection, or adaptation of marketing material and website. So far, we’ve helped more than one thousand Canadian small businesses explore new opportunities in 53 markets around the world. You could be next.