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List of Main Steps for Implementing a New Company in Brazil.


The Purpose

Knowing that each business does have its own characteristics, the appropriate approach will depend on how the company wants to be set up. Most of the topics can be bureaucratic and timing consuming. However, they are all equally important and when properly addressed can save an enormous amount of time and resources. International companies are at a disadvantage when not accessing and taking the necessary precautions to understand the dynamics of Latin America business culture.

Presence

I. GREENFIELD ALONE International companies do have an easier and most lucrative profile when establishing themselves with the local government. The local, state, and federal governments do have special programs intended to assist international companies. These programs are available for companies willing to start new business. The government is also seeking new ways to generate new jobs and are in search of companies that can bring new technologies into the country. Establishing a presence in Brazil can be accomplished and is as simple as using one person operating out of an office. This person should be familiar with all matters regarding startup and the preference would be a local bilingual individual. This would eliminate difficulties with the language and cultural barriers that a foreign would encounter.

II. EXPANDING EXISTING BUSINESS This alternative is to create a branch of an existing business abroad. Although this alternative sounds easier to follow, it does not receive any special attention or possible tax breaks often offered by the government to newcomers.

III. BUY OR JV WITH A BRAZILIAN COMPANY This option could certainly bring new business/new customers immediately. A certain amount of time would be necessary to establish the proper relationship. It will demand a careful analysis with complete due diligence of the company by a third party. Liabilities related to past due taxes, labor litigation, and environment are the most common causes that disturb and delay joint ventures in Brazil.

Fundamentals

A. A market brief to determine what is the best way to present your product in Brazil. It will provide marketing understanding and allow further research that can be the basic database for establishing the company's marketing strategy.
B. Market segments and information on current competitors.
C. List of Brazilian companies - potential partners, potential clients, distributors, representatives.
D. Cultural immersion - translations and adaptations of all materials, web site, brochures into Brazilian Portuguese
E. Government and entrepreneurial recommendations - trustworthy companies and individuals.

Developmental Phases


1. Business Stategy

A. Marketing - percentage to be imported, manufactured, sold, and exported. B. Finance - profitability and economic risks. C. Customers Perception - quality, reliability, competitiveness, support. D. Brazilian Team - multifunctional, trained, involved, professional. E. The Office and Facility - location advantages, strategy, availability of professionals.


2. A Proposed Working / Management System

Proposing and adapting the necessary items to be a lean and profitable organization. The goal is to enable reaching the strategic targets with minimum investment, and to lower the risks of a costly operation. List of Main Steps for Implementing a New Company in Brazil These steps should be proposed after evaluating the options for every aspect of the new business. The suggestion is to organize in "Microsoft Project" with day-by-day and target goals established. For this synopsis I use a manufacturing facility as an example of implementing factory issues. Also, regulations to construct other types of plants will follow similar legislation where city codes must be observed at all times. Example:

  • - Purchase Order or Equivalent Contract of
  • - Select Initial Team Members
  • - Legal Issues
           · Creation of the company in Brazil
           · Articles of Incorporation
  • - Office Building
  • - Supporting Staff
           · Select law firm
           · Select broker
           · Select accounting support
           · Select insurance company
           · Select bank
  • - Personnel Issues
           · Contract managing director
           · Select/assign administrative secretary
           · Select/assign team group
           · Train all teams
  • - Define Plant Basic Parameters
           · Define number and type of equipment
  • - Site Selection
           · Define Geographical location
  • - Determine Site
  • - Site Issues
           · File for city license
           · File for fire marshal license
  • - Building Issues
  • - Environmental Permits
  • - Equipment Issues

After establishing a legal presence in the country the next step is to organize your thoughts regarding the technical issues of a new facility.


3. Operational Issues

The issues listed below are a follow-up of the above list. It is complementary information regarding operation and should be used as a reference guide to be consulted. The list should be updated as the events are solved and become more feasible.

- Electrical: project, contracting quantity, 440V, 380V, 220V / 3 phase, 127V, transformers, points, drops.
- Water: volume, water reservoir, pressure, waste disposal company to remove effluents, indoor treatment.
- Metal / Aluminum Scum: treatment, company to remove effluents.
- Hydraulic, mechanical, pneumatic: service type or need;
- Air quality: conditioning, plant, offices.
- Rigging: choosing the appropriate contractor.
- Purchasing Services: recommended to have its own.
- Receiving inspection protocol: quality issues.
- Maintenance: To support operation having its own personnel, hire a contractor, machine repair parts, MRO inventories and storage.
- Material handling: fork lifter and operator.
- Gage calibration / metrology / metallurgical lab / equipment: what to have and what to contract outside gage records, recall system, spares storage, and rehabilitation.
- Janitorial and cleaning services for facility.
- Environmental: environmental engineering company to license waste streams.
- Scheduling, logistics, EDI: responsible for providing support in these areas.
- Document control: handling document control and storage within the facility, machine drawings, process prints, master control programs, product prints, gage drawings, purchasing records, and shipping.
- Tool room support: having its own area of manufacturing, buying from an outside contractor.
- Chemicals MSDS sheets.
- Internal accounting records: petty cash.
- Reject disposition, salvage loops.
- Inventory control.
- Cafeteria/ contract food service: estimated number of employees.
- Internal communication: integrated system with the various departments.
- Electronic communication of Engineering: set up a electronic system to send and receive information from any company.
- Telephone/facsimile/copier: to support the operation and customer's needs.
- Safety and ground care: contract an outside security.


4. Office Considerations

São Paulo is Brazil's largest business center. The vast majority of multinationals operating in Brazil have their headquarters in Greater São Paulo. If they are not in São Paulo or the surrounding cities, they are elsewhere for specific reasons. The incentives to be in São Paulo are:

- International quality of office space.
- large and sophisticated financial and business center.
- For executives and their families, excellent fenced neighborhoods.
- Flights to anywhere in the world every single day.
- Proximity to other growing markets in the region, especially Argentina.





Advantages

Because of the exchange rate today, US dollars can buy and significantly offer a strong position when negotiating for office space.


Rental Considerations

When negotiating for office rental expenses make sure all other costs are discussed. Office rental agencies should explain "Condomínio" (monthly contribution to maintenance of the office and building) costs. Also rental contracts are normally for one year (few exceptions). Other expenses, if not properly addressed, can sometimes be almost as expensive as the rent itself. Make sure that the following items are covered:

- Water Bill (check average cost in the building).
- Electrical Bill (same as above).
- IPTU (Municipal Tax Bill).
- Telephone Line, computer line, and fax line. (It is common to be overcharged if you don't ask).
- Receptionist (Many offices have a single individual that answer and direct all calls for a particular building).
- Parking availability (how many vehicles are you entitled to).
- Heating systems (older buildings still use the European gas type and an extra cost could be associated with that).
- Property Insurance (check what is covered).
- Property Insurance (check what is covered).


Telephone line used to be very expensive, only recently with the privatization of this type of services the lines are becoming more available and less costly. Please check what type of line is available in the office you are planning to rent. Some older buildings have not updated their systems and have analog phone connections. Tenants must normally provide some form of rental deposit. The most common is the "fiança" (a set aside bank guarantee fund). This cost can be up to 6% of your one-year rental agreement. Also in Brazil, tenants are responsible for small repairs, taxes, condominium charges, cleaning, and energy bills. Most rental agreements are standard contracts unless using some special type of agreement. An inadequate initial location can impact the efficiency of the entire start up. To avoid expensive mistakes it is advised to have a local professional for all these details.

Negotiations

It is most advantageous to you to start thinking like your local associates. Because the local market would identify you as an international, they will immediately associate you with US dollars. Even though some transactions could potentially be done in US currency, Brazilian law requires that local contracts be specified in "Real" (Brazilian national currency). The official exchange rate fluctuates. However, in the airport and hotel exchange bureaus you will pay 10-20% premium.

Start Phase

Once the office has been decided, the first step is to have a senior or individual laying the groundwork. If a potential partnership or joint venture is being formed, it is common to share the partner's premises. At this stage the incoming company should have already established, or be in the process of establishing an administrative nucleus. Again, a local advisor would be a tremendous asset at the juncture. The next issues will be related to contracting supporting services (account, attorney).

Be Aware

- Safety. São Paulo has a very high crime rate similar to most major world cities. Foreign executives and their families are advised to take big city precautions. If you are planning to carry or have any type of cash available in your office. It should be secret and known only by your general manager or office manager. A security guard should be considered. For security reasons it is also advisable to have a small quantity of cash available if faced with life threat. Get advice from security companies.
- Greater São Paulo is standardized on 110-volt 60Hz outlets; however few areas of the country and specific determined outlets in your hotel or other facility will have 220 volts. Always ask!
- Power cuts are becoming more frequent with the high demand of a growing region. This aspect could be a subject of future discussion. A local study should be conducted to evaluate the possibility of having power shortage in the area you are planning to establish your office or facility. Also, consider power backup for computers and telecommunication equipment.

Also, transportation in the city relies heavily on buses, mini vans, local trains, and subway (Metro). When traveling within the city limits it is most convenient not to drive and to use other means of transportation.

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