Brazil has the 9th largest economy in the world (ranked 2002), and represents about half of South America in population, territory, and economy. With approx. 175 million people, it is rich in

• agricultural,

• mineral and

• industrial resources

and represents a substantial market opportunity for exporters, particularly in areas such as

• energy generation,

• construction,

• safety and security equipment,

• metalworking machinery

According to brazilian customs statistics,  the trade surplus since the year 2000 demonstrates the efficiency of the brazilian manufacturers. This positive export trend has continued in 2002 and will be maintained in the year 2003 since the commercial saldo until October 2003 reflects already a surplus of more than US$ 18 billion (10/03)

Want to know how Brazil is doing with its external balance?             click here to see a chart

  The Brazilian economic scenario has changed since the Real Plan implementation in 1994. The Plan brought down inflation, reduced trade tariffs and held the exchange rate relatively stable through 1998. With that, however, the Brazilian currency became overvalued and the economy moved into a trade deficit. Then, with the international crisis in early 1999, the Brazilian Central Bank was forced to abandon its exchange rate policy and allowed the local currency, the Real (R$), to float. The average exchange rate dropped from R$1.16 per U.S. dollar in 1998 to an average of R$2.35/US$ in 2001. During the last years, the exchange rate has fluctuated heavily (up to R$ 4/US$, Dec. 02) and is now at R$2.85/US$ (Oct. 2003).

The Brazilian economy has been going through a period of transformation that is both promising and difficult. The economy has a high growth potential with a considerable consumer market. During the first stage of the Real Plan, the Brazilian market could absorb almost everything, considering that per capita consumption of many products was much lower in Brazil when compared to developed countries. Nevertheless, with tightening economic conditions in 1998 and after the 1999 devaluation, most imported products disappeared from supermarket shelves as they were no longer price competitive.

Nevertheless, when analyzing the purchases of Brazil in the local currency, the results show a positive trend . In 1999, Brazil imported R$150 million in consumer-oriented products from the U.S.. In 2000 and 2001, the value of these imports in Reais increased 7 percent and 3 percent, respectively, demonstrating that despite the devaluation, local importers put more effort and continued to be committed to bringing in foreign products.

In the current commercial environment, exporters introducing new products in the market need to effectively target niche segments and offer refined high-end/value-added products that respond to upper-level consumer demand. Proper product placement, pricing and marketing are increasingly important factors. Foreign companies determined to compete in this market, must learn how to move in this up-and-down economic environment.

IMPORT CHANNELS: All of the customary import channels exist in Brazil: Agents, distributors, import houses, trading companies, subsidiaries and branches of foreign firms, among others. Brazilian importers generally do not maintain inventory of capital equipment, spare parts, or raw materials. This is partly due to high importation and storage costs. Recently, due to the creation of additional bonded warehouses, industries that rely heavily on imported components and parts are maintaining larger inventories in bonded warehouses.

Want to know where the main import streams come from?               click here to see a chart

FINDING A PARTNER: Although some companies import directly from foreign manufacturers without local representation, in most cases the presence of a local agent or distributor can be very helpful. As in other countries, the selection of an agent requires careful consideration. In general, larger Brazilian companies will have sales offices throughout Brazil. Smaller agents may have geographical limitations.

It is up to the foreign company and the local agent or distributor to negotiate the type of representation, whether it is an exclusive representation and whether performance targets are included. Contract clauses are freely negotiated between the foreign and local firms. However, we strongly suggest that foreign  companies consult with a Brazilian law firm before signing any type of agreement with local firms to avoid legal problems in the future.

PRICING A PRODUCT: Due to very high local interest rates, often the price of products sold in the domestic market reflects financing costs. Therefore, price negotiations are intimately related to the supplier's payment terms. It is not unusual for a company to select a supplier whose prices are higher than the competition based solely on payment terms.

Tax burden in Brazil on both imported and locally manufactured products is the heaviest in Latin America. In order to be competitive in the market, several companies are reducing profit margins and implementing efficient logistics systems to reduce costs.

AFTER SALES SERVICE - CUSTOMER SUPPORT:  The "Consumer Protection Law" of 1992 requires customer support and after-sales servicing. In the case of imported products, the importer or the distributor is responsible for such services. Therefore, it is important that exporters appoint agents or distributors in Brazil that are qualified to provide such services.

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