1.

International Trade System

Brazil ranked 123 out of 190 countries in the World Bank’s 2016 Ease of Doing Business
Report. U.S. companies cite high tariffs, an uncertain customs system, high and unpredictable tax
burdens, and an overburdened legal system as major hurdles they must overcome to do business
in Brazil. U.S. exporters in regulated industries (e.g., medical devices, health, and safety
products) have a particularly challenging time navigating Brazilian rules and regulations.

Tariffs and regulations

Tariffs and duty rates are constantly revised and are subject to change without notice.

All products exported to Brazil are taxed by an import tax (unless otherwise specifically
exempting the product from such payment).
The key points to note about the import tax include:
It is levied on the customs value.
The customs value is generally assessed based on the transaction value and that coincides with
the cost, insurance and freight (CIF) value.
The import tax rate is selective and depends on the product's tariff classification.
Special preferences granted on a wide range of items imported from member countries of the
Latin American Integration/Development Association and, in particular, from Mercosur member
countries (Argentina, Uruguay and Paraguay).

Most duties are ad valorem, based on the GATT Valuation Code (approximately CIF value)
(Incoterms 2000).

The drawback regime is an incentive for exports introduced by the Brazilian Government. The
requirement for requesting the regime is that the finished product that has been manufactured in
Brazil and then exported has used some parts and pieces that have been imported into Brazil.
This presents opportunities for Australian exporters in all industries.

It is important to note that Brazil requires special labels for toxic and food products that need to
be addressed when exporting.

Non-tariff barriers

Import restrictions
Pre-import license products have up to 60 days to proceed with the shipment. Merchandise must
be on board the carrier prior to expiry date of import licence. Some imports are subject to quota
or to special requirements.

Product certification, labelling and packaging

Label requirements vary in accordance to the product category. Special label requirements will
apply to food, beverage, agrochemicals, pharmaceuticals and cosmetics and may have to be

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approved by regulatory bodies. The name and contact details of the importer and some additional
information in Portuguese are mandatory on the back labels of most imported products.

Methods of quoting and payment

Quotations should be FOB and C&F (Incoterms 2000), ex-works, Brazilian port, and in US
dollars. Payment terms can be in advance, collection (payment terms are freely negotiable,
averaging 360 days), with or without a letter of credit coverage.

Documentation required includes:

commercial invoice
bill of lading
certificate of origin - if a product is eligible to special multilateral agreements.
Insurance

2. Economic Environment
Population
The current population of Brazil is 209,840,172 as of Monday, November 6, 2017, based on the
latest United Nations estimates.
Brazil population is equivalent to 2.77% of the total world population.
Brazil ranks number 5 in the list of countries (and dependencies) by population.
The population density in Brazil is 25 per Km2 (65 people per mi2).
The total land area is 8,358,140 Km2 (3,227,095 sq. miles)
85.1 % of the population is urban (178,168,858 people in 2017)

The country’s industrial structure.

The Brazilian economy is characterized by a mixed economy that relies on import substitution to
achieve economic growth. Industrializing Economy
The service sector is the largest component of GDP at 67.0 percent, followed by the industrial
sector at 27.5 percent. Agriculture represents 5.5 percent of GDP (2011).Brazilian labor force is
estimated at 100.77 million of which 10 percent is occupied in agriculture, 19 percent in the
industry sector and 71 percent in the service sector.

The country’s income distribution; Very low, very high incomes.

Brazil has been tackling problems of income inequality despite high rates of growth.
Its GDP (gross domestic product) growth in 2010 was 7.5%. In recent decades, there has been a
decline in inequality for the country as a whole. Brazil’s GINI coefficient, a measure of income
inequality, has slowly decreased from in 0.596 in 2001 to 0.543 in 2009. However, the numbers
still point to a rather significant problem of income disparity.
The country's high income concentration is depicted by the richest one per cent of the population
(less than 2 million people) having 13 percent of all household income. This percentage is

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similar to that of the poorest 50 per cent - about 80 million Brazilians. This inequality results in
poverty levels that are inconsistent with an economy the size of that of Brazil.

3. Political-Legal Environment

Attitudes toward international business

As the purchasing power of the Brazilian population has grown, the demand for imported
products, specially from the US, has been growing as well. Also, as the country is growing,
industries need inputs and end up importing too.
Added to that, there is also the matter of deindustrialization of Brazil due to the high tax burden
and to the professional shortage, that increases the hiring costs.
The solution the current government has found was to create a protectionist plan that would
enhance the competitiveness of the national industry under the slogan “innovate to compete”.

Here is a list of the most important measures the government has adopted as a way of promoting
the development of the national industry.
A)Reintegra: Tax Exemption for Exports
B) Governmental Purchases: The Summit of Protectionism
C) Commercial Defense: Fighting Antidumping Practices
D) Payroll Tax Exemptions: A Burden to the National Treasure(government will exempt
economic sectors sensible to exchange and to international competition - which are those of
clothing, shoes, furniture and software)

Brazil: Political stability index (-2.5 weak; 2.5 strong)

: For that indicator, The World Bank provides data for Brazil from 1996 to 2015. The average
value for Brazil during that period was -0.14 points with a minumum of -0.38 points in 2015 and
a maximum of 0.28 points in 2002.

In Brazil, accounts can only be kept in local currency (Brazilian Reais, R$). For a Brazilian
importer to remit funds to a seller in the United States, the importer must purchase the
corresponding foreign funds by means of an exchange contract at any bank authorized by the
Brazilian Central Bank. The exchange rate and related fees are negotiated directly between the
purchaser of the foreign currency (the importer) and the bank.

Bureaucracy in Brazil is so widespread and extensive that a term was created to denote the
difficulties and delays businesses face in the country.
A new study by the World Bank confirms the efficiency problem, showing that Brazilian
companies need fifteen times longer to pay tax authorities than their European counterparts.
Businesses in Brazil spend on average 2,600 hours on filing their taxes according to the World
Bank. This is three times more than in Venezuela and fifteen times more than what countries in
the European Union need. In France for example 137 hours are needed and businesses in the UK
spend110 hours on their taxes.

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Brazil is ranked 125 among 190 economies in the ease of doing business, according to the latest
World Bank annual ratings. The rank of Brazil deteriorated to 125 in 2017 from 123 in 2016. Ease
of Doing Business in Brazil averaged 121.60 from 2008 until 2017, reaching an all time high of
129 in 2009 and a record low of 111 in 2014.
4. Cultural environment

POWER DISTANCE
With a score of 69, Brazil reflects a society that believes hierarchy should be respected
and inequalities amongst people are acceptable. The different distribution of power
justifies the fact that power holders have more benefits than the less powerful in society.
In Brazil it is important to show respect to the elderly (and children take care for their
elderly parents). In companies there is one boss who takes complete responsibility. Status
symbols of power are very important in order to indicate social position and
“communicate” the respect that could be shown.

INDIVIDUALISM Brazil has a score of 38 which means that in this country people from birth
onwards are integrated into strong, cohesive groups (especially represented by the extended
family; including uncles, aunts, grandparents and cousins) which continues protecting its
members in exchange for loyalty. This is an important aspect in the working environment too,
where for instance an older and powerful member of a family is expected to “help” a younger
nephew to be hired for a job in his own company. In business it is important to build up
trustworthy and long lasting relationships: a meeting usually starts with general conversations in
order to get to know each other before doing business. The preferred communication style is
context-rich, so people will often speak profusely and write in an elaborate fashion.
MASCULINITY
A high score (Masculine) on this dimension indicates that the society will be driven by
competition, achievement and success, with success being defined by the winner / best in field –
a value system that starts in school and continues throughout organisational life.
A low score (Feminine) on the dimension means that the dominant values in society are caring
for others and quality of life. A Feminine society is one where quality of life is the sign of
success and standing out from the crowd is not admirable.
Brazil scores 49, a very intermediate score on this dimension.
UNCERTAINTY AVOIDANCE
The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact
that the future can never be known: should we try to control the future or just let it happen? At
76 Brazil scores high on UAI – and so do the majority of Latin American countries. These
societies show a strong need for rules and elaborate legal systems in order to structure life. The
individual’s need to obey these laws, however, is weak. If rules however cannot be kept,
additional rules are dictated. In Brazil, as in all high Uncertainty Avoidance societies,
bureaucracy, laws and rules are very important to make the world a safer place to live in.
Brazilians need to have good and relaxing moments in their everyday life, chatting with

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colleagues, enjoying a long meal or dancing with guests and friends. Due to their high score in
this dimension Brazilians are very passionate and demonstrative people: emotions are easily
shown in their body language.

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