Profa. Celina M. Ramalho

General Aspects About

Doing Business in Brazil

Professor Celina Martins Ramalho

Campinas September 25, 2018

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Profa. Celina M. Ramalho

AGENDA

1. INTRODUCTION

2. THE WORLD ECONOMY

3. BRAZILIAN ECONOMY

4. ECONOMY 4.0

5. 10 REASONS FOR INVESTING IN BRAZIL - CAMPINAS

6. FINAL CONSIDERATIONS

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Profa. Celina M. Ramalho

INTRODUCTION

1. INTRODUCTION

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Profa. Celina M. Ramalho

Motivation and challenges on doing business in

Brazil

• Insight into Brazil’s economy

• Essentials to successfully invest in the Brazilian Market

• Brazil is an open and diversified economy

• Wide array of opportunities across multiple productive

sectors

• Brazil’s government efforts to help support international

investors and business projects

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Profa. Celina M. Ramalho

Question:

• How can Dutch firms create dedicated partnerships with

Brazilian business partners in which all parties appropriate a

fair share of the value created?

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Profa. Celina M. Ramalho

http://www.clicrbs.com.br/especial/rs/caminhos-do-

algodao/19,0,2956858,Holanda-e-um-dos-principais-

parceiros-comerciais-do-Brasil.html

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Profa. Celina M. Ramalho

RANKINGS ON DOING BUSINESS TOPICS -

BRASIL

PROTECTING MINORITY INVESTORS 43º

GETTING ELECTRICITY 45º

ENFORCING CONTRACTS 47º

RESOLVING INSOLVENCY 80º

GETTING CREDIT 105º

REGISTERING PROPERTY 131º

TRADING ACROSS BORDERS 139º

DEALING WITH CONSTRUCTION PERMITS 170º

STARTING A BUSINESS 176º

PAYING TAXES 184º

OVERALL 125º

Brazil stands among

the 190 economies

measured.

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Profa. Celina M. Ramalho

RANKINGS ON DOING BUSINESS TOPICS -

NETHERLANDS

STARTING A BUSINESS 20º

DEALING WITH CONSTRUCTION PERMITS 76º

GETTING ELECTRICITY 52º

REGISTERING PROPERTY 30º

GETTING CREDIT 105º

PROTECTING MINORITY INVESTORS 62º

PAYING TAXES 20º

TRADING ACROSS BORDERS 1º

ENFORCING CONTRACTS 69º

RESOLVING INSOLVENCY 8º

OVERALL 32º

Netherlands stand

among the 190

economies measured.

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Profa. Celina M. Ramalho

2. THE WORLD ECONOMY

Profa. Celina M. Ramalho

Profa. Celina M. Ramalho

ONE ROAD, ONE BELT AND

INTEROCEAN ROUTE IN LATIN AMERICA

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Profa. Celina M. Ramalho

FOREIGN DIRECT INVESTIMENTS IN

BRAZIL, AMONG TOP 10 HOST ECONOMIES

(2016)

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Profa. Celina M. Ramalho

• CONSTITUTION – 1988: democracy, social rights, market economy

• DEMOCRACY: Executive, Legislative and Judicial

• THREE LEVELS OF EXECUTIVE GOVERNMENT: Federal, State and Municipal

• DIRECT ELECTIONS AND ONE REELECTION FOR President, Governors and

Mayors.

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3. BRAZILIAN ECONOMY

Profa. Celina M. Ramalho

ECONOMY

• 2,5% GDP average in last 10 years

• Target inflation regime centered in 4,5% and 1,5% s.d.

• Basic interest rate defined by BaCen around 6,5% and 8%

• 7th in world economy with US$ 2 trillion GDP

• 208 million people, consumer class, 6% illiteracy, 6% down

poverty line, 98% child vaccination

• 2,6 million cars yearly in the internal market, 3 years

renewal, 70% flex fuel engine

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Profa. Celina M. Ramalho

Brazilian Economy and Prospects (*)

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Ano PIB % Inflação %Taxa de Juros

SELIC %Câmbio US$

2012 0,9 5,84 7,5 2,1

2013 2,3 5,91 9,9 2,35

2014 0,1 6,41 11,15 2,65

2015 -3,8 10,67 14,15 3,87

2016 -3,6 6,29 13,65 3,35

2017 1 2,95 7 3,16

2018* 2,7 - 1,36 3,5 - 4,09 6 - 6,5 3,37 - 3,83

2019* 3 - 2,5 4 - 4,11 8 3,4 - 3,75

Profa. Celina M. Ramalho

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4. ECONOMY 4.0

DISRUPTIVE TECHNOLOGIES

Profa. Celina M. Ramalho

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Profa. Celina M. Ramalho

- CPqD

- Techno Park

- Parque Tecnológico de São Carlos

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Profa. Celina M. Ramalho

INFRAESTRUCTURE IN BRAZIL

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Profa. Celina M. Ramalho

LABOR FORCE

69%

21%

10%

SERVICE INDUSTRY AGRICULTURE

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Profa. Celina M. Ramalho

1. LEADING REGIONAL ECONOMY

2. GLOBAL DESTINATION FOR

INVESTIMENT (USD 85 BILLION)

3. RESILIENT DOMESTIC

MARKET (207 MILLION PEOPLE)

4. DIVERSIFIED ECONOMY

5. ENERGY POWERHOUSE

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5. 10 REAZONS FOR INVESTING IN BRAZIL

Profa. Celina M. Ramalho

6. LARGE POOL OF

WORKERS

7. EXTENSIVE RAW

MATERIALS

8. CAPACITY TO ENDURE

9. GLOBAL PLAYER, THE “B” IN BRICS

10. GATEWAY TO LATIN AMERICA

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Profa. Celina M. Ramalho

Business opportunities

• Diversified economy

• One of the largest consumer markets in the world

• Highly productive agriculture sector

• Broad and sofisticated industrial base

• One of the most solid and prudently regulated financial sector in

the G20

• The largest stock Market in Latin America

• Abundant natural resources

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BRAZIL, WORLD SUPER POWER IN

AGRICULTURE (USDA, 2016)

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Profa. Celina M. Ramalho

FARMING MODELS AND SUSTAINABILITY

• Rehabilitation of degraded pastures

• Tillage System

• Crop-livestock-forest integration and agroforest systems

• Biological Nitrogen Fixation, as a substitute for nitrogen fertilizers

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Profa. Celina M. Ramalho

GROSS VALUE OF BRAZILIAN

AGRICULTURE AND LIVESTOCK

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BRAZILIAN AUTOMOTIVE INDUSTRY

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Profa. Celina M. Ramalho

Marks

• AGCO (Massey Ferguson) • Agrale • Audi • BMW • Caminhões Metro-Shacman • Caterpillar • CNH (Case and New Holland) • DAF • Fiat Chrysler Automotive • Ford • General Motors • Honda • Hyundai • Iveco

• Jaguar and Land Rover • John Deere • Mahindra • Man (Volkswagen Trucks e

Buses) • Mercedes-Benz • Mitsubishi • Nissan • Peugeot Citroën • Renault • Scania • Toyota • Volkswagen • Volvo

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Profa. Celina M. Ramalho

INVESTMENTS AND PRODUTION IN THE

BRAZILIAN AUTO SECTOR

YEAR INVESTMENTS

(MILLION USD) PRODUCTION

(UNITS)* YEAR

INVESTMENTS

(MILLION USD) PRODUCTION

(UNITS)*

2000 1.745 1.605.848 2009 2.721 3.076.000

2001 1.825 1.675.522 2010 3.872 3.382.163

2002 1.042 1.663.790 2011 5.339 3.417.782

2003 748 1.684.715 2012 5.347 3.402.963

2004 820 2.124.177 2013 - 3.712.386

2005 118 2.357.172 2014 - 3.146.386

2006 1.572 2.403.680 2015 - 2.429.421

2007 2.136 2.825.276 2016 - 2.156.356

2008 3.197 3.050.631 2017 - 2.699.672

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Profa. Celina M. Ramalho

RENEWABLE ENERGY &

ENVIRONMENTAL SOLUTIONS

SOURCE 2016 2024 ESTIMATE

HYDRO 68,6% 56,7%

ALTERNATIVE ENERGY* 16,2% **27,3%

THERMO*** 14,7% 14,4%

NUCLEAR 2,6% 1,6%

*Biofuel, Wind.

** Includes Solar

*** Natural Gas, Industrial Gas, Oil and Coal

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Hidrelética de Itaipú

103 million MWh in 2.016

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WIND ENERGY

YEAR TOTAL MEGA-WATT YEAR TOTAL MEGA-WATT

2005 27,1 2013 3.484,1

2006 235,4 2014 5.979,6

2007 245,6 2015 8.733,4

2008 341,4 2016 10.747,3

2009 600,8 2017 13.205,0

2010 932,4 2018 16.137,5

2011 1.535,1 2019 16.938,6

2012 2.529,0 2020 17.257,2

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Profa. Celina M. Ramalho

BIOFUEL PRODUCTION OVER TIME

(THOUSANDS OF m³)

YEAR PURE BIODIESEL B100 ETHANOL YEAR PURE BIODIESEL B100 ETHANOL

2005 0,7 15.821 2011 2.672,8 22.682

2006 69,0 17.844 2012 2.717,5 23.226

2007 404,3 22.527 2013 2.917,5 27.476

2008 1.167,1 27.526 2014 3.422,2 28.480

2009 1.608,5 25.691 2015 3.937,3 30.232

2010 2.386,4 27.376 2016 3.801,3 28.692

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Profa. Celina M. Ramalho

TOTAL OIL PRODUCTION (IN THOUSANDS

OF BARRELS).

YEAR TOTAL PRE-SALT LAYER

2006 628.797

-

2007 638.018

-

2008 663.275 25.587

2009 711.883 6.756

2010 749.954 16.317

2011 768.471 44.394

2012 754.409 61.488

2013 738.715 110.538

2014 822.293 179.820

2015 889.667 280.055

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Profa. Celina M. Ramalho

INFRAESTRUCTURE & LOGISTICS – PUBLIC

PROGRAMS AND OPPORTUNITIES

SPECIAL TAX REGIME

INFRASTRUCTURE DEVELOPMENT

(REIDI)

NATIONAL PLAN OF LOGISTICS AND TRANSPORTATION

(PNLT)

INVESTMENT PARTNERSHIPS PROGRAM (PPI)

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Profa. Celina M. Ramalho

TRANSPORT INFRASTRUCTURE AND

SERVICES

PROJECTIONS FOR FREIGHT

TRANSPORTATION GROWTH IN BRAZIL

TYPE 2019 2031

ROAD 44% 38%

RAIL 36% 43%

WATER 14% 15%

PIPELINES 5% 4%

61,1% 20,7%

13,5%

4,2% 0,4%

CURRENT FREIGHT TRANSPORTATION IN

BRAZIL

ROAD RAIL WATER PIPELINES AIR

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HEALTHCARE SYSTEM

48%

21%

30%

1%

CURRENT HEALTHCARE SPENDING IN BRAZIL

PUBLIC SPENDING PRIVATE HEALTHCARE INSURANCE

PERSONAL SPENDING NON-PROFIT HEALTHCARE SERVICES

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Profa. Celina M. Ramalho

PRIVATE EQUITY AND VENTURE CAPITAL

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INDUSTRY & TAX INCENTIVES

EX-TARIFF IPI

EXEMPTION RECAP

REINTEGRA SMALL

COMPANIES REGIME

INNOVATION LAW

IT LAW

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Profa. Celina M. Ramalho

SPECIAL TAX REGIMES BY SECTORS

REIDI

• SPECIAL REGIME OF INCENTIVES FOR THE DEVELOPMENT OF INFRAESTRUCTURE

PADIS

• PROGRAM OF SUPPORT FOR THE TECHNOLOGICAL DEVELOPMENT OF THE SEMICONDUCTOR INDUSTRY

RETID

• SPECIAL TAX REGIME FOR THE DEFENSE INDUSTRY

REPES

• SPECIAL TAX REGIME FOR PLATFORMS OF EXPORTATION OF INFORMATION TECHNOLOGY SERVICES

REPORTO

• SPECIAL TAX REGIME FOR MODERNIZATION AND EXPANSION OF THE PORT STRUCTURE

RETAERO

• SPECIAL REGIME FOR THE BRAZILIAN AEROSPACE INDUSTRY

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Profa. Celina M. Ramalho

FEDERAL REGIME INCENTIVE PACKAGES

PADTV

• BRAZILIAN DIGITAL TV INDUSTRY DEVELOPMENT SUPPORT PROGRAM

RECAP

• SPECIAL TAX REGIME FOR CAPITAL GOODS ACQUISITION BY EXPORT COMPANIES AND SHIPYARDS

REINTEGRA

• SPECIAL TAX REGIME FOR REINSTATEMENT OF TAXES FOR EXPORTER COMPANIES

RETAERO

• SPECIAL REGIME FOR THE BRAZILIAN AERONAUTICS INDUSTRY

REPENEC

• SPECIAL INCENTIVE REGIME FOR THE DEVELOPMENT OF THE OIL INDUSTRY INFRASTRUCTURE IN THE NORTH, NORTHEAST AND MIDWEST REGIONS

REPETRO

• SPECIAL IMPORT AND EXPORT CUSTOMS REGIME INTENDED FOR THE EXPLORATION AND PRODUCTION OF OIL AND GAS

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Profa. Celina M. Ramalho

EXPORT PROCESSING ZONES (EPZs)

Main benefits • For purchases of goods and services on the domestic market,

suspension of:

– IPI (tax on manufactured products) – Cofins (social contribution – tax presumptive profit) – Pis/pasep (social contribution on gross revenue)

• For imports of good and services, the suspencion of:

– II (import tax) – Afrmm (additional freight charge for the renovation of the

merchant marine) – IPI – Cofins – import – Pis/pasep – import

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Profa. Celina M. Ramalho

EXPORT PROCESSING ZONES (EPZs)

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Profa. Celina M. Ramalho

• BRAZILIAN SUPPORT SERVICE by SEBRAE System in States

• Supported by States tax rent, gives orientation for small entrepreneurs

SMALL BUSINESS SUPPORT

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Operação Lava-Jato

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Profa. Celina M. Ramalho

INTELLECTUAL PROPERTY

• IP international standards have been duly incorporated into Brazil’s

legislation and, in some aspects, the country’s domestic legislation provides

protection beyond TRIPs (Trade-Relatad Aspectis in Intelectual Property

Rights) requirements;

• The country has also established domestic laws protecting industrial design

and IC (Integrated Circuit) layout design;

• Brazil adopted international trademark classification systems and

examination standards;

• In 2016, Brazil acceded to the Hague Convention Abolishing the

Requirement of Legalization for Foreign Public Documents, which speeds up

the processing of documents between signatories.

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Profa. Celina M. Ramalho

CHALLENGES FOR BRAZIL AS AN EMERGING ECONOMY

SHORT TERM:

• Presidential ellections

• Social mobilization

• Economic temporary downward

LONG TERM:

• Infrastructure

• Education & Health

• Private investments

• Public debt: reforms in 2019 are necessary

• Diplomatic relations

• New commercial relations

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6. FINAL CONSIDERATIONS

Profa. Celina M. Ramalho

Obrigada!

celina.ramalho@fgv.br

11 98639-0487

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