Budget boost to Irish companies aiming for Brazil
Last week's emphasis on trading with emerging BRIC markets is most welcome. Barbara McCarthy looks at doing business in Brazil
Published 11/12/2011 | 05:00
LAST week's move to boost exports to the BRIC markets (Brazil, Russia, India and China) through a new foreign earnings reduction tax break may nudge more and more Irish companies to look at faster growing economies rather than relying on the sluggish European and US export markets.
George Soros is buying oil, Donald Trump is buying golf clubs and Warren Buffet thinks it's "one of the world's great investment opportunities". Brazil must be on to something.
With a €1.3trn economy, unemployment at six per cent and named as "the best place to put your money for the next 10 years" (according to the Financial Times), life on Ipanema and Copacabana is sweet. And with the 2014 soccer World Cup and Olympic Games on the way, Brazil is being hailed by global professionals as the new China, and Irish businesses would be foolish not to look to the land of samba, milk and honey. But surely it can't be all plain sailing?
"There is a lot of bureaucracy and a tax system which makes setting up a company extremely difficult, but we have found doing business in Brazil to be a lot easier than, say, in the Middle East or Spain," says Joe Kennedy, director of Kompas International Architects, a joint venture between Smith & Kenny architects and O'Mahoney Pike architects.
"Currently we have 20 projects throughout Brazil in the pipeline, of which several will be converted," Kennedy says.
These projects include residential developments, luxury hotels in town
'The weekend starts at 12 o'clock on Fridays so not much happens after that'
centres in Paraty and a master town plan near Sao Paolo.
"Brazil is our main focus now. We find people are very easy to deal with and we have local partners who look after all our planning permission and applications, which is the key to our success," he says.
Kennedy says the company did a lot of conceptual work, feasibility studies and high-end work in Dublin first.
"In terms of language barriers, we have Portuguese architects in Dublin, as designers in Brazil are too costly. You have to pay 30 per cent PRSI on top of their salary."
You need to do your homework on the market, get in touch with Enterprise Ireland, and build relationships with companies before you go, says Seamus McMenamin CEO of Mantis Cranes, a company, which manufactures self-erecting cranes.
"We originally found a market for our products in Brazil after a trade mission with Ernst & Young in 2009 and Enterprise Ireland in 2010," he says.
Currently the Minha Casa, Minha Vida (My House, My Life) project, which is being implemented by the Brazilian Federal government to deal with the massive housing deficit, will create housing for millions of Brazilians in the coming years.
"The houses are low rise so they are perfectly suited for our type of cranes. So when we sent some cranes to Brazil for trials, we subsequently got an order," says McMenamin.
Though Brazil is open for business, import taxes are up to 40 per cent excluding shipping costs. "There is a market for sure, but it is difficult to enter and you need a lot of time and persistence. You also need to have a local distributor who can support your product locally. Shipping also takes up to six weeks, which can have an effect on cash flow if you don't have the correct terms in place," he warns.
Martha O'Byrne O'Reilly, a business development administrator for Daon, an Irish identity management software company based in Sao Paulo, argues that the bureaucracy will work against you.
"My Dublin departure date was delayed by two months due to issues with my visa and work permit."
On arrival in Sao Paulo, every foreigner has to register with the federal police in order to be issued with standard documentation.
"My appointment with them is scheduled for February next year," she complains. Until then she cannot buy a phone, pay a utility bill or rent an apartment.
That said, it's exciting stuff -- and reminiscent of Ireland in the mid-Nineties when it was all starting to kick off. Brazil has an extremely young population, a growing middle class with an expendable income, and it's the biggest exporter of raw materials in the world. A €2trn oil discovery should ensure that it won't be just a fly-by-night success story.
"But there are still pitfalls," says Keith Harris, who moved to Fortaleza in northern Brazil in 2010. "I have a massage practice and work in hairdressing and have found that here, in the north especially, people's work ethic leaves a lot to be desired. The weekend starts at 12 o'clock on Fridays, so not much happens after that, plus people don't really take to teamwork much."
Outside of work, he says it can be difficult to make friends -- and Brazilians drive like lunatics.
"But in the last year since Dilma Vana Rousseff has become president, there has been a crackdown on violence and access to education has improved greatly. Also I can go for a swim in the sea before work in the morning, and there are few people who can happily say that," he says.
Sunday Indo Business