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The Sports Company to Enter the Vietnam Market Within the Next Three Years Via a Joint Venture with a Local Distributor.

In: Business and Management

Submitted By tupamaro
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Overseas Business Risk - Brazil
Information on key security and political risks which UK businesses may face when operating in Brazil.

Political and Economic
Between 2002 and 2010 more than 35 million Brazilians moved from classes D and E to class C. In recent years, Brazil is the only BRIC country that successfully achieved high economic growth rates while reducing inequalities. With a high propensity to consume, growing demand from this new middle class represents a huge opportunity for companies to exploit. The Brazilian tax system is complex and reportedly prone to corruption Some positive developments in relation to corruption and investment can be recognised as Brazil is often cited for its strong legal framework expected to decreasing corruption, and the country is occasionally used as a role model for other developing countries, yet effective enforcement of laws is a problem.

Economic Overview:
In the last decade Brazil has shown economic stability and was one of the first countries to recover from the crisis of 2008/2009. The country is a member of Mercosul, and is the biggest economy in South America, accounting for over 50% of the continent’s GDP. The attractiveness to foreign investors is justified by its solid economic fundamentals (with Brazil holding an Investment Grade from all three main ratings agencies) and its large consumer market. . In 2011, Brazil’s main buyer was China with a 17.3% share of Brazil’s exports, followed by U.S. with 10%, Argentina with 9%, Netherlands with 5.3%, and Japan with 3.7%.

Bribery and Corruption
Bribery is illegal. Brazil is among the world's leading investment destinations. However, despite a formally well-functioning business environment, corruption and bribery are still serious obstacles to doing business in Brazil. Especially in business dealings with the government at the local levels, corruption reportedly represents a serious threat.

Some positive developments in relation to corruption and investment can be recognised as Brazil is often cited for its strong legal framework expected to decreasing corruption, and the country is occasionally used as a role model for other developing countries, yet effective enforcement of laws is a problem.

Corruption is common in some environments, especially when it comes to speeding up bureaucratic processes. In 2010, Brazil was ranked 69 out of 178 in the Transparency International’s corruption perception index (CPI). There is a wide range of regulatory agencies due to the federal structure of the political system, which may increase the likelihood of demands for bribes by public officials. Multiple corruption scandals have emerged over the years, involving politicians and bureaucrats taking kickbacks from companies in exchange for awarding public contracts. The Brazilian tax system is complex and reportedly prone to corruption. It is reported that tax collectors frequently ask for bribes to relax assessments and inspections, to refrain from pursuing acts of tax fraud or to give advice on the legal possibilities of reducing tax obligations. Entrepreneurs may find difficulties in navigating complex systems and vested interests when setting businesses up in Brazil. UK businesses should consider, in most cases, engaging a local partner when establishing interests in Brazil. Local labour law is complex and onerous and requires careful handling to avoid incurring potentially expensive liabilities. There is a well-developed system of HR managers and lawyers that can offer expert advice on how best to manage employment. This is again another area where the right local partner could be essential for successful market entry. Read the information provided on our Bribery and corruption page.

Protective Security Advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses Robbery, mugging, street violence and "quicknapping" (where individuals are forced to withdraw funds from ATM machines) are not uncommon in Brazil. The risks vary widely between cities and between districts in each city. Care should be taken not to advertise wealth or vulnerability. Local advice should be sought on when and where it is safe to travel. Given these sensible precautions, most visitors do not encounter problems. Brazil has yet to enact a legal framework to provide a safer environment for IT business - the Cybernetic Crime Act is still being debated in Parliament. However, civil society has already mobilized to monitor Internet activities - the Safernet project is one example. Cyber crimes grew 318% in Brazil on 2008.

Intellectual Property
IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, they you should consider registering your IP rights in your export markets. Brazil has been strengthening its IP and copyright protection rules and is now a member of the IPO. The Government has a National Anti-Piracy Plan, which created the National Council for Combating Piracy and Intellectual Property Crimes. Intellectual Property Rights, however, remain a risk area in Brazil. The Patent and Trademark Office is improving, but can still be bureaucratic.

Organised Crime
Organised crime is still a significant problem in some parts of Brazil. Illegal organisations connected to drug trafficking are strongly linked to piracy and financing through counterfeit products. Organised crime is also present in the society's high-income strata. Illegal activities range from Government procurement manipulation to cargo theft. A broader scheme encompasses also money laundering (illegal gambling such as the "jogo do bicho" and jackpot slot machines) and tax evasion through havens. Despite these threats, the Brazilian Government is tackling organised crime with increased vigour prior to the World Cup in 2014 and the Rio de Janeiro Olympics in 2016. It is undertaking a variety of operations to clean-up a number of places where organised crime resides (favelas for instance)

One important thing, however, is to find and use competent experts on Brazil. In other words, don't go in alone.

Small companies with financial and manpower restraints usually rely on agents or distributors to sell their products. This form of distribution is most favored by companies that have limited overseas market experience or exposure. There are low investment risks and this form permits penetration into a foreign market which otherwise would be impossible.…...

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