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Doing business in Brazil

by: Christian Filli, Associate Partner of Hofstede Insights

Something that might jump at you immediately when you see Brazil on a map is the sheer size of its territorial extension, relative to the rest of Latin America. As the 5th largest country in the world, Brazil’s landmass is equivalent to roughly 85% of the entire European continent. But, in addition to geographic, demographic and economic dominance, Brazilians’ sense of uniqueness also derives from speaking a different language than all of their neighbors. When I worked for multinational companies and needed to implement marketing campaigns throughout the region, the one thing I would always hear from my colleagues in Brazil was “that won’t work here because we are different” - a sentiment that is magnified by protectionist policies which make market entry generally difficult. It’s useful to always keep this in mind while working with your local counterparts. Ranked 124th out of 190 global economies for ease of doing business (according to the World Bank, 2020), Brazil struggles to live up to its “country of the future” motto. Though its economic and geopolitical leadership potential is ever present, so are the challenges posed by inadequate infrastructure, extreme social inequality, high levels of corruption (ranked 106th out of 198 countries according to Transparency International, 2019), as well as complex tax, labor laws and regulatory requirements. That being said, Brazil is a land of vast opportunity and virtually limitless optimism, and it is home to one of the most creative and vibrant cultures on the planet.

 

Three most important things to remember

 

  1. Brazil is a country defined by a great range of ethnicities, traditions and beliefs that stem from African, European and Asian immigration, as well as its own rich indigenous origins. These have converged in various ways over time to create a very unique cultural mosaic, which can be appreciated across five core regions. Perhaps the most important thing to remember is that Brazilians tend to be extremely cross-regionally aware. It is perfectly common for someone to reside in the South and conduct most of their business in the North, for instance, or continuously straddle between urban, coastal and rural environments, whether for work, leisure or family reasons. Some of the favorite national pastimes, like soccer and samba, function as enablers of this interwovenness, radically blurring the lines between places of origin, classes and races, even if momentarily. This cultural (and regional) fluidity is embedded in the Brazilian psyche and lifestyle, and arguably a big driver of the country’s sense of unity (Brazil’s Individualism score is 38, making it a mostly collectivist society).

  2. As in the case of most Latin American countries, Brazil’s economic activity and wealth are highly centralized. The Southeast region (composed of Minas Gerais, Rio de Janeiro, Espíritu Santo and São Paulo states) represents approximately 50% of total GDP. The megacity of São Paulo alone is considered to be the “Brazilian locomotive” that commands national industry and modernization. Both, the Southeast and the South (which includes major urban hubs like Curitiba and Porto Alegre), serve as headquarters for the country’s largest business conglomerates, as well as foreign multinationals. Ironically, the capital city Brasília was established in 1960 to help shift some of the economic concentration and political power away from Rio and the Southeast but this goal remains largely unfulfilled until today. 

  3. While there is little doubt that Brazil’s exuberant culture and abundant natural wonders help shape the national identity, it is arguably the unrelenting positive outlook and upbeat attitude of Brazilians that enable them to endure repeated socio political breakdowns and the seemingly endless economic rollercoaster. Their unshakable conviction that, no matter what, they can figure things out on their own, is popularly referred to in Portuguese as “jeitinho brasileiro” (the Brazilian way). This is likely connected to Brazil’s high-scoring Uncertainty Avoidance (76), as it empowers them to circumvent almost every hurdle or obstacle. It is a special kind of resourcefulness that shows up in a myriad of forms and is applied in all areas of life. We can see it in traditional rituals, religious practices, indigenous creeds, hidden cults and witchcraft (e.g. Catholicism, Candomblé, Macumba). It also appears in the locally developed and modified martial arts such as Capoeira and Jiu Jitsu (BJJ) and the special touch exhibited by soccer players on the international stage. A final example would be resourcefulness in the accounting maneuvers for dealing with an impossibly complicated bureaucracy.

 

What to look for in a reliable business partner in Brazil

 

  1. Make the necessary investment in developing trust, not just by establishing a personal relationship with your counterparts but also by assessing the degree to which they are up-to-date and compliant with anti-corruption laws. Unfortunately, one must remain vigilant of this at all times in Brazil. 

  2. Along those lines, check their level of familiarity with, and ability to navigate all the administrative requirements and the heavy bureaucracy. However, no matter how familiar they are with the administration, do not expect things to move fast. 

  3. Evaluate their willingness and capacity to deal with economic fluctuation. Brazil has a multi-party political system, and government policy (e.g. trade tariffs, social welfare programs, employee protections, etc.) can shift quickly and dramatically when there is a change in leadership. Note that stability and consistency have not been Brazil’s key strengths. Also, keep in mind that the country scores fairly low in Long Term Orientation (44) - which is higher than the Latin American norm but significantly lower than many European countries. (Recall my observation about its desire to be the “country of the future” in the previous section.)

  4. If you do not speak Portuguese, it is strongly advisable that you have someone in your team who does. As a matter of fact, trying to do business in Brazil without speaking the language is practically impossible, just as it is if you don’t involve a local business partner. You may be surprised otherwise occasionally, but as a general rule, do not expect locals to speak any other language except Portuguese.

  5. Ask your potential partner about their contacts and connections, even personal acquaintances. You are interested in partners who have already laid some of the groundwork and can open as many doors as possible for you. 

 

Business Culture and Etiquette

 

Brazilian business culture might come across as much more informal and relaxed than it tends to be in North America, Europe and parts of Asia. However, this should not be confused for lack of seriousness and ambition. The country is home to some colossal companies that operate in a variety of sectors such as Telecommunications, Retail, Banking, Energy, Food & Beverage, and Cosmetics, to name a few. A significant portion of leading companies in Brazil are family businesses, and they tend to be vertically organized. This aligns with the values of high Power Distance societies (Brazil’s PDI scores in the upper range, at 69). But even those companies that aren’t family owned may seem to operate as if they were. Some key implications of this are:

 

  1. In spite of the informal atmosphere, Brazilians are respectful of title, rank and/or seniority (including the elderly, most of all). Addressing someone as “você” (the informal version of “you" in Brazilian Portuguese) is acceptable only once a relationship has been established, or when you have been given express consent to do so. Otherwise be as formal as possible. Use the title Senhor(a), Dona, or Doutor(a), followed by the person’s first name - for example, Dona Beatriz, or Senhor Milton, Doutora Tânia. 

  2. Physical appearance and status indicators are considered important in Brazil. This may include academic credentials, financial achievement, travel habits, wardrobe, or family name. Brazilians normally factor in one’s personal background when hiring talent and assessing business partnerships. 

  3. Great emphasis is placed on personal relationships, too. You should be prepared to open up about some aspects of your personal life, as this is often part of the ‘ritual’ of getting to know each other. Doing so will help you build rapport quite substantially, and likely serve as a conduit for positive business negotiations/outcomes. It may take a number of encounters before you can achieve the intended business outcome, though. Be patient. And by the same token, try to avoid replacing key players in the middle of an important negotiation or decision-making process, as this will likely force you to start all over again.

  4. A typical business meeting with Brazilians will be noisy, with participants interrupting and talking over each other - especially if the meeting is conducted over lunch or dinner. Having a passionate discussion comes with the territory, so to say, and is not viewed as impolite or disrespectful.

  1. As in most Latin American cultures, physical contact is commonplace in Brazil (handshakes, hugs, taps on the shoulder, etc.), even in the office. Expect to shake hands with everyone you meet, anytime. (Note: this might obviously not be the case during the Covid-19 pandemic but it is otherwise the social norm). Women kiss on the cheek when greeting each other, and so do women and men, though it is advisable to allow her to initiate contact when meeting for the first time. 

  2. Brazil scores mid-range on Masculinity (49) and gender parity is increasingly considered the norm. Differences in social roles are certainly still noticeable, but these are dictated more by class, race and geography than by sex. Female business leaders are still the exception, however, even though many do occupy positions of authority. The country recently had its first female president, though her tenure ended with impeachment.

 

Building Trust

Brazilians tend to draw less rigid boundaries between their personal and professional lives than, for example, the Americans, Germans or Japanese. In other words, they are more prone to opening their hearts and letting others peek into their souls. This likely is a result of a culture that blends high Power Distance, moderate Masculinity, high Collectivism and high Uncertainty Avoidance. Human bonding gives Brazilians a sense of comfort and security. It also helps make life more enjoyable. Employees expect their leaders to take an interest in their private lives (to a reasonable extent, of course) and spend social time with them. This is considered essential to build trust and camaraderie. They will be quick to invite a foreigner to join in, in part because it feels natural to do so but also as a way of getting a better sense of who you are.

 

Be Especially Careful with Criticism 

You will notice that Brazilians are not shy about criticizing their own country. However, this is not an invitation for you to “rub it in”, especially if you are still a newcomer to the culture. In fact, you will be better off by highlighting the positive aspects of your experience, as well as your knowledge of the country’s history, natural wonders, traditions and customs. Most of all, Brazilians love to hear about their success stories and positive influence abroad, so make sure to have one or two examples that you can share. 

 

Short Case Study

A global consulting firm headquartered in San Francisco was eager to launch operations in Brazil. Its international footprint was quite solid, after having developed a strong business in key European and Middle Eastern countries, and successfully entered big markets like Russia, China and India. Though the company had a long-standing office in Mexico, its presence throughout the rest of Latin America had been erratic, with regional projects taking place only occasionally and being overseen directly by U.S. based team members. 

The firm had previously failed to establish a local office in Brazil, and the board of directors was increasingly frustrated with the company’s inability to tap into one of the most promising economies in the world. This frustration was exacerbated by the fact that the firm enjoyed a premium reputation everywhere else around the globe, and they were convinced that the quality of service and methodology their company offered was hard to match. 

The directors also believed that the failed attempt to enter Brazil was mainly due to not hiring the right person for the job. Fernando was an Argentinean who had been living in Chicago for many years, and was a well-respected member in the organization. He had never been to Brazil and didn’t speak Portuguese, but was incredibly excited when the CEO offered him the role of Country Manager in São Paulo. Plus, he figured that Spanish and Portuguese are similar enough, so he would be able to get by. Sadly, Fernando ended up quitting six months later and the local office was shut down. Now it was time for the firm to give it another try. 

Question: If you were the CEO, what key steps would you take in order to ensure the mission is successful? Note: the board of directors is getting impatient and another failure would likely put your own job at risk.

 

References and interesting links

Ease of doing business ranking: https://www.doingbusiness.org/en/data/exploreeconomies/brazil

Odebrecht Scandal: https://www.bbc.com/news/world-latin-america-41109132

Corruption Perceptions Index: https://www.transparency.org/en/cpi#

Brazil’s GNP by state: https://www.ibge.gov.br/explica/pib.php

Top 30 publicly traded companies of Brazil: https://disfold.com/top-companies-brazil-ibovespa/

AboutBrasil, your starting point in Brazil: http://www.aboutbrasil.com/modules/brazil-brasil/business_brasil_business_brazil.php?hoofd=2&sub=5&art=45