Brazil Cost: Pay It or Not?
By Jane Han
Staff Reporter
While Brazilians are widely known as easy-going, foreigners say investing in the South American country is no samba due to its tough business procedures. But as more local firms continue to eye the BRIC market, a leading trade group Tuesday highlighted some pointers to offset the ``Brazil cost.''
The Brazil cost is a term often used to label the excessive costs, including high taxes, duties and bureaucratic procedures, of doing business in the Amazon state, which is said to be cutting down the potential of the country's economic development.
Dating back to 1995, South Korean investment in Brazil went through its ups and down until it reached a total of more than $11 billion (in 82 cases) as of December 2006.
LG Electronics and Samsung Electronics are top local players who have been doing successful business in Brazil, but because of uneasy conditions, many smaller firms have sought support, said the Korea Trade Investment-Promotion Agency (KOTRA).
The complicated tax and customs system, slow processing and overly bureaucratic order have been named as the toughest hurdles for local investors.
``It's crucial that they do thorough research before landing their business in Brazil because the law and other regulations are more confusing than expected,'' Kim Youn-hee, team manager of the Europe and Americas at KOTRA said, adding the labor law is another sensitive matter.
The trade promotion group put out an in-depth investment strategy report that underlines key aspects not to be overlooked.
In order to make a soft landing, Kim says sketching out a long-term roadmap is ideal instead of rushing into the new market.
``IT, digital and electronic appliances are some areas that have much room for development as Brazilians' demand for these goods is expected to hike in the near future,'' she said, adding that Korean companies have already tapped these industries.
And investing in regional areas instead of the free economic zones, including Manaus and Sao Paolo, is also recommended as each locality has its unique commercial factor beneficial to potential investors, said the KOTRA report.
``Because there have been much trial and error, it would be helpful for businesses to make sure the same mistakes aren't made again,'' said Kim.
The full report is available via the organization's Web site.