How to Export to Brazil - Sprint Lazio

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Brazil – Ministry of External Relations As for the use of letters of credit, the Brazilian importer habitually attempts to persuade the exporter to avoid this form of payment, as the bank charges and the requirements for local guarantees in Brazilian banks are very stringent and this may make the transaction unfeasible. In the case of the South American exporter, the payment by means of a letter of credit has an advantage: there is no need for a confirmation of the credit, due to the Reciprocal Lending Agreement – CCR existing in Latin America with the participation of the central banks. All that is needed are the guarantees from the issuing bank and the irrevocability of the document. It must be stressed that the requirements and instructions set by Brazilian importers on letters of credit are objective, direct and without major complications, with a focus on the shipment time and the documents that the exporter needs to present to the bank. Occasionally, an inspection of the cargo prior to shipment may take place, which is conducted by an inspection firm of international renown. However, merchandise inspection prior to shipment in the port of origin is not mandatory in Brazil. It must be noticed as well that the South American exporter must closely follow the requirements in documentary credits, as any discrepancy, in addition to halting payment, may harm the importer from the logistic and customs viewpoint, which includes fines and penalties provided for by customs regulations and imposed by the Federal Revenue and Customs Administration during the process of nationalization. In case of litigation and controversy between the parties, depending on the form of payment, the issue can be settled in the light of the rules of the International Chamber of Commerce – ICC rules or, if there is no agreement, by judicial means within the jurisdiction chosen, which can be the supplier’s or the buyer’s country. IV.3. Government procurement In any country, the government is a major client and that is not different in Brazil. In addition to the Brazilian Federal Government, there are 26 state governments, the Federal District government and over 5,500 municipalities, some of which are quite large. At any government instance, procurement is regulated by the federal Law no. 8,666, dated 21 July 1993, which establishes the need for bidding processes for these purchases, whether of goods or services, including those originating abroad. The Ministries, mixed-capital companies, autonomous State companies and state agencies are required to conduct import operations by publishing government procurement opportunities and inviting interested parties in participating in a public pricing bid. The selection criteria depend on the content of the announcements, but the criterion of lowest price is normally prevalent, provided the product’s technical requirements and the supply conditions are met. In the case of a tie between the proposals presented by a national firm and a foreign one, the law will favor the national product. How to export to Brazil 79
Brazil – Ministry of External Relations Normally, a bank guarantee is required together with the proposal; should the winning company renounce signing the supply or execution contract, the guarantee given will cover the expenses of the new bid. All public bidding is posted on the Internet. IV.4. Distribution channels The exporter may choose from three different ways of placing their products in Brazil, depending on their business interests and the needs of the consumer market. IV.4.1. Direct export In this case, the exporter will negotiate directly with importers, be them the final consumers of their products or not. It is recommended that, prior to the initial contact, a detailed market survey be made to identify the potential buyers, thus avoiding wasting time with Brazilian companies that, while related to the product, do not represent a real business prospect. This strategy demands a constant effort and considerable financial expense from the exporter, as it entails frequent trips to Brazil to take care of business directly with the buyers. The Brazilian importer favors direct contact with suppliers as they take into account the decision power of the exporter, allowing technical queries related to the product to be cleared and, at the same time, to carry out negotiations related to the remaining sales conditions and towards more competitive prices. To avoid considerable expenses, the exporter should have in mind a strategy geared towards those really interested in their merchandise, which may require substantial traveling across the Brazilian states. IV.4.2. Indirect export The advantage in this distribution channel is that market expenses in Brazil are considerably reduced for the exporter, in consequence of the outsourcing of sales efforts to a specialized company. In Brazil, these intermediary companies are divided in two organizational forms: • Trading Company; • Commercial Company. 80 How to export to Brazil
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