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Panel 4. Business Experiences in Brazil: Views from the Inside

10/05/2012


Panel 4. Business Experiences in Brazil: Views from the Inside

Raul Herrera, partner, Corporate Securities Group, Arnold & Porter, LLP
Frederic Larmuseau, SVP of North America, former General Manager of Brazil, Reckitt Benckiser
Gabrielle Trebat, director, Brazil and Global Practices, McLarty Associates
Kathleen McInerney, director, Brazil-U.S. Business Council 

Moderator: Richard J. Coyle, executive director, Emerging Markets Institute, Samuel Curtis Johnson Graduate School of Management, Cornell University

Great reward and promise dampened by bottlenecks and challenges

Over the course of the 2012 Brazil Conference hosted by Johnson’s Emerging Markets Institute, Brazil: A Pathway into the Future, the picture of Brazil that emerged was a place of great reward and promise, but with frustrating bottlenecks and significant challenges to what most would consider normal, day-to-day business operations. Although he has worked in China, Europe, and now the U.S., Frederic Larmuseau, formerly general manager of Brazil for Reckitt Benckiser, said he is fondest of Brazil, “a country close to my heart.”   

Brazil, in addition to having enviable natural resources in the form of agriculture and oil and gas, also has an amazing resource in its people. “I tell them to leverage their can-do attitude,” said Larmuseau. “Their smile is contagious – you want to do a lot for them.” By the same token, he described middle management as being devoted to the point of being willing to walk through fire for good leaders.

What holds Brazil back, said Larmuseau, is the terrible condition of the country’s infrastructure, and the high poverty and illiteracy levels of its people. Among the issues hamstringing organizations, he mentioned onerous regulations and processes for registration, compliance, and even advertising (all commercials have to be made in Brazil). In addition, burdensome, complicated tax structures can sometimes force businesses into ridiculous gyrations: “In selling to distributors, we would have to ship through three states for a better tax situation, because if we shipped straight to where we were going, we’d pay 10 percent more,” said Larmuseau. He also pointed out the nation’s high rate of litigation in the labor market: 2.5 million new labor lawsuits annually, compared with 75,000 in the U.S.

Larmuseau counseled businesspeople interested in Brazil to focus on building their networks with industry associations and authorities: Enlist expert help on tax, legal, environmental, and consulting issues; consider local acquisitions, joint ventures, and partnerships; and close legal labor issues quickly (pay out settlements as soon as possible).

Raul Herrera, partner with the Corporate Securities Group of Arnold & Porter, LLP, characterized Brazil’s strengths versus other BRIC countries: “Unlike China, it’s democratic. Unlike India, it has no insurgents or hostile neighbors. And, unlike Russia, it treats investors respectfully.”

Gabrielle Trebat of McLarty Associates pointed out that any outside organization hoping to conduct business in Brazil should be aware of the political situation: nearly 30 political parties exist in a fragile coalition, although President Dilma Rousseff’s strong approval rating of 80 percent helps to expedite matters. She stressed the need for joint ventures and partnerships, emphasizing that Brazilians are looking for partners, not buyers. She mentioned that one good opportunity to partner and invest directly in human capital is through the Brazilian government’s Ciencia sem Fronteiras program, which is sponsoring 100,000 students in technical education.

Kathleen McInerney, director of the Brazil-U.S. Business Council, briefly addressed some of the differences in business practices between the U.S. and Brazil. For example, she said, industry association leaders can be more powerful than company leaders in Brazil, whereas the opposite is generally true in the U.S. She also mentioned some of the issues affecting Brazil’s business with the U.S., such as World Trade Organization cases against the U.S. on cotton and orange juice; agricultural subsidies on cotton, ethanol, and soybeans; and restrictive tariff rate quotas on sugar, oil, and ethanol. On the other side of the coin, U.S. business concerns with Brazil include high tariffs, complicated taxes, intellectual-property issues, onerous licensing and regulatory requirements, and transparency and bureaucracy issues.

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