Brazil offers the best of both worlds
Purchasing and supply chain professionals reportthat doing business with Brazilian suppliers requiresa detailed focus on building strong relationships. But the rewards are low-cost and high-quality material and service;the best of both worlds.
By David Hannon -- Purchasing, 10/5/2006 2:00:00 AM
Buyers looking for a low-cost supply region with adequate infrastructure and an educated workforce need look no further than Brazil. Procurement professionals responding to a recent Purchasing survey said the supply base in Brazil offers a good balance of low-cost and reliable quality, the Holy Grail of global sourcing.
John Kaiser, vice president of purchasing transformation at ConAgra Foods in Omaha, Neb., has been working with Brazilian packaging suppliers for more than a decade. He says Brazil, as a culture, is “more European than Latin American” which makes for good relations with U.S. companies.
“Brazil has significant infrastructure in place, unlike that found in many other low-cost countries,” Kaiser says. “And the workforce in Brazil is motivated and the overall focus is export-friendly.”
Relationships rule
Business relationships are taken more seriously in Brazil than buyers in the U.S. or Europe may be used to. A commodity manager at a Texas Internet firm tells Purchasing U.S. buyers should “be yourself and be honest with the Brazilian companies you are doing business with. That sounds easy but American businesspeople can be known to convey an attitude of superiority to companies south of the U.S.”
That advice comes from years of experience working with Brazilian telecom and Internet service providers.
Paulo Teixeira is a consultant that works with plastics and chemicals suppliers in Brazil and agrees that working there is similar to doing business in Europe. He says Brazilian companies are very open negotiators and the “people are very friendly and open and they like to develop personal relationships with customers and suppliers. Brazilians are very committed to what they agree upon and are a lot friendlier when doing business than many other countries. For me, the best part of working in Brazil is the long-term relationships that often develop with the Brazilian suppliers that transcend business.”
Another survey respondent advises that, “When doing business in Brazil, take your customers and suppliers seriously. Whatever you have heard about Brazil, it’s no banana republic.”
Kaiser points out that in his experience in doing business with Brazilian companies, “relationships are extremely important. With the historical fluctuations in the real (Brazilian currency), relationships between buyers and suppliers act as a stabilizing factor in a potentially volatile economic climate.”
Fluctuations in business climate can also be geographic in Brazil. Kaiser says Brazil is “a tale of two cities or cultures,” pointing out that the business climate in Rio de Janeiro can be very different than that of Sao Paulo or Recife. Researching the specific customs and industries in each region can provide a big head start to doing business in the specific geographies.
Teixeira says “the country is a mixture of well-developed and under-developed regions. Sao Paulo is the financial and industrial core and its agricultural business is very strong, especially for soy and meat processing. The midwest region is developing very fast as a result of the growing agriculture business while the southern region is already well developed. But the north and northeast are the poorer, underdeveloped regions.”
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Doing business in Brazil Dos • Build strong relationships with suppliers, both professionally and personally. • Learn about the region of Brazil you’re most interested in doing business in. • Learn some Portuguese if possible. • Learn to like cafezinhos or small cups of coffee. It may come two or three times during a meeting. • Learn about the currency, the real, and its value fluctuations before doing business in Brazil. • Brush up on your futbol as Brazilians are very big soccer fans. • Try the beef! Brazil’s beef comes highly recommended. Don’ts • Give the “OK” hand gesture in Brazil. It’s considered obscene. • Launch right into business talk with Brazilians—they like chit-chat. • Get flustered by seemingly casual attitudes—there’s a difference between relaxed and unprepared. • Try speaking Spanish in Brazil, unless you know the person understands Spanish. • Expect much business to get done in Rio de Janeiro (or many other places in Brazil) during its famous Carnival. Note: the 2007 Carnival is Feb. 17-20. |
Negotiation tips
Buyers experienced in doing business in Brazil say when it comes to negotiating with Brazilian companies, it’s not uncommon for suppliers to bring a lot of people to the meeting. Most do not participate but are there to learn/gain experience. And after a tense day of negotiations, it’s not uncommon to see higher management at the next meeting. This may mean some rehashing of the same issues discussed in the previous negotiations.
Kim Clark is in the purchasing organization at Iowa-based wheel and tire maker Thombert and says in her experience Brazilian suppliers appear to be very cautious of Americans. “They expect a great deal of factual information when encountering a quality issue with parts especially.”
Thombert uses a U.S.-based broker to expedite the business process in Brazil. “Working through a broker is helpful for negotiating pricing and also for clarification on quality issues. We have not seen any drawback to using a broker.”
Another benefit to using a broker with experience in the region comes when making trips to Brazil. “We felt it was best to go to Brazil with someone familiar with traveling there and who speaks the language,” says Clark. “It helps us stay on schedule.”
Nancy Bridson worked as a buyer for a Canadian office products firm and says Brazilian suppliers tend to be “more formal than those in the U.S. and Canada and definitely had a slower pace than we were used to.”
Bridson also says there “seems a slightly different attitude in dealing with women vs. men,” but admits it may be due to the fact that they simply don’t do business with women as often as U.S. or European firms.
Portuguese required?
Survey respondents gave conflicting reports of the language requirements for doing business in Brazil. While some said nearly all businesspeople speak English in the country, others said that is not true and learning some Portuguese would be useful. Again, regions in Brazil vary, so knowing which languages are prevalent in the regions you’re doing business in will be a great help.
Patricia Lin was born in Brazil and now works for a company exporting to and manufacturing in Brazil. She says, “There are still people who don’t know how to speak English, and if you don’t know Portuguese, Spanish may be the closest language you can use to make contact. But usually Brazilian people are very receptive and receive all foreign people well.”
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Exports What’s coming out of Brazil? Brazil’s $605 billion GDP makes it the 12th largest market in the world. Here’s a list of what the country is making for export today. Aircraft Bauxite Beef Cellulose Cereals Cocoa Coffee Crude oil and petrochemicals Diamonds Furniture Gold Households appliances Hydroelectric power engines Iron ore Manganese Motor vehicles Nickel Phosphates Platinum Processed food Quartz crystals Rubber Shoes Silver Soybeans Steel Sugar Textiles Timber Tin Titanium Uranium Zinc Source: Brazilian Embassy in Washington |
Lina Escudero is the procurement manager in the packaging group of a U.S.-based healthcare firm. She says Brazilian companies are “very informal and like to do business during lunch or dinner.”
Meals in Brazil tend to take place much later than U.S. businesspeople may be used to. The Texas-based commodity manager says dinners are often a very social affair and can be a good way to build the all-important relationships, but “watch the drinking” that is sometimes present at U.S. business dinners.
And perhaps most importantly, one survey respondent points out that “Brazilian beef is excellent.”
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From Purchasing.com:
Brazil to increase ethanol production for exports
Useful links for doing business in Brazil:
Doing Business in Sao Paulo
The web site from the State of Sao Paulo Industry, the main industry federation in Brazil.
Brazilian Embassy in the U.S.
To find out which cities are the easiest to do business with in Brazil visit the World Banks web site on Doing Business in Brazil. U.S. Commercial Service’s site on BrazilThe Brazilian-American Chamber of Commerce of Florida
Executive Planet’s guide to doing business in Brazil offers a wealth of information for buyers heading to the country.
Looking for trade shows and supplier fairs in Brazil? Look here.
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