The challenges of doing business in Brazil are legendary. Miles of red tape, paperwork horror stories, poor infrastructure, and other challenges help the country to place 116 out of 189 on the World Bank’s annual Ease of Doing Business report. Despite being the hemisphere’s second-largest economy, and the seventh largest economy in the world, the country is still a challenging place for investors and businessmen alike.
Or to sum it up: “Brazil is not for beginners,”said WelberBarral, formerly Brazil's Secretary of Foreign Trade and currently managing partner at BarralM Jorge Consultores in Brasilia.Speaking beforea meeting of theUniversity of Miami’s Center for Hemispheric Policy, Barral pointed to the overpowering bureaucracy that afflicts Brazil, the negative effects of protectionism and an overvalued real, plus the urgent need for reforms in education and taxes, all of which make Brazil a tough place to do business, and which have held back growth in recent years. While the country once posted growth rates around 8 percent last decade, growth has since grown sluggish.
“Brazil needs 40,000 engineers just for the oil sector and has four types of value-added tax.”How do you explain that to foreigners? he asked
Barral also gave a stunning example of Brazil’s mind-numbing bureaucracy: "When I was secretary, I received a call from an official at Guarulhos International Airport who told me, 'The Olympic torch has arrived but it’s stuck in customs.'” The problem was that that torch – which travels to different countries – had been lit before arriving in Brazil and was considered used, and such imports are banned. In a recent episode at the World Cup, the Uruguayan team complained when 86 pounds of dulce de leche – a national favorite – were confiscated at the airport as the team didn’t have proper documentation to import dairy.
As Secretary of Foreign Trade, Barral says he spent “half of the day listening to people complain about protectionism overseas and the other half listening to other people complain about imports being allowed into Brazil.”
Of course, Brazilian critics of restrictive international trade policies have plenty to complain about, especially with generous subsidies offered to farmers in the United States and Europe. “Every European cow receives about two euros a day in subsidies,” Barral said. “That’s more than the income of some people in the world.”
Brazil, Venezuela and Argentina all lack a sound policy for insertion in the world economy and are not competitive in the international economy principally because of rising protectionism over the last five yearsmarked by sharply higher tariffs, the former trade secretary said.
Focusingon Brazil, Barral noted that his country’s domestic industrial production is “not competitive” and is being held back by an overvalued real. “Brazilian manufacturing needs to find new markets, but this will not happen over the short term.”
According to the World Bank, Brazil’s exports of goods and services grew by only 0.5 percent in 2012, compared to 4.5 percent in 2011 and 11.5 percent in 2010, after falling by 9.1 percent in 2009, during the Great Recession.
Brazil has been Miami’s leading trade partner for years. In 2013, Brazil’s exports to the Miami Customs District were about $3.3 billion, up 11.2 percent from 2012. But these exports were dwarfed by imports from Miami last year, which reached $13.5 billion. Additionally, millions of Brazilians travel to Miami each year to purchase consumer goods given the high cost of purchasing them at home with various and exorbitant sales tax. Estimates put the lost revenue in the billions of dollars.
If Brazil is to continue to grow and bring its products to new markets, it must overcome many of these barriers to growth.