Importing to Brazil

Photo: Matt Hintsa

© Connection Consulting 2009

It was virtually impossible to find imported products in Brazil before 1990. The Brazilian government made use of protectionist measures such as limiting quotes and extremely high taxes to discourage importing of goods. This picture however changed when ex-president Fernando Collor de Mello broke the importing barrier by reducing the average importing taxes and abolishing many limiting quotes.

Although it became easier to import products, there are still other challenges that companies will face when bringing their goods into Brazil. Besides of meeting prohibitions on the import of certain items such as used clothings, cars and machinery, importers have to deal with complex cascading taxes and charges that increase significantly the cost of importing products into the country. In most cases taxes (both federal and state) and other charges will add about 100% to the importing cost, depending on what type of product and which state is the final destination for the import.

How to start importing

All importers must be registered at Foreign Trade Secretariat (SECEX) through a system named Sistema integrado de comércio exterior (Siscomex). This system registers, monitors and controls international trades with Brazil. You will be able access to Siscomex from banks, broker agencies or terminals on foreign trading related governmental agencies. It is also possible to access the system from your office if you obtain a password at Federal Revenue Secretariat.

You will be registered at Siscomex as importer or exporter at Registro de Exportadores e Importadores (REI) the first time you are importing goods. The next step is to obtain an importing license if your product requires one. There are two types of license:

* Automatic license: Automatic Licenses are granted to most imports into Brazil.
* Non-automatic license: These are necessary for products that require approval from other ministries or agencies, such as National Petroleum Agency (ANP), Brazilian Institute of Environment (IBAMA), Ministry of Science and Technology (MCT). The list of products that require non-automatic licenses can be found here.

It is important to make sure you have the necessary license before you ship the goods, as some items are not allowed to enter the country without the documentation in place. Unfortunately, if your product is under a non-automatic license regime, it may take several months before you receive your license.
RTS – Simplified taxation regime

If you you are planning to import your products using the regular mail service or couriers, you may benefit from a simplified taxation regime when your import has a value under USD 3000. RTS however doesn’t apply for alcoholic beverages, tobacco and smoking related products.

The fixed import tax is 60% of product value declared in the commercial invoice plus the freight and freight insurance costs if these are not included in the value of the goods. The procedure to pay the tax will depend on the carrier you choose:
Regular mail

If the goods worth less than USD 500, taxes (import tax and ICMS) are paid at the post office when you are picking up the goods. For goods that worth above USD 500 and below USD 3000, you must register the import at Siscomex to obtain a Declaração Simplificada de Importação (DSI). In addition to ICMS (VAT) you will be required to pay BRL 150 for customs clearance.
Couriers

Courier will calculate and pay the necessary taxes directly to the Federal Revenue Secretariat, and the addressee will be charged later.

*Written by Connection Consulting, a business consultant boutique for foreign technology companies that want to develop business opportunities in Brazil. Connection Consulting have the HQ in São Paulo and offices in London and San Francisco. For more information see: http://connectionconsulting.com.br/ or contact them at info@connectionconconsulting.com.br

Brazil clips the wings of banks adept at capital flight

By Gillian Tett/Financial Times

The Brazilian financial system has contained a striking local quirk in recent years. Unlike most other large economies, Brazil has insisted that any global bank that wanted to operate within its borders had to create subsidiaries, with their own capital, rather than branches of a head office.

This stance seemed unfashionable until quite recently. The dominant western theory before the credit bust was that capital markets were becoming increasingly globalised and integrated, which implied that banks should be able to move capital freely wherever they wanted, without worrying about national borders.

But Brazil’s stance is now stimulating a wider policy debate. Brazilian officials say one reason their financial system weathered the recent crisis relatively well was that the presence of subsidiaries enabled regulators to keep a close eye on banks – while also preventing any sudden capital flight. “This policy has served us well,” one Brazilian financial official told counterparts in Europe last week. Thus, the question now is whether other countries should follow suit and impose similar, local ring-fencing policies.

This is a suggestion that many bankers hate. Some big global banks, such as HSBC and Santander, do have a form of subsidiary structure. But most do not, and are apt to argue that national restrictions on banks would fly in the face of globalisation, while making the cost of capital much more expensive, since the use of capital would be less efficient.

However, at least two key reasons are enabling the concept to gain traction. First, the collapse of Lehman Brothers last year illustrated the problems that regulators face when trying to retrieve assets, if these can flit across a border without any control. In the case of Lehmans, billions of dollars left London just before its collapse. British lawyers are still trying to get it back.

Second, the debate on “living wills” – blueprints for how banks might dissolve themselves in a crisis – is threatening to shine a fresh light on global banking structures.

The idea of such wills was first mooted earlier this year, and British regulators have recently renamed them “recovery and resolution plans”. The Financial Services Authorityhas asked half a dozen UK-based banks to prepare such RRPs.

Paul Tucker, deputy governor of the Bank of England, is leading an international committee that will soon follow suit with 25 or so global banks.

Onecontentious issue is whether these reports will be kept confidential or not. But if the exercise gains momentum, it might produce a new level of transparency about where banks currently keep their assets, relative to their business and risks. That, in turn, might well prompt demands for more national ring-fencing of banks’ operations, as well as other forms of reorganisation.

Precisely for that reason, the emerging market members of the G20 are now backing the whole “living wills” idea. Some countries have spotted that if assets are ring-fenced, it makes it harder for global banks to flee if a crisis breaks.

Of course, as western bankers point out, such ring-fencing comes at a price – most notably, by making capital more expensive.

At a time when the world is still reeling from the cost of seemingly seamless global capital markets, however, that trade-off may yet appear more compelling.

Either way, it is worth keeping a close eye on what happens next to those living wills-cumRRPs – not just inside nations such as Brazil, but in the rest of the global financial system, too.

4 Common Misconceptions About Brazil

By Connection Consulting

After providing consulting for numerous business to start up in Brazil, we have learned that there are a few subjects related to bureaucracy and perceptions about Brazil that catch foreigners by surprise especially when they are planning to set up or already are in the process to open their business in the country.

Based on our experience we decided to write this guide to clarify 4 of the most usual misconceptions that people have when bringing their business to Brazil:

Salaries are Very Low in Brazil

It is easy to think of Brazil as a country with cheap workforce so this may be the most common misconception of all people planning to set up in Brazil. Just to give you an idea of the evolution of the salaries, the minimum wage increased at an astonishing pace in the past years practically doubling if compared to the figures from 2002.

Right now the minimum wage is BRL 465. It is worth to note however that the gap between different categories is huge so you will rarely find any employee with a bachelor degree in engineering that earn less than BRL 3000. Salaries vary a lot from state to state, but for experts the salary may double or even triple.

Top that with high social costs and an extra salary per year (the 13th salary) and will you have a idea of the annual cost of an employee for the company.

Companies can be Opened on a Blink of an Eye

Unlike the process in the US or in most European countries where opening a company is quick and usually require filling out a form or two, the Brazilian company formation process is far more complicated and time-consuming. Different authorities, licenses and taxes are involved depending on the type of company you are planning to open and it can take from one to six months before your company is operating. 

The fact that there is foreigner presence in the company also makes the process slower and more expensive due to extra translations costs.

Rio de Janeiro is the Only City to be

Some people tend to be fooled by the status that Rio de Janeiro has as a vacation destination thinking that such status also applies for business. We are not trying to say Rio de Janeiro is not a good place to establish your business, but you should be aware that there are other places in the country with great potential and that may even offer incentives such as free plots of land for you to build your business or tax reductions. 

São Paulo is still considered the business capital of Brazil and alone corresponds to 15% of the country’s GNP. Also three quarters of the all business events in Brazil happen in São Paulo. Manaus is also an interesting place for electronics manufacturing business due to its free trade zone regulations.

Get your Brazilian Documents in Brazil

Foreigners sometimes get overwhelmed by the amount of documents that are necessary to live in Brazil and the most natural perception is that it will be easier to obtain all documents once they are in Brazilian soil. That is not always true. 

Some documents, for example the CPF, can also be obtained in the Brazilian Consulate so it worth to check with them if they can assist you. You are little likely to get information in English from the authorities in Brazil, so besides of having help in your own language, the Consulate is more used to handle request from foreigners.