Thinking of trading in Brazil? Main facts and how to get started

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Investing in Brazil is always a top of mind matter when thinking about Latin America since, over the years, Brazil has emerged as a strong and competitive global player.

With a highly diversified economy, a relevant domestic consumer market and a wide range of trading partners, there are plenty of business opportunities in the country, particularly in agribusiness, aquaculture, oil and gas, mining, retail, capital projects and infrastructure, education and healthcare.

However, as any other emerging market, Brazil presents pitfalls and challenges that businesses must consider and overcome to succeed in their operations.

Brazil shipped US$191.1 billion worth of products around the globe in 2015. This represents roughly 1% of overall global exports estimated at $18.686 trillion.

Brazil's size when compared to European countries.
Brazil’s size when compared to European countries.

From a continental perspective, 39.1% of Brazil’s total exports by value in 2015 were delivered to Asian trade partners. European importers purchased 20.7% of Brazilian shipments while 18.7% worth of products arrived in other Latin American countries (excluding Mexico) and Caribbean nations. Brazilian exports to North American clients totaled 15.8%. At 4.3%, a smaller portion of Brazilian exports were bought by importers in Africa.

Top 15 trade partners

Almost two-thirds (63.9%) of Brazilian exports in 2015 were delivered to the following 15 trade partners:

  1. China: US$35.6 billion (18.6% of total Brazil exports)
  2. United States: $24.2 billion (12.7%)
  3. Argentina: $12.8 billion (6.7%)
  4. Netherlands: $10 billion (5.3%)
  5. Germany: $5.2 billion (2.7%)
  6. Japan: $4.8 billion (2.5%)
  7. Chile: $4 billion (2.1%)
  8. India: $3.6 billion (1.9%)
  9. Mexico: $3.6 billion (1.9%)
  10. Italy: $3.3 billion (1.7%)
  11. South Korea: $3.1 billion (1.6%)
  12. Belgium: $3 billion (1.6%)
  13. Venezuela: $3 billion (1.6%)
  14. Spain: $3 billion (1.6%)
  15. United Kingdom: $2.9 billion (1.5%)

 

Regional trading agreements

Brazil is a member of the Southern Cone Common Market (Mercosur) trade agreement, along with Argentina, Paraguay, Uruguay and Venezuela. The Mercosur Customs Union, which took effect in 1995, includes:

  • A “rules of origin” agreement whereby Mercosur member countries may exchange products tariff-free provided certain conditions are met;
  • Exclusion lists that grant Mercosur countries the right to specify import product categories they sought to exclude from the common external tariff; and
  • A bilateral accord permitting products manufactured in Brazil’s Manaus free trade zone or Argentina’s Tierra del Fuego to be traded with full tariff exemptions within the Mercosur.

The 2004 Mercosur–Andean Community Free-Trade Area, under which Mercosur partners agreed to link their trade area to that of the Andean Community (comprising Bolivia, Colombia, Ecuador and Peru) states that import duties should be eliminated among the signatories within 15 years. To respect previous bilateral agreements within Mercosur and within the Latin American Integration Association, the bloc has 67 schedules for the reduction and eventual elimination of import duties among the nine members. Brazil is also a member of the World Trade Organization (WTO) and the Latin American Integration Association.

Countries belonging to Mercosur and timeline of their indexation.
Countries belonging to Mercosur and timeline of their indexation.

Mercosur also signed an agreement in 2004 to adopt special tariffs in its trade with the countries of the Southern African Customs Union, comprising Botswana, Lesotho, Namibia, South Africa and Swaziland. The agreement aims to gradually reduce and eventually eliminate tariffs. Similar agreements were signed with India, Chile, Mexico, Guiana, Suriname, Cuba, among others.

Imports and exports procedures

All Brazilian goods importers and exporters are required to have a special trading license named RADAR, which grants a password to access the Brazilian Integrated Foreign Trade System (Sistema Integrado de Comércio Exterior – SISCOMEX). The SISCOMEX is an electronic integrated trade documentation system designed by the Brazilian Government to control and monitor the Brazilian Foreign Trade.

This system is supervised by the Chamber of Foreign Trade-SECEX (Secretaria do Comercio Exterior), the Federal Revenue Service (Receita Federal do Brasil, or RFB), and Brazilian Central Bank (Banco Central do Brasil or BACEN). There are basically three types of RADAR licenses: (i) Express, (ii) Limited, and (iii) Unlimited. Certain procedures to obtain such licenses apply.

Except in special cases, Customs officials at the Brazilian airport or port will not release any exports until the importer pays all taxes due. SISCOMEX is responsible for automatically calculate the taxes due on shipment, based on the CIF value of goods in Brazilian Reais, using the day’s conversion rate.

Portal Unico SISCOMEX schematic
Portal Unico SISCOMEX schematic

Even if the importer is the accountable for the taxes payment, it is very important for the exporter to know how these taxes will affect the competitiveness of the product in the Brazilian market.

The Brazilian Customs Regulations allows the Brazilian entity to use special customs regimes for import and export of goods. The main custom regimes are Temporary Export, Ex-Tarifario, Bonded Warehouse, Certified Bonded Warehouse Regime and Drawback.

Antidumping rules

In 1994, Brazil and other countries signed an agreement to implement antidumping rules (GAAT 1994). Dumping is considered the offer of a product in the market of another country by a price lower than its usual price, when the export price is lower than the price charged in usual transactions for the same product in the exporting country.

To avoid such practice, the Brazilian authorities control the import prices based on the inputs obtained in commodity exchanges, specialized publications, price lists of foreign producers, prices declared by the importers, and any other method that allows evaluating import and export prices. If authorities suspect of the price charged, the company has to prove that price adopted is not lower than the price generally charged using one of the comparison methods available.

Import Tax Exemption for certain sectors

Some business can apply for an exemption or postponement of import duties on goods, creating a cash flow opportunity. This benefit may be extended to value-added taxes at State and Federal levels under certain circumstances.

There are also free-trade zones (FTZs) created for the development of the North of Brazil’s border regions. Goods for consumption, re-exportation, fish processing, mineral resources, agricultural goods, forest raw materials, tourist facilities and ship construction and repair are examples entitled to special fiscal incentives. There are four sector which cannot benefit from tax exemption in the FTZs: tobacco products, alcoholic beverages, passenger cars and guns and ammunitions.

The tax burden on imports is a fertile field for careful planning. The difference between success and failure might lie in a throughout business structure, offering products not available in the local market or with distinctive quality.

The Brazilian government often enacts bilateral agreements, import quotas and special procedures related to customs during certain periods and under determined requirements. Some exceptions and reductions are occasionally granted to industries or enterprises which are particularly important or beneficial to Brazil’s economy. Due to this dynamic scenario, prospective importers are encouraged to use expert advisors to navigate current legislation and regulations.

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Mariana Vicente is a Brazilian tax lawyer with over 10 years of international experience in tax planning and compliance, legal advice and audit in multinational companies in Europe, Asia and the Americas. She has lived in Brazil, Panama, Mexico, United States and Italy, residing in Denmark since 2015.

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