For the last few days I’ve been working in Sao Paulo – itself a classic example of cognitive dissonance. Locals pronounce it both as ‘San Paulo’ and ‘Sow Paulo’. When asked which is correct, they answer ‘both’.
Sao Paulo is a sprawling mega-city, grittier and more dangerous than the elegant Santiago I just left, but with life and colour, an evident love of football and, of course, more Brazilians than a teenage boy’s browser history.
The street the NZTE office is on is one of the main roads in the city and is host to street marches at least twice a week. On one hand, you would think the seemingly carefree, life-loving Brazilians incapable of being unhappy – but here again cognitive dissonance is evident. While the vibrant, happy sounds on the street are true, so too are the deep-seated concerns and mistrust of the Government, and a strong desire for change. When the approval rating of the current President is lower than the average temperature in winter, you have a problem. President Dilma’s approval rating is around 6% due to a huge corruption scandal with a state-owned oil company and alleged general mismanagement of the economy. Meanwhile the temperature today varied between 34 – 38 degrees.
And the cognitive dissonance continues; Brazil is simultaneously one of the most difficult markets in the world, and the most promising. Local Beachheads advisors briefed me on the current market and political environment: low growth, but a high currency. A very tough time for businesses to invest, but perhaps a good time to buy a business. Brazil has a tax regime that is incredibly difficult to navigate– it’s common for a business to have to report over 40 different types of taxes, and in some cases, these are additive – tax on tax. Apparently the Brazilian tax authority has 2 ‘Kray’ supercomputers focused on processing claims and most businesses hire an internal tax expert whose sole job is to file returns. It gives you a new appreciation of our country, with New Zealand ranked in the top 3 easiest places in the world to do business.
Because New Zealand has no tax treaty with Brazil, New Zealand companies still need to pay tax on money returned to New Zealand – even after paying Brazilian taxes. Despite this, there are NZ companies here doing well – again that contradiction. With 200 million people - many moving into the middle classes – and an average age of 23-26 years, the sheer power of numbers quickly kicks in and a good idea can take hold fast here.
The class system here is interesting – it has a sort of semi-official rating system, running from A to E. Despite high unemployment, analysts predict a large number to move up from ‘D’ to ‘C’ over the next few years. This represents new consumers hungry for quality products and a quality of life that new-found wealth can bring. It will also put increased pressure on infrastructure which is already under strain. For example, the city is currently facing a water crisis, not a drought – apparently there is plenty of water – but a shortage of water as the locals claim mismanagement of the water supply can leave some parts of the city with only 3 or 4 hours of water supply a day. Similarly power appears to go off regularly too. I was surprised to hear that Brazil has made huge strides in slowing and remediating the impacts of deforestation and carbon emissions.
Of course, that may be wrong, who can tell in this country?
I met up with some friends from my Stanford experience, and again, heard more of the contradiction that is Brazil. One of them drives an armoured car, but the other runs to work. Both are tempted to leave to find better conditions for themselves and their families, both love living in Sao Paulo and are optimistic for the country. “Brazil, the country of the Future”, the locals joke – “yes, and it always will be”.
How to reconcile all this dissonance? Perhaps I should conclude with some advice from all the people I met about New Zealanders entering South America as a market:
- New Zealand has a ‘brand’ here; a positive association, a receptive and willing audience. Despite our beating the Argentinians at rugby on the weekend South Americans find us ‘charming’, ‘resourceful’, ‘smart’ and even ‘cute’ (that might be just me, not sure). Perhaps metaphorically, the song ‘How Bizarre’ is really popular here; it’s apparently played almost every night at clubs and parties. So we are pushing on somewhat of an open door.
- Don’t get complacent. ‘Charm is not enough’ one person told me – ‘Kiwis are too relaxed, too low-key, too under-prepared’ for what they need to do to be successful. I was told tales of businesses who’d neglected the basics, such as having a contract with their customer, refusing to give their in-market people the support and basics they need to be successful (like a business card in the local language!), or concluding a deal with a distributor with just a handshake at the airport. Our beachheads advisors told me they had yet to meet a New Zealand business owner who spoke Spanish (or Portuguese).
- It’s never a bad time to enter the market, if you are prepared, and if you find a niche to be successful in. With smart products, a good appreciation of the required investment, local support and good advice, you can be successful – even in a market where the real tax rate may be close to 50%, where a patent can take longer to register than the period it covers you for, and corruption is still rife.
Which gives me an idea for a new slogan: “Brazil - How Bizarre.”