Lazy workers, strict laws and difficult sales — what prejudices prevent startups from entering the Brazilian market

Kirill Onopriychuk, ex-director of the Moscow office of the Chinese accelerator Techcode and the Startup Grind branch, the largest community of entrepreneurs in the world, partner of the BonoPartner agency in bringing companies to the markets of Latin America, spoke about his experience of localizing startups in Brazil.

Brazil — what is this region today

Brazil — it is a federation even more decentralized than the US.

Power here is divided equally between:

• President
• Parliament,
• local governors
• by the local legislature.

Just like in America, each state has its own laws and taxes.

However, the Brazilian market is not so interested in global trends and what is happening in neighboring Latin American countries.

To conquer this market, you need to understand it well: there are many cultural subtleties and peculiarities of mentality. Therefore, it is equally difficult for Latin Americans from the Spanish-speaking LATAM and foreigners from other regions to enter Brazil.

But Brazil is open to foreign entrepreneurs — it is enough to become "Brazilian" company and speak Portuguese, and all roads will open immediately.

Brazil's Hidden Potential

All world funds are represented in the country, and investments in the region are growing in proportion to the start-up market. In many ways, Latin American startups are “doing” the cash register Asian funds — especially China.

China sees Brazil as a good M&A market. And the money they can't invest in the US, they invest in Brazil.

"This is what could have happened to Russia, but happened in Brazil — simply because there is a working legal system that can protect foreign investors and minority shareholders», — the expert thinks.

Presence of SEZ

In Brazil, there are autonomous agglomerations, remote from the centers of business life, where many people live — these are, for example, tropical regions and regions of the Amazon. In the north, there are many automotive industries that hire cheap labor.

The government gave these industries great preferences: there are free economic zones there.

Startup Visa

All LATAM countries have Digital Nomad visas, some — for example, in Chile and Colombia, you can get a start-up visa.

You can apply for a residence permit in Brazil on the basis of an established company.

Brazilian mentality

From a business point of view, it will be easier for Russian entrepreneurs to integrate into the environment than in China, but harder than in the United States. Cultural demands manifest themselves in several moments at once.

Language

In Brazil, they speak Portuguese, almost no one knows English. Therefore, if you are serious about doing business in Latin America, there are three ways:

1. hire a local team
2. contact consultants who know the language
3. learn Portuguese by yourself.

Most likely, you will have to do all three things — not immediately, but in order.

For example, to enter Distrito, a local IIDF (diversified community), it is enough:

•  chat with community members,
•  go to events
•  be able to speak Portuguese — this is a mandatory requirement.

 Personal communication

“It is easy for Brazilians to understand Russians, and vice versa. We have approximately the same view of our countries. Only from Brazilians and Russians can you hear the phrase "our country could be the greatest in the world, but why are we constantly screwing up?"», — Kirill says.

Business communication here is the same as in Russia, except that you should not immediately get down to business — Brazilians first like to talk and exchange news.

And Brazilians, like the Japanese, don't like to say a direct "no". They will shy away and look for other ways to give you a hint of how things really are. This is important to consider when negotiating.

Myths about the region

Myth 1. "A distributor or integrator will help you enter the market"

In Brazil, a distributor or integrator has a completely different model of work.

This is a tool for growth and scaling, the success of such stories — no more than 3-5%.

Myth 2. "I'll take my own team, the locals are very lazy"

Yes, work culture is more developed in Russia, but Brazil is also not lazy — it's just that somewhere they are used to working differently, and it would be simply dishonest to call them lazy.

“In Brazil, everyone works the way society expects them to, and if you hire a foreigner who acts differently, you simply won’t learn how to sell to Brazilians. If you think someone is lazy — you just haven't learned how to work with it. In another country, people cannot live up to your expectations because of a different culture,” — the expert notices.

Myth 3. "Selling here is risky: everyone buys in installments or wants to return the product after a week of use"

If a customer comes to you and wants to return the purchase, you have every right not to accept it: in Brazil, consumer legislation is not particularly developed, it is based on a contract that the seller signs with the buyer.

And even if you're selling an IT product, check — your contract terms.

There is no law in Brazil that requires you to accept a return.

How do I ship the product to Brazil and LATAM countries?

Where is the best place to start exiting

There are more than a dozen major countries in Latin America. And there are 15 answers, where is the best place to enter the market.

However, Argentina will probably be the most unpopular option:

• Three defaults have been declared in the last 20 years
• the country has three different official dollar exchange rates,
• inflation in 2022 was almost 100%,
• money cannot be withdrawn from there — and to try, you need to get a license from the Central Bank.

In Brazil, the withdrawal of money will be subject to large taxes and fees — if you withdraw under the contract. If you withdraw money as dividends from the work of the Brazilian "daughter" to the parent company, you do not need to pay tax.

The Brazilian government has a very open policy towards foreign entrepreneurs, but they have a clear rule: earn on our market — give "to Caesar what is Caesar's".

That is, pay the tax and hire the local team — and everything that you earn from above, withdraw wherever you want. Everything must be local — company, partners and employees.

Where is the best place to register a company

If you want to develop in Latin America and Brazil, you need at least two companies:

• one will serve Brazil — and it should be registered in Brazil,
• other — serve Spanish LATAM, and there are six different answers here; you need to understand what exactly you are selling.

Where will the return on investment be faster

In Brazil, it will be very long, but it's worth going here because:

1. Here is the largest economy in the region;
2. 80% of venture capital is here;
3. Great opportunity to sell products and services to the corporate sector.

If a company operates in the B2C market — most likely, you need to go to Mexico:

• The market is smaller there, but the first profit will appear faster;
• There is the easiest way to withdraw money, since the country has a free trade agreement with the United States.

However, becoming a billion dollar company in the Mexican market is likely to fail. And Brazil provides such an opportunity.

What does Brazil invest in

Almost every startup industry already has a local unicorn. The most promising niches:

1. fintech banking
2. retail eСom
3. healtech farmtech — this is one of the few industries that is very far ahead of Russia. Brazil is in the top ten economies in terms of spending on medicine: the country spends more than 8% of the annual budget on this area, while in the Russian Federation they spend 3%, in China — 5%. 

Sales here will be difficult — business climate in Brazil

Optional and "childish"

In Brazil, it will take four months to negotiate with a decision maker, CEO or director of a large company. Cancel an appointment with such difficulty an hour in advance and reschedule for another month — a common thing for Brazilians.

You have to work with the Brazilians like with children: be patient and constantly remind about the agreements.

The problem of "manyana"

This word is ironically called "any time between tomorrow and never."

A foreign entrepreneur needs to know when is the best time to approach Brazilians with business ideas — Brazil has a different work cycle.

For example, in November-December it is better not to start anything new — for the locals, these are empty and useless months, but March and April — a very good time to start new projects.

All work processes (meetings, negotiations, approval) will be very slow, and you need to get used to it. So, the average deal cycle here is calculated according to the formula: "multiply the Russian deal cycle by three".