International Business: Law, culture influence the pace of business in Brazil
“If I killed my employee, I would spend less time and money dealing with (Brazil’s) legal system than if I fired him,” commented a Brazilian businessman to his U.S. attorney. The client certainly made his point about red tape in Brazil’s employment law; however, the attorney, Randall K. Edwards, obviously did not make any recommendation that would favor homicide.
Edwards and Randa B.S. Vieira, LL.M., who is licensed to practice law in Brazil, gave a presentation about exporting to Brazil on March 20 at the World Trade Center of Utah. The example of this frustrated employer is one of many examples Edwards and Vieira shared to illustrate that Brazilian law and culture influence the pace of business, making transactions complete either more slowly or more quickly than they would in the United States, depending on the type of transaction involved.
With his expertise in U.S.-Brazilian business law, Edwards regularly meets people who want to do business in Brazil because they fell in love with the country while studying, volunteering or vacationing there. Still, these people are often surprised to find business in Brazil so very different from America’s and can inadvertently step on a myriad of figurative landmines.
Edwards regularly sets expectations with U.S. businesses by explaining that transactions in Brazil follow a “rule of three.” “It will take three times as long to accomplish a business transaction in Brazil as in the United States, and it will cost three times as much money,” says Edwards. “But you will make three times as much profit,” thanks to the strong growth of the country’s economy.
If you are frustrated with trade regulations and laws, he recommends you do not attempt to sidestep them illegally, as doing so can have disastrous consequences. One U.S. franchise discovered this the hard way.
After achieving considerable success in the United States, this franchise decided to expand to Brazil with the help of an American representative who, after living in Brazil for two years as a volunteer, spoke the Portuguese language and knew many local contacts. As new franchisees were recruited, the American would simply bring the necessary business equipment for each new recruit in his checked baggage, but did not report any of it to customs.
Eventually, enough franchises got up and running that the American was forced to send a separate shipment of expensive franchise equipment to Brazil. Unfortunately, Brazilian customs held up the shipment, as it arrived without the proper paperwork, and the American was dismayed by the amount of red tape he encountered when trying to get the shipment through.
After six months without making any progress, customs decided to make an example of this franchise the shipment was put out on a pallet in the middle of the port, set on fire and photographed. The message — U.S. companies should not attempt to avoid import laws and regulations — was clear.
Brazilian culture also influences the pace of business there. Vieira explained that 10 a.m. meetings commonly start at 11 a.m. in Brazil, particularly during the rainy season when flooding snarls city traffic. Once meetings begin, they may include a lot of talk about “futebol” (soccer) and casual, non-business topics, especially over lunch, dinner, coffee or a drink at happy hour. Edwards says you may close a deal after socializing all day long and never once speaking about business.
Working with the local government can also influence the pace of a deal. Edwards heard of one U.S. company clinching a deal because it offered to sponsor a public works project in honor of a Brazilian mayor.
On the other hand, Brazilians sometimes see business in the United States as slower and more risky. When Edwards represented a Brazilian client who was suing a U.S. company in U.S. courts, the client told Edwards, “In Brazil, a judge would normally cost about $20,000, but I assume it would cost more in the United States. Would it take about $50,000?”
Shocked, Edwards replied, “No, that will not work.”
The client misunderstood, thinking that Edwards might be attempting to request more so he could skim some off the top — which Edwards, of course, was not trying to do — so the client persisted, “Well, then how much? $100,000? More?”
“No, you don’t understand,” exclaimed Edwards. “Bribery is not an option! We would all go to jail!”
“Well, how can you go to court if you don’t know how it will turn out?” asked the Brazilian. “How can your system work like that?!”
These differences in law are not unique to Brazil, but Brazilian import laws did make headlines this month when millions of dollars in Argentine auto imports were held up at the Brazilian border awaiting a new special license that could take as many as 60 days to be approved.
These differences that affect the pace of business in Brazil are also not new. Gary Neeleman, President of Utah’s Brazilian-American Chamber of Commerce, was a correspondent in Brazil for United Press International from 1958 to 1966 and recalls even tougher obstacles. “It was a torment,” said Neeleman in Flying High, a book about his son, David Neeleman, who founded the airlines JetBlue and Azul. "You couldn't import anything. We'd go to the foreign ministry and say, 'Look, we've got to have another seven teletype machines because Eisenhower is coming,' and they might (occasionally) give us a break."
Whether business transactions move more quickly or more slowly in your target market, companies benefit greatly from having contacts like Edwards and Vieira to set expectations and guide them through different laws and culture. Such contacts for Brazil can be found through the local or national Brazilian-American Chamber of Commerce and similar organizations. With expectations properly set and import laws properly followed, companies can better plan for success and avoid seeing their international venture go up in flames.
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