How to enter the Brazilian market:
The main ways to enter the Brazilian market are through:
- Sales representation or a distribution network,
- setting up a business, subsidiary or branch
- acquire a company
Setting up sales representation and distribution networks is challenging even though it saves costs when compared to the incorporation of a subsidiary. The challenges are mostly related to finding the right person or company and the potential lack of control over the way third parties distribute your products and deal with your trademarks.
In starting up a company, most likely you will have to decide if you start a microcompany, a Ltda or a S/A. There are some key differences with the type of Limited’s and corporations you have in the rest of the world. Another way to set up an off-shore company.
Acquiring a company presents its own challenges as well. M&A activity in Brazil increased sharply during the last few years. Most transactions in Brazil are in the range of US$10-US$50 million. Some of the issues in company acquisition are:
- informal practices (income not recorded)
- unregistered employees
- aggressive tax planning
- low quality of financial information and controls
- high number of tax lawsuits
- succession risks
Thus, a high quality due diligence is a must in the pre-acquisition phase.