Oh Say Can’t You See — Top 10 Mistakes Foreign Companies Make When Starting Businesses in Brazil
During most of my professional life I have worked with foreign companies who are doing, or trying to do, business in Brazil. I have advised them, consulted to them, made presentations and delivered seminars on how to do business in Brazil. In the current cyber-paced world where everyone lives quarter-to-quarter, square-jawed Dallas-based sales managers have the same inflexible demands for the Rio de Janeiro office as for the Jakarta one. That will never work. In the interest of helping improve understanding and give foreign companies some perspective on what it takes to be successful in Brazil, I list below the 10 most frequent mistakes I have seen made.
#1 — Being Arrogant
Arrogance is a problem often found in the behavior of foreign companies entering the Brazilian market. Although it can take many forms, it’s generally a mix of condescendence and a slight but clearly visible sense of superiority that often contaminates business relationships from the start. It might be a weird left-over from more imperialistic times, or the remains of a yet-to-be-entirely-replaced banana republic view of our region. But the fact is that most foreign companies don’t seem to consider it necessary to learn even the basic rudiments of our culture, language or geography. Many executives put in charge of Brazil have never been here. Very well paid marketing professionals do not conduct the most basic local market research and expect to be able to push their foreign products with no customization or adaptation to local tastes and habits (Wall Mart stocking their first store in Brazil with life jackets when boat ownership in Brazil is minuscule comes to mind). Sales VPs refuse to translate software interfaces, manuals and even contracts to Portuguese “until a significant amount of sales is made”. Big shots who come down to “look into the eyes of the customers” reveal themselves as blabbermouths incapable of and uninterested in true communication — they come here to dictate and take orders. Arrogance prevents them from learning. Arrogance leads to making unbelievable mistakes. I can still remember the sales manager who flew to Brazil without a visa, absolutely sure they would let him in (he was sent back on the first flight). Or the company that lost a 100-million dollar contract due to their decision to appoint as leader of negotiations a gentleman from Indian origin who had never been to Brazil, did not speak a word of Portuguese and who was more interested in buying knick-knacks in Copacabana than engaging the customer in Brasilia.
#2 — Using the Home Country as a Reference
If I had a vote for every time I heard the sentence “here’s how we do this back home” I’d be President. There are many similarities between Brazil and the US (after all we were fed the same diet of Coca-Cola, sitcoms and Disneyworld) but the differences are also many, at all levels, and can be difficult to detect at first sight. I’ve met newcomers who claimed to know everything about selling to the Brazilian government because they spent their careers selling to the US or French governments (key difference: Brazil has a single law — number 8.666 — that applies to all government procurement, be it federal, state or municipal). I have seen preposterous 100-page contracts in English that companies tried to require their Brazilian clients to sign before they were given the honor of buying products (Hint: they don’t have to buy your product.)
#3 — Miscommunicating
Some of us may speak English, but that means standard, school-type English. If you say “my product is a very good one” they will understand you. But if you say “we can do this from soup to nuts” or “we need to get hold of him” it is safe to say you will lose 90% of the audience. Idiomatic expressions and slang are a no-no when trying to get your message across. Also, speak up. Slowly. And always, always check for understanding. Brazilians will not tell you they have no idea what you are talking about. They will just smile and say yes. And you will lose the business. Also, don’t believe everything you hear and run to the office to plug optimistic forecasts into your salesforce.com. Brazilians never say “we don’t like your product and will never buy it”. They will gladly allow you to wine and dine them, and take them on trips to California or Paris, for years. Ah, and we hate — absolutely hate — conference calls.
#4 — Expecting Quick Results
You need at least two years if you are planning to build a business from scratch — and your local people need the resources to do it. This is a vibrant, complex economy, with sophisticated consumers, much competition and government regulation. It does not matter how good your product and idea are: you will not build a profitable and sustainable business instantly. The sales cycle to government clients is nine months or longer after they agree that your product is great. Large corporations are not much faster; many of them will require your product to go through some sort of testing (regardless of the impressive client list you already have in Europe and the US). There are no miracles; or maybe there are, but the magicians that perform them might compromise your ethics.
#5 — Falling into the Home Office Trap
Lately many foreign companies, new entrants to Brazil, have discovered that they can save a lot of money by not having an office and having their people work at home. But Brazilian lifestyle is not suited to this; our families are large and noisy and our wives are demanding. A home worker will never have the same productivity they would have in an office. In the end there will be no actual savings. Also, a great amount of paperwork is involved in running a business here (if you are doing it right). Also, beware of labor law issues. You will need an office.
#6 — Misunderstanding the Legal System
Foreigners are often scared to death of the Brazilian legal system and therefore reluctant to do any business here. Fear may also lead to the imposition of absurd contractual requirements. The CFO of one large defense contractor I worked for demanded that their prospect Brazilian clients paid the invoice 100% in advance before the company would even start providing services, and became very angry when this proved not be a successful marketing approach. Brazilian law is neither better nor worse than the law of other countries; it’s just different. The most significant issue is that courts move very slowly, so try to avoid any legal battle if at all possible. Opening a business here? Hire a good law firm and develop a trusting relationship with them. That simple. Do not, I repeat, do not make decisions based on articles on Brazilian law you found on the internet. This is a serious issue.
#7 — Hiring Too Fast
Labor law in Brazil is heavily biased against employers (don’t ask — it’s another article). Firing can be very expensive, especially with no cause. It’s easy for employees to sue companies and most often they get something. So wait until you need to hire, and make sure you are making sound choices. I know companies that get a new country manager every few years wasting a lot of their profits (and credibility) in the process.
#8 — Not Valuing Relationships
Brazilians do not do business with companies, they do it with people. Relationships are key. Your clients need to like you and your people. Really. If you have jerks in your team, send them back home or fire them. Brazilians won’t be bossed into buying your products. You must connect at the personal level. We have a saying: “to our friends, everything; to others, the law”. Think about it.
#9 — Underestimating the Size of the Country
We are a very big country. A plane ticket from Rio to Manaus is more expensive than one to Miami. Consider this when planning your trips here or when assigning sales territories.
#10 — Not Vetting Your Associates
It never ceases to surprise me how often large foreign companies associate with Brazilian businessmen or companies they know next to nothing about. Do your due diligence; at the very minimal ask for bylaws, balance sheet, income statements and, when dealing in especially sensitive markets, a statement of clean criminal records. Otherwise you could easily find yourself in trouble.
Roberto Motta is a Rio de Janeiro-based entrepreneur, consultant, lecturer and writer. He writes on LinkedIn, Medium , Facebook and Quora. He also blogs in Portuguese in his own blog Seis Por Meia Dúzia