Establishing a successful market presence in Brazil is a process demanding the investment of time, organizational resources, and money. It entails a whole-hearted commitment. It is more art than science.
However, there are certain strategic principles that -- if understood and followed -- will significantly enhance the chances for success. These can be grouped into the following areas: 1) understanding the environmental technologies marketplace and information gathering, and 2) defining a strategy.
Understanding the Environmental Technologies Marketplace
A successful market presence is constructed on the foundation of thoroughly understanding the Brazilian marketplace and its customers. A baseline effort should be made to build an understanding of the marketplace, its dynamics, business culture, the major government and business players, the competition, and the market niches that offer the best opportunities for profit. Such an understanding will lead to the critical success factors pertinent to the market, which then provides the appropriate grounding for comprehensive strategy formulation, and hence, effective market positioning.
Critical Success Factors
There are four main factors which are important for positioning in the Brazilian environmental technologies.
1. For U.S. companies to effectively operate within the Brazilian environmental technologies, in- country presence is absolutely necessary. This may be attained either by means of direct presence, or by local partnering. The latter is highly recommended for U.S. companies not accustomed to conducting business in Brazil, since a local partner will prove an extremely valuable added component due to knowledge of local practices and a probable greater affinity towards relationship building.
2. Developing a complete package which encompasses all aspects: equipment supply, consulting services, and financing or financing feasibility. In the absence of such a complete package, it is difficult to get U.S environmental exports into Brazil. The current need for financing has enhanced the need for such complete business packages.
3. Mastering the forthcoming ISO 14001 standards is imperative for environmental suppliers to Brazil, especially in the medium and long term. This has particular importance with all Brazilian exporting companies and multinationals, which must be ISO certified to guarantee future exports, especially to European Union customers. The United States to date has fallen behind in this aspect; nevertheless, U.S. environmental equipment and services companies must strive to familiarize themselves with the standards before expecting to engage in operations in Brazil.
4. Promoting visits and exchanges can be a decisive source of competitive advantage. The underlying logic is that by participating in trips, Brazilian companies will be exposed to the host company’s products in a sustained and detailed way. Companies from Japan, France and Canada regularly promote professional exchanges and visits.
Information Gathering
The best informal sources of information on environmental business opportunities are the following:
1. Noncompetitive Expatriate Business People
Business people in other new markets, from banking to technology, are often outstanding sources of information. They are particularly good sources of information in complex areas, like profit remittance and the development of professional relationships.
2. Creative Local Business People
Native business people are often outstanding sources of information, because they are eager to prove that the country is a good place in which to do business -- not the Brazil of old, but a modern, changing environment. They can provide very useful firsthand experience on regulatory enforcement and compliance.
3. Potential Business Partners
The use of potential business partners is is the trickiest area, given that there is little built-in incentive for providing information beyond what is of most interest to these executives.
It is imperative to develop powerful information sources as soon as possible. This is normally done through firms that are accustomed to training foreign managers, by opening up solid contacts and sources of information for them.
There are also a number of traditional sources -- the "usual sources" -- that can provide a foundation of information on the market. These sources include:
A. U.S. & Foreign Commercial Service
The U.S. & Foreign Commercial Service (US&FCS) of the U.S. Department of Commerce’s International Trade Administration provides useful subsector analyses and project information with timetables for bidding and contact information. The US&FCS is particularly well established in Brazil’s major business center, São Paulo, with the new U.S. Commercial Center building. However, the U.S. Government also operates consulates in Rio de Janeiro, Belo Horizonte, and other cities throughout Brazil. US&FCS officials are often contacted directly by Brazilian companies interested in meeting U.S. partners.
B. International Business Chambers
International business chambers offer opportunities to network with other Brazilian and U.S. firms that have developed important knowledge of the local environmental technologies. The American Chamber of Commerce in São Paulo, for instance, offers frequent seminars or workshops on specific topics, publishes a newsletter, and is currently doing a special report series on good cities for doing business in Brazil. It is an excellent source of information on specific companies and business opportunities.
C. Local Associations
Brazil organizes its industry along well-established associations networks, representing specific sectors (construction, steel, petrochemical, etc.). These associations can provide an industry overview and will often make referrals to their member firms or have databases on industry members. The Federation of Industry in the State of São Paulo (FIESP) is one of the largest such organizations. Located in the city of São Paulo, it has its hand on the “pulse” of trends in heavy industry, including the utilization of environmental technologies.
In addition, the São Paulo-based Agency for the Development of the Tietê-Paraná (ADTP), a regional Tennessee Valley Authority-style development group, promotes major infrastructure projects, including municipal wastewater treatment facilities, in a five-state area of southern Brazil.
D. Local Private Consultants and Researchers
Private providers of market information and industry contacts are an increasingly important source of information as they fill a void in the market. In choosing private consultants or researchers, professional credentials and experience need to be carefully reviewed.
E. Specialty Business Publications/Conferences
There are an increasing number of specialty publications and conferences focused on business issues in Brazil. These provide not only overviews of business climate and assessments of opportunities in specific subsectors, such as renewable energy, hazardous waste, wastewater, etc., but also a very solid opportunity for developing contacts.
Defining a Strategy
Forming a Project Team
Many international firms are working with different local firms on a project-by-project basis, often with the implicit or explicit understanding that if the resulting project is successful a more permanent relationship might be established. Under this model, a firm might form a partnership with local company X on one project, company X's competition on another project and with company Y on a third. Local partners are usually selected according to either regional strengths or strengths in a given market segment.
The advantage of this approach is that it avoids long-term commitments while allowing the foreign firm to selectively choose a partner based on the particular strength of a local partner for a particular project. If successful, a revenue stream can be established prior to having to make decisions involving major capital expenditures.
On the negative side, the project-by-project approach requires a large expenditure of effort to coordinate projects with different partners and to constantly build new relationships. This strategy may also create the impression of a firm that is indecisive and unreliable. Local partners are cautious about sharing information for fear that the foreign firm may use it to advantage in a competing venture.
Develop a Team of Local Professionals
Simultaneously, while gathering information on the marketplace and opportunities, the foreign firm should seek to identify and bring into the team qualified professionals with a wide range of experience and the ability to perceive and communicate a range of relevant, high-value, information. These executives will become a part of the firm's permanent Brazil team -- and will largely determine strategy and tactics, as well as success and failure.
These professionals should include not only lawyers, accountants, business consultants, and financial advisors, but also those professionals who can act as informal advisors on a periodic basis. This latter group might consist of industry or government contacts that can be trusted to provide an independent perspective on strategic questions to the business yet have no vested interest in the process.
Culture
Cultural issues are fundamental and come in two flavors: business issues and social issues. In terms of fundamental distinctions it is at least as important to remember that cultural rules and norms differ radically even within a region such as Latin America. The Brazilian business culture is different and should not be blindly left to a company’s “Latin America expert,” unless he or she is knowledgeable of the cultural differences.
Additionally, personal relationships are fundamental to successful business in Brazil. While this is a well-worn truism, it must be stressed. Brazilian businessmen perceive relationships as fundamental to any joint activities while U.S. executives generally place less value on relationships. Whereas the Brazilian executive perceives relationships as currency built-up over a lifetime, a U.S. executive tends to see contacts as business associates who should be made available in the normal course of business. In a country where the rules of doing business -- laws, regulations, government policy, and even constitutions -- have changed frequently over the years, the personal relationship between two businessmen can be a more predictable, lasting, and dependable force.
Spend Time in Country
Executives who play an oversight role in establishing Latin American operations should spend as much time in country as possible. Without such exposure it is difficult for most executives to understand the fundamental transformation of the Brazilian economy or to appreciate the deep impact that cultural issues have on business practices and market opportunities. Spending time in country also builds personal relationships -- and doing business in Brazil is driven by relationships.
Setting a Focus
Due in significant part to the large amount of resources needed to enter environmental technologies overseas, foreign firms are often best served by focusing on market areas in which they are most competitive.
This is logical and also serves a "getting-started" purpose. By focusing on a single project you gain fundamental experience and contacts, as you move through the layers of the business and public policy communities, negotiating the deal and getting to know the key players and their real importance.
In this sense, the initial focus on one project or market sector is fundamental. This can be difficult, since given the vast environmental opportunities in Brazil it is tempting to cast as wide a net as possible.
Guard Reputation Carefully
Brazil’s business community and government tend to be linked through friendships and family. As a result, reports of foreign firms' successes, failures, or reputation spread quickly and often irreversibly. Thus, new market entrants must be cognizant of the intense scrutiny that they will receive during the market entry process. Inappropriate cultural behavior, alliances with less than reputable local firms or individuals, or any hint of less than aboveboard dealings with government officials must be avoided. On the other side, a firm that manages the entry process well will establish a strong reputation and will increase the number of opportunities available to it.
Credibility
Regardless of the reputation and size of the foreign firm in its home market, credibility will not be established until it has successfully completed work in Brazil. Brazilians want evidence not only that the foreign firm has the ability to successfully manage projects or sales outside of the home market, but also in the unique context of Brazil. There is a persuasive sense that until a foreign firm has demonstrated this ability in Brazil, it cannot be considered a serious player. This is more than the obvious point that winning projects is good for business, but that the establishment of a track record is critical to serious consideration for leadership in major projects in Brazil. You are not real in the eyes of in-country executives until you have mastered the system -- until you have "run the traps."
Many companies fall into the trap of touting their track record in other Latin American markets. A word of caution must be given, since Brazilian firms do not like to use their Latin American neighbors as models. Brazilian firms as well as Brazilians in general view their own experience as unique and separate from that of the rest of Latin America.
