Red tape and taxes could be discouraging, but as Charles Orton-Jones discovers, these are obstacles which can be overcome
South America is a wonderful place to do business. But before you leap on a flight, it is worth assessing the logistical issues you will encounter when doing business in Latin America.
In addition to the cultural barriers, there are import tariffs, red tape and trade restrictions to consider. To keep you on your toes, the rules will vary across the country.
Trade tariffs are a serious concern. Unlike the European Union, where goods and services move freely, exporting to Brazil, for example, will be subject to restrictions and taxes.
There are two types of shipment for customs purposes: courier and formal. Courier shipments are small-scale and can be cleared by customs as they arrive. The customs officers will need to see the original waybill and commercial invoice, and an import tax of 60 per cent of the customs value will be levied. In addition to this tax there is a state tax, which varies from state to state – the average is 18 per cent. Items valued up to $3,000 may be processed this way.
It’s very European, has a lovely climate and gives you the opportunity to move into Uruguay
Consignments of higher value must go through formal clearance. This is more bureaucratic – for example, documents must be signed in blue ink – but may reduce tariffs depending on the product type.
Setting up a business in Brazil is relatively easy. Unlike that other BRIC nation China, there are few restrictions on foreigners owning land or owning a manufacturing plant.
There are some surprising taxes. Labour taxes are high and there is a mandatory “13th salary”, which is a full month’s pay paid as a bonus in December.
Nick Stocker, a director of engineering recruiter NES Global Talent, who set up a division in Brazil two years ago, says he discovered there were yet more taxes. “There is also a security fund, where a percentage of the employee’s wages must be deposited into a bank account that can be withdrawn only if employment is terminated or the employee suffers a serious illness.”
Mr Stocker adds: “The legal and tax system in Brazil is very complicated, so the use of supporting consultancies is a must to help navigate the system and set up processes. Once the systems are in place and understood, doing business in Brazil is much easier.”
These obstacles may seem dissuasive. They shouldn’t be. The British Library’s entrepreneur-in-residence Stephen Fear has done business in Brazil for three decades. He’s found it straightforward and says the law is clear. Transport for goods is superb, particularly by sea, though railways are sparse.
His tip is to look at Pelotas, a city of 346,000 people in the far south, near the Uruguay border. “It’s very European, lovely climate and gives you the opportunity to move into Uruguay,” he says. Any problems, then the British and Brazilian consulates will be keen to help.