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Exporting tires to Brazil, an opportunity after the nightmare

Exporting tires to Brazil, an opportunity after the nightmare

How to export tires to Brazil

Julian Soler, B2B Tyres Commercial Manager, Panama, 20 October 2018

After the recent elections in Brazil, optimism for a change in the tariff regime to create a more dynamic and open market has spread. The tire business is not out of the loop on this. The country will be a market that sellers and traders will be looking closely in the next months.

Brazil – A huge, unfriendly, market for the tire industry

Brazil is the biggest market in Latin-American and fifth global. However, it has been always considered a difficult, unfriendly market to get in. Some veterans in the import/export industry may remember the ban of retreaded tires by Brazil. This decision was challenged at the Word Trade Organization by the European Commission. The EC considered that Brazil disguised protectionism for that country’s tires market in violation of several General Agreement on Tariffs and Trade (GATT) disciplines.

Opportunities, but be aware of tariff and regional differences

Fortunately, some things have changed now. Analysts expect total sales being over the $6.5b USD by 2022, with special positive projections for cars and commercial vehicles. This means great opportunities for brave sellers and traders willing to take risks.

According to the Banesto, a Santander Group bank, Brazil’s average import tariff is 10.73% for emerging markets. However, this is far of reality for the tire industry. In this case, those tariffs are not only much higher but also depends on the final state where the merchandise is going to be shipped. Our simulations for OTR tires, an interesting market due to the lower number of agents, suggests that it is not abnormal those tariffs to go over the 100% of the cost of tires + shipping.

Finally, Brazil has 26 states and one federal district distributed in five regions: north, south, north-east, south-east and central-west. Each tax system can be very different.

Culture

First, Brazilian way of doing business is unlike any other in the western world. Some of the most frequently highlighted issues that businesses encountered when entering the Brazilian market include:

  • Bureaucracy;
  • Complex tax system;
  • High taxes;
  • Complicated labour legislation.

Moreover, the knowledge of Portuguese is also a must if you expect to make long term relationships in the country.

Inflexibility in adapting to the business culture of Brazil can deter businesses in their initial approach to the market. Patience and persistence are the keywords for success among those foreign businesses that have already entered the Brazilian market. Brazil is not a place to make a quick buck.

Some tips to make business

One of our main tips for overcoming obstacles in Brazil is to be open to new relationships. Brazilians are friendly. Creating personal relationships and taking the time to know the person behind the decision-maker opens up advantages to all those planning a long-term investment and achieving success in the country.

Consequently, visit the country is a must. It will be highly difficult for brokers to open the market without several visits to your final clients.

Finally, choose your location with care. Ports cities such us Santos are ideal for the initial contact with companies that will deal with customs and the Brazilian tax system.

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