Overview
Doing business in Brazil requires in-depth knowledge of the local environment, including the high direct and indirect costs of doing business, commonly referred to in Portuguese as the “Custo Brasil” or “Brazil Cost.” Brazil has been working to improve its business climate. Recent reforms include a change in transfer pricing regulations that reduce the likelihood of double taxation on multinational firms repatriating profits and tax reforms aimed at simplifying its complex tax system. The Government of Brazil has been working to improve its regulatory processes through its August 2024 “Regula Melhor” Strategy, with the objective of making the preparation, implementation, monitoring and review of Brazilian regulations more efficient, in addition to promoting transparency and public participation in the regulatory process. While these new strategies and laws move Brazil in a positive direction towards economic integration, further reform is needed to address Brazil’s restrictive labor laws. Companies seeking to enter the Brazilian market should identify local partners and customs brokers to help navigate Brazil’s complex legal, regulatory, and tax systems.
Some of the challenges that U.S. companies in Brazil may face include:
Complicated Tax System: Recent tax reforms slated to be implemented between 2026 and 2032 will consolidate five existing taxes (PIS, Cofins, IPI, ICMS and ISS) into a dual Value Added Tax (VAT) system, streamlining what has been one of the most complicated tax systems in world. As Brazil phases in the new system, the current complexities of Brazil’s domestic tax system, including multiple cascading taxes and tax disputes among the various states, pose challenges for all companies operating in and exporting to Brazil, even the most experienced ones. Moreover, without a free trade agreement, Brazil imposes high taxes and tariffs on imported goods and services coming from the United States and other markets. The U.S. Commercial Service has numerous industry specialists and a host of other contacts that are equipped with tools to help U.S. exporters succeed when met with the bewildering bureaucracy surrounding taxes and tariffs.
Other Non-tariff Barriers: U.S. exporters can expect to encounter a complicated regulatory system, inadequate or ineffective intellectual property protection and enforcement, and unique standards with limited recognition of the international standards commonly used in the United States. Companies must navigate a complex web of federal, state, and local regulations affecting their products, and frequently must be prepared to meet different standards and technical requirements from those used in the United States. This means that even if a company has already tested its products and successfully met technical requirements in the United States, it may still be necessary to re-test and re-certify those products to meet the technical requirements used in Brazil.
Logistical Costs and Delays: Poor infrastructure and inefficient customs processes mean getting products to a destination can often be a lengthier process than exporters are accustomed to experiencing. Companies should be prepared to face fees and delays in getting goods into the market. However, Brazil has taken steps to improve its infrastructure and bureaucratic inefficiencies over the past several years; and as a result, product clearance time and costs are falling. In September 2022, the customs administrations in the United States and Brazil signed a Mutual Recognition Arrangement which enhances cooperation on security and trade and will reduce wait times at the border for trusted traders.
Non-transparent Public Procurement Processes: Government tenders often favor domestic players due to local content requirements. While the Government of Brazil is the largest buyer of goods and services in Brazil, navigating the government procurement process can prove challenging if companies are not equipped with the proper contacts and information. To make the procurement market more open to international bidders, Brazil implemented a new government procurement law in January 2024 that more closely follows global procurement practices for government contracts, including eliminating some of the regulations that favored local companies. However, U.S. exporters may still find themselves at a competitive disadvantage if they do not have an in-country presence, either through established partnerships with Brazilian entities or a Brazilian representative, along with endurance and financial resources to respond to legal challenges and bureaucratic issues. The U.S. Commercial Service in Brazil (CS Brazil) can help U.S. companies find trusted local partners through our matchmaking and due diligence services.
There are several things that companies can do to familiarize themselves with the local market and overcome these challenges. First and foremost, work with the U.S. and Foreign Commercial Service when considering doing business in the market, and with our Advocacy Center when bidding on public procurements. Companies should be prepared to make a long-term commitment to the market, as it will take time to establish and build relationships locally. Given that imported U.S. products will likely be more expensive than local products, companies will need to be prepared to make the case for the product’s overall quality and value.
U.S. companies may also wish to work with our team to identify potential tools that can help to mitigate Brazil’s high tariffs and taxes. These include programs such as ex-tarifario, which grants a temporary waiver of import duties on some products not produced in Brazil. Finally, if you do encounter a trade barrier, make sure to report it either through the Commercial Service or the Department of Commerce’s Office of Trade Agreements, Negotiations and Compliance website.