The Brazilian way

Learning the meaning of jeitinho is key to understanding how to do business there.
BY SABINE VOLLMER AND SAMANTHA WHITE

Brazil dialed back its economic growth in the past three years partly to contain its inflation risk, but the world’s fifth-largest country by population and square miles remained a top global investment destination. Brazil ranked fourth in foreign direct investments received in the past 24 months, behind the United States, China, and the United Kingdom, and economic activity is expected to get a boost as Brazil hosts the World Cup in men’s soccer from June 12 to July 13 and the Olympic Games in 2016.

Businesses that expand into Brazil are likely to encounter the many faces of a country that is home to tropical rain forests, snow-covered mountains, coastal urban centers, and sparsely populated areas in the interior. Brazil is one of the most racially diverse countries in the world, but Brazilians from all walks of life are familiar with jeitinho (pronounced ZHAY-tee-new), a Portuguese expression that reflects the Brazilian way of dealing with rules and regulations.

To find out what CPAs need to know about Brazil, the JofA asked Devon Bodoh, a tax lawyer and principal in charge of Latin American markets at KPMG; Rodrigo Kich, an accountant and owner of Zwirtes Contabilidade, a public accounting and consulting firm in southern Brazil; Fábio Moraes da Costa, an accounting professor at FUCAPE Business School in Vitória, a coastal city northeast of the city of São Paulo; and Magda Wormann of Meta Contabilidade, an accounting firm in southern Brazil. Portions of that discussion follow.

What are some important customs in Brazil, and why should U.S. CPAs be familiar with them?

Costa: Brazilians need to build connections. Often meetings start with Brazilians asking personal questions in order to build connections: Are you married? Do you have kids? Prior to doing business, they want to know who the individual is they are dealing with.

Also, there’s what we call jeitinho in Portuguese. Brazil is a very bureaucratic society. We have lots of regulations, lots of rules. Sometimes it’s really hard to keep up with it all, and Brazilians tend to interpret the rules, bend them a little. Jeitinho is the Brazilian way to deal with a problem in an imaginative way; but there’s a line between legal and illegal, and jeitinho is not necessarily illegal stuff.

Bodoh: Lunch is the principal meal of the day, and Brazilians take it very seriously in the business context. When meeting in person, going out to lunch presents a good opportunity to develop relationships and discuss business opportunities.

Brazilians tend to use nonverbal cues to express themselves. For example, they show their emotions with facial expressions, gestures, tone, and volume. Conversation is lively and enthusiastic. In the business setting, Brazilians tend to be less confrontational than their U.S. counterparts and try to avoid embarrassing situations.

Kich: Brazilians are very warm and open. Even if we are meeting someone for the first time, we greet them with hugs and two kisses on the cheek. Also, it is perfectly normal to invite a business contact to dinner at your house. Of course, there are also Brazilians who are more reserved.

From mid-December to the beginning of March, Brazil comes to a halt. People all across Brazil head for the coast for summer vacation. Brazil starts to function normally again after Carnival.

Wormann: Punctuality is not one of the Brazilian people’s strongest virtues. If a meeting starts late, it’s no big problem. American visitors should not interpret that as lack of interest. 

How do business culture and corporate leadership in Brazil differ from the United States? What steps can U.S. CPAs take to minimize misunderstandings?

Costa: Do not rush to do business with Brazilians. It won’t work. It takes time to build a relationship. If you’re patient and you have time to know each other, build connections, even on a personal level, I believe it’s a good way to start. It can be a little bit frustrating for a U.S. business person who is used to doing things fast.

It’s easier and faster when you’re dealing with a big company that is used to export and import or with a company in an international industry such as the financial sector or the aviation industry. But it’s harder, for example, trying to buy fruit from a farmer in the countryside who doesn’t speak English.

Bodoh: Brazilians solve business problems and develop opportunities using personal influence and networking. Having a representative with good connections, relationships, and experience in the relevant market or industry may be a key factor of success when conducting business in Brazil and verifying reliability of information.

Kich: U.S. companies have been making use of the stock market to raise funds for many years, whereas in Brazil this is just emerging. We didn’t used to have many small investors, but now it is becoming more common for people to have investments at the stock market.

In terms of business culture, Americans are more voracious, more strategic, more courageous when it comes to investing in business. The most daring Brazilian entrepreneurs are just beginning to use institutional tools and invest in foreign markets. 

What’s the best way to handle a business dispute with a supplier or partner in Brazil?

Costa: If you rely on Brazilian courts, it can take a long time—maybe 10 years, 12 years, or 15 years. I think it’s very important to write a good contract as a way to protect yourself. Once it’s written down, it’s easier to fight for your rights. If it’s not written, you’ll have to rely on interpretations. Should a dispute arise, seek an out-of-court agreement if possible. Negotiate before you sue.

Verbal agreements are valid. If you’re dealing with a company that cares about its reputation, then a verbal agreement will work, but if reputation is not an issue, writing it down is a proper way to be protected.

Bodoh: Relationships and connections are key when handling business disputes. If a direct approach to negotiations does not work, try using a different negotiator or a party that was not directly involved in the problem. However, litigation is very common.

Wormann: It is important that the relationship between the partners should be well-defined in advance through contracts, which will facilitate the mediation process if a litigious/legal situation should arise.

How difficult is it to recruit and retain employees in Brazil, particularly finance talent? What is the best way to address the challenges?

Costa: We have really good, qualified people. But I believe we don’t have enough of them, and the ones we have can be expensive. I talked to a headhunter a few months ago, and he told me he was terrified about being hired to recruit an accountant. He said he once tried to recruit an accountant he had previously placed at another company, because he couldn’t find anybody else. When we adopted IFRS, the Big Four accounting firms helped companies do the transition, and many, many Big Four auditors were then recruited by their clients.

To recruit finance talent in Brazil, you have to offer good salaries and a good career program for the development of these employees.

Bodoh: An opportunity to work outside Brazil, like a secondment abroad, is an effective way to attract employees. In most cases, the best way to find qualified employees is through good relationships with business partners who can recommend potential candidates based on their experience. Use of recruiting professionals is also common.

Kich: A lot of managers have adopted a very liberal style of management in order to retain their talent, because it’s scarce. It suits employer and employee. In my office, we try to create a good working environment. For example, we provide lunches and good-quality equipment for work. I have no problem allowing someone to leave early if he or she needs to on occasion as long as that person delivers results.

Wormann: At present it is difficult to hire and retain talent, particularly in the area of finance and accounting. The unemployment rate has been low in Brazil in recent years, especially in some more industrialized regions. The professional training schools do not keep up with supplying the market with qualified professionals.

To retain these professionals, the company should monitor the regional wage reality continuously, which is quite dynamic, and proceed with the necessary adjustments. Benefits, such as a health plan, subsidized lunch, and transport are very highly valued. Continuous investment in education and professional training is key to talent retention. 

What’s the most important piece of advice you would give U.S. CPAs dealing with Brazil? Why do you feel so strongly about this advice?

Costa: If it’s your first time going to Brazil to do business, I would maybe look for a partner in Brazil, someone you can trust, someone you can be sure has deep knowledge about your industry, about what’s going on, about the bureaucracy. Then, on the second and third times you can come alone.

Our style in terms of regulation is inspired by Continental Europe—Portugal and Spain. But many things in Brazil have become closer to the way the U.S. works in the past 20 years, since the military dictatorship ended in 1985 and we have a democracy again and because of the many U.S. companies that have done business in Brazil for a long time.

Bodoh: Have face-to-face meetings to enhance your relationships and listen to your local team. The focus of Brazilians on personal relationships and connections makes managing human relations the most significant factor for succeeding in Brazil.

Kich: Any company seeking to do business with a partner needs to find out who they are doing business with and whether the company is appropriate and competent. For example, it’s important to examine balance sheets and financial statements that Brazilian companies are obliged to release under international standards (IFRS). So there’s no longer any need to convert them.

And there are other things you can check about companies. In Brazil we have INSS (which is something like Social Security in the U.S.) and there’s the FGTS (Fundo de Garantia do Tempo de Servico, or severance pay fund). For each of these, the government issues certificates once a business makes the requisite social contribution. The certificate guarantees that the business does not owe payments. Some companies deduct INSS from their employees’ wages but then don’t pay the government. If a company doesn’t have these certificates, it is a sign that the company is poorly managed. Similar certificates are issued for payment of state, federal, and city taxes.

Wormann: The obligations/requirements are numerous, and the fines are heavy. The same goes for the labor side of things, which apart from being different and complex, could be the source of many problems in the future if things are not done well at the beginning.

Sabine Vollmer is a senior editor with the AICPA Magazines & Newsletters team. She can be reached at svollmer@aicpa.org or 919-402-2304. Samantha White is a senior editor with the AICPA Magazines & Newsletters team. She can be reached at swhite@aicpa.org .

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