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ENVIRONMENTAL MARKET IN BRAZIL

By

Andréa Rangel, Trade Officer Rodrigo Voltani, Commercial Assistant

Date: May 15, 2002

“Whereas every effort has been made to ensure that the information given in this report is accurate, the Swiss Brazilian Chamber of Commerce accepts no responsibility for any errors, omissions or misleading statements in that information and no responsibility is accepted as to the standing of any firm, company or individual mentioned.”

1 CONTENTS Page No.

I - EXECUTIVE SUMMARY 03

II - METHODOLOGY 04

III - MARKET OVERVIEW 05

IV - TAXES 07

V - CONTACT LIST 09

VI - RECOMMENDATIONS 18

VII - TRADEMARKS AND PATENTS 20

VIII - BRAZIL MAP 21

IX - COMPLEMENTARY INFORMATION 22 (A) MERCOSUL 22 (B) SETTING UP A COMPANY IN BRAZIL 24 (C) TRADE FAIRS 28 (D) USEFUL TIPS 29 The Brazilian Businessman and Brazilian Industry 28 Consumer Profile (Middle/Upper Income) 28 Exporting to Brazil 30 Visiting Brazil 30 Airports 30

2 I – EXECUTIVE SUMMARY

The Brazilian market of environmental technologies ranged US$ 2.8 billion, in 2000. In the same year, 30% of the business was provided by foreign companies, being them from the United States (35%), Germany (25%), France (15%) and Canada (12%).

From 2001 to 2005, it is estimated a growth of 8 to 10%.

The Brazilian environmental market can be divided by the following segments:

- Solid waste: treatment of industrial and domestic waste - Sewer and water treatment - Reduction of gas emissions - Remediation of contaminated areas - Energy

The United Nations Conference about the Environment and Development in 1992, in Rio de Janeiro, set up new standards of working in accordance with the environment, throught the sustainability concept. Afterwards, the concern with the environment became part of the industrial activities.

We recommend an early visit to the market. Personal contact with potential partners will greatly facilitate relations in a country that puts great weight on this aspect of business.

3 II - METHODOLOGY

This report was carried out through desk research, telephone calling, internet, and company visits.

Also, technical literature, other Chambers of Commerce studies, consultants and trade press were consulted and verified.

Part of the information herewith was also provided by associations and government agencies.

4 III – MARKET OVERVIEW

The Brazilian environmental sector is the biggest in Latin America and received in 1997 a total investment amount of US$ 2.2 billion. From 2001 to 2005, it is estimated a growth of 8 to 10%.

This sector is very promising and has been growing rapidly because of the new legislation, environmental care, concern and understanding of the industry and population.

Ten years have passed since Rio 92, and Brazil has presented a great progress, not only to the agreements signed in Rio 92, but mainly to the Total Quality Management and sustainability matters.

The Brazilian market can be divided by the following segments:

 Solid waste: treatment of industrial and domestic waste

This segment presents many opportunities for investors. Brazil produces 90.000 tons of domestic garbage on daily basis and only 2% of this amount is recycled. There are great possibilities for business in the engineering and consulting services, recycling technologies, treatment of dangerous residues and incineration.

 Sewer and water treatment

This is a potential market of US$ 20 billion. Only in the treatment of urban sewer, US$ 8 billion have been invested. Business opportunities may be found in: sewer and water treatment stations; high-tech equipment; engineering and consulting services; measuring and automation equipment as well as laboratory equipment.

 Reduction of gas emissions

Technologies to control the atmospheric pollution are mainly requested by industries of cement, paper, chemicals, oil, metallurgical and fertilizing. In order to reduce the air pollution (90% caused by vehicles and 10% by industry), CONAMA – Conselho Nacional do Meio Ambiente - created a specific legislation to control the gas emissions, which forces the cleaning of exhaust systems. Good business opportunities may be found by manufacturers of filters and monitoring equipment for gas emissions.

 Remediation of contaminated areas

Unfortunately, Brazil has faced many enviromental accidents recently such as: oil spilling in Araucária (PR), Baia da Guanabara (RJ) and soil contamination in Mauá (SP). There are many projects for remediation of contaminated areas. Some major projects, such as remediation of Rio Tietê in São Paulo, Baia da Guanabara in Rio de Janeiro and Baia de Todos os Santos in Bahia are supported by the government and BNDS (Brazilian Development Bank).

5  Energy

Brazil produces approximately 90% of its electricity by hydroelectric plants, a process that has few effect on the environment. Last year, Brazil faced the energy rationing. This forced the Energy sector to think about other alternatives rather than hydroelectric and nuclear. The Brazilian electricity rationing program opened various opportunities for investments in the country. The Spanish company Endesa, for example, is investing US$ 350 million in a second transmission line linking Argentina and Brazil, with which it intends to double the exports of electricity to the Brazilian market. Iberdrola AS, another Spanish company, will also invest in the generation of electricity for the Brazilian market. In this case, the electricity will be generated by wind farms, a development of the program to invest over US$ 1.1 billion, which the company has set aside to be applied also in Spain itself, Portugal and in other nations of Latin America.

Currently, Brazil has more than 350 companies certified with ISO 14001, being most of them located in the state of São Paulo, Minas Gerais and Rio Grande do Sul.

The Ministry of Environment created in 1989 the FNMA (Fundo Nacional do Meio Ambiente – Environmental Fund) that provides financial support to small and medium size projects, which aim the sustainable use of Brazilian natural resources and preservation and recovery of the environment. The FNMA has supported more than 700 projects throughtout Brazil by establishing partnership with ONGs and municipal districts.

Counting on the economy, the commitment of the industry, ONGs and population, the environmental sector in Brazil presents huge opportunities for new technologies and investors.

CPC

CPC is the Clean Production Center, created in June 2000 through the partnership between SENAI (Serviço Nacional de Aprendizagem Industrial) and SECO (State Secretariat for Economic Affairs).

CPC intends to raise the competition among the Brazilian organizations by eco-efficiency actions, reducing costs and improving the environmental performance.

SWISSCAM provides local support to CPC by helping out with meetings, events and contacts. For further information, please contact Mr. Bernhard Muller through telephone number 55 11 5507 4947 or fax 55 11 5505 4255.

6 IV – TAXES

IMPORT AND OTHER DUTIES

The import taxes in Brazil are based on the Harmonized Tariff Code or NCM. Please contact SWISSCAM, in case you need to know the taxes for your products.

IMPORT TARIFFS

Like many countries, Brazil uses import tariffs as a means to control the supply of imports. However, since 1990, as part of its policy of opening up the economy to outside competition the government has reduced tariffs from an average of over 40% to about 14% now. This has encouraged a large increase in imports creating difficulties with the country’s trade balance. Temporary measures which were taken at the end of 1994 and the beginning of 1995 reversed earlier decision to lower tariffs on a range of goods such as cars, consumer durables, textiles, shoes, consumer electronics and, later, toys and car parts. Car tariffs were raised to 70%, but subsequently reduced to 35% for car makers who manufacture in Brazil.

Non-tariff barriers remain a problem. For example, even though a product may have a low tariff, the bureaucracy surrounding the issue of an import licence can be held up for a long time. Rules can also change, often with little notice, which can complicate import documentation.

Duty is assessed at the price at which the goods are offered for sale on the wholesale market in the exporting country, plus the cost of insurance and freight (CIF).

Goods that have been imported into Brazil can – subject to certain exceptions – be exported to countries within the Mercosul bloc without further duties being levied by the country of final destination. A harmonisation of tariffs with Mercosul is scheduled to be in place between 2001 and 2006.

7 The example below illustrates the taxes involved in a consignment attracting a 20% import duty arriving by sea:

FOB product price US$10,000 Freight & Insurance (9% + 1%) US$ 1,000 CIF product price US$11,000 Merchant Marine Tax (25% of seafreight) US$ 225 Import Duty (20% of CIF) US$ 2,200 Port Costs (about 20% of import duty + misc) US$ 44 IPI (Manufactured Products Tax) (12% on CIF + Import Duty) US$ 1,584 ICMS (sort of VAT – 17% on CIF + Import Duty + IPI) US$ 2,513 Union Tax (2.2% of CIF) US$ 242 TOTAL COST US$17,808

8 V – CONTACT LIST

1) Aquamec Equipamentos Ltda. Rua Vespasiano, 95 – Vl. Romana 05044 – 050 – São Paulo – SP Phone: +55 (11) 3872-1811 Fax: +55 (11) 3872-8892 E-mail: [email protected] Site: www.aquamec-filsan.com.br Activities: water and equipment

2) CH2M HILL do Brasil Rua Eng. Antonio Jovino, 220 – Cj. 32 05727 – 220 – São Paulo – SP Phone: ++55 (11) 3771-7340 Fax: ++55 (11) 3771-7341 E-mail: [email protected] Site: www.ch2m.com Activities: engineering and consulting in water, air and solid waste

3) CSD-Geoklock Geologia e Engenharia Ambiental Ltda Av. das Nações Unidas, 13.797 - bl. II - 14º andar – Morumbi 04794 – 000 – São Paulo – SP Phone: ++55 (11) 5501.3777 Fax: ++55 (11) 5506.4492 E-mail: [email protected] Site: www.geoklock.com.br Activities: engineering and consulting in water, air and soil

4) Resotec Rua Dr. Eduardo de Souza Aranha, 387 – 14º andar 04543 – 121 – São Paulo – SP Phone: ++55 (11) 3897-0258 Fax: ++55 (11) 3897-0258 E-mail: [email protected] Site: www.holcim.com.br Activities: final destination of industrial waste in cement kilns

9 5) Tribel – Tratamento de Resíduos Industriais de Belford Roxos S/A. Estrada da Boa Esperança, 650 26110 – 100 – Belford Roxo – RJ Phone: ++55 (21) 2762-5202 Fax: ++55 (21) 2761-4686 Site: www.tribel.com.br Activities: consulting in water and solid

6) Waterloo Brasil Ltda. Rua Dep. Lacerda Franco, 300 – 12º andar 05418 – 000 – São Paulo – SP Phone: ++55 (11) 3030-9344 E-mail: [email protected] Site: www.waterloo.com.br Activities: waste management

7) Lurgi Bamag do Brasil Ltda. Rua Carmo do Rio Verde, 245 04729 – 010 – São Paulo – SP Phone: ++55 (11) 5641-9192 Fax: ++55 (11) 5641-1630 E-mail: [email protected] Site: www.lurgibamag.com.br Activities: consulting in water and air

8) Tersel Equipamentos Industriais Ltda. Av. Padre Antônio José dos Santos, 449 – 4º andar 04563 – 001 – São Paulo – SP Phone: ++55 (11) 5533-2820 Fax: ++55 (11) 5532-1323 E-mail: [email protected] Site: www.tersel.com.br Activities: consulting in air

9) ANGEL Geologia e Meio Ambiente Rua Jaceru, 293 04705 – 000 – São Paulo – SP Phone: ++55 (11) 0800-992099 Fax: ++55 (11) 0800-992099 E-mail: [email protected] Site: www.whitemartins.com.br Activities: Consulting

10 10) ERM Econsult Ltda. Rua João Napoli Alvim, 35 02517 – 170 – São Paulo – SP Phone: ++55 (11) 3951-5623 Fax: ++55 (11) 3951-5623 E-mail: [email protected] Activities: Consulting

11) Arquipélago Engenharia S/C Ltda Rua Tabapuã, 821 – cjto. 62 04533 – 013 – São Paulo – SP Phone: ++55 (11) 3079-8940 Fax: ++55 (11) 3079-8894 E-mail: [email protected] Site: www.arquipelago.eng.br Activities: Consulting

12) Cia. Auxiliara de Viação e Obras CAVO Av. Gonçalo Madeira, 400 05348 – 000 – São Paulo – SP Phone: ++55 (11) 3714-9599 Fax: ++55 (11) 3768-4677 E-mail: resí[email protected] Site: www.cavo.com.br Activities: Engineering

13) Claritec – Equipamento Tratamento Água Ltda. Av. Pacaembu, 980 07810 – 000 – São Paulo – SP Phone: ++55 (11) 4449-3188 Fax: ++55 (11) 4449-3997 E-mail: [email protected] Activities: Equipment

14) Enfil S/A Controle Ambiental Rua Vespasiano, 95 – Vila Romana 05044 – 050 – São Paulo – SP Phone: ++55 (11) 3871-2532 Fax: ++55 (11) 3871-4376 E-mail: [email protected] Site: www.enfil.com.br Activities: Equipment

11 15) Gafor Ltda. Av. Nações Unidas, 10.989 – 3º andar Vila Olímpia – São Paulo – SP – Brasil Phone: ++55 (11) 3046-9090 Fax: ++55 (11) 3046-3588 E-mail: [email protected] Site: www.gafor.com.br Activities: Equipment

16) Mettler Toledo Ind. E Com. Ltda Al. Araguaia, 451 – Alphaville 06455 – 090 – Barueri – SP Phone: ++55 (11) 4166-7400 Fax: ++55 (11) 4166.7401 E-mail: [email protected] Site: www.mtpro.com Activities: Equipment

17) Bachema Serviços Analíticos Ambientais Ltda. Rua Américo Brasiliense, 2420 04715 – 005 – São Paulo – SP Phone: ++55 (11) 5182-6399 / 5501.3773 / 5501.3779 Fax: ++55 (11) 5183.9289 E-mail: [email protected] Activities: Laboratory

18) Green Brasil Serviços Ambientais Rodovia Rio - Terezópolis km 121,5 25900 – 000 – Magé – RJ Phone: ++55 (21) 2215-8818 Fax: ++55 (21) 2215-8819 E-mail: [email protected] Activities: Laboratory

12 Trade Press:

Revista Meio Ambiente Industrial Editora Tocalino Ltda. R. Padre Manoel Campello, 373 05206-020 – São Paulo – SP Tel./Fax: 55 11 3917 2878 E-mail: [email protected]

Banas Ambiental Editora Banas Ltda. Rua Nelson Gama de Oliveira, 825 – bloco B 05734-150 São Paulo – SP Tel.: 55 11 3746 1950 Fax: 55 11 3746 1951 Contact: Ms. Denise Guzzo

Química e Derivados Editora QD Ltda. Rua Cons. Brotero, 589 – cj. 11 01154-001 São Paulo –SP Tel.: 55 11 3826 6899 Fax: 55 11 3826 6988 Contact: Mr. Theo Pireneus

Saneamento Ambiental Brasil Mineral Química Industrial Editora Signus Ltda. Rua Eugênio de Medeiros, 499 – Pinheiro 05425-000 São Paulo – SP Tel.: 55 11 3814 6899 Fax: 55 11 3813 5534

Useful Contacts:

Abas – Assoc. Brasileira Águas Subterrâneas Rua Aspicueta, 313 aptº 72 05433 – 010 – São Paulo – SP Phone: ++55 (11) 3061-3200 Fax: ++55 (11) 260-2155 E-mail: [email protected] Site: www.sabesp.com.br

13 ABLP – Assoc. Brasileira de Limpeza Pública Av. Prestes Maia, 241 S/ 3218 01031 – 902 – São Paulo – SP Phone: ++55 (11) 229-5182 Fax: ++55 (11) 229-8490 E-mail: [email protected]

ABNT – Assoc. Brasileira de Normas Técnicas Av. 13 de Maio, 13 – 28º andar 20003 – 900 – Rio de Janeiro – RJ Phone: ++55 (21) 3974-2300 Fax: ++55 (21) 2220-1762 E-mail: [email protected] Site: www.abnt.org.br

ANA – Agência Nacional de Águas Setor Policial – Área 5 – Quadra 3 – Bloco B 70610 – 200 – Brasília – DF Phone: ++55 (61) 445-5400 E-mail: [email protected] Site: www.ana.gov.br

Cebds – Cons. Empres. Brás. De Desenv. Sustentável Av. das Américas, 1155 – Sala 608 – Barra da Tijuca 22631 – 000 – Rio de Janeiro – RJ Phone: ++55 (21) 2439-9218 Fax: ++55 (21) 2493-5746 E-mail: [email protected] Site: www.cebds.com

Cetesb – Companhia de Tecn. De Saneamento Ambiental Av. Prof. Fred. Hermann Jr., 345 – Alto de Pinheiros 05489 – 900 – São Paulo – SP Phone: ++55 (11) 3030-6000 Fax: ++55 (11) 3030-6402 E-mail: [email protected] Site: www.cetesb.sp.gov.br

14 CNI – Confederação Nacional da Indústria Rua Mariz e Barros, 678 – 2º andar 20270 – 002 – Rio de Janeiro – RJ Phone: ++55 (21) 2204-9513 Fax: ++55 (21) 2204-9522 E-mail: [email protected] Site: www.cni.org.br

Conama – Conselho Nacional do Meio Ambiente Esplan. Dos Ministério – Bl. B – sala 637 – 6º andar 70068 – 900 – Brasília – DF Phone: ++55 (61) 317-1433 Fax: ++55 (61) 226.2837

CRA – Centro de Recursos Ambientais Rua Rio S. Francisco, 1 40425 – 060 – Monte Serrat – BA Phone: ++55 (71) 310-1402 Fax: ++55 (71) 310-1515 E-mail: [email protected] Site: www.bahia.ba.gov.br

Desema – Secretaria Mun. de Desen. e Meio Ambiente Rua Recife, 2025 – Parque 10 Manaus – AM Phone: ++ 55 (92) 642-1833 Fax: ++ 55 (92) 642-1030 E-mail: [email protected] Site: www.brasil.gov.br

Feam – Fundação Estadual Meio Ambiente Av. Prudente de Morais, 1671 – Sta. Lúcia 30380-000 Belo Horizonte – MG Phone: ++ 55 (31) 3298-6200 Fax: ++ 55 (31) 3298-6422 E-mail: [email protected] Site: www.mg.gov.br

15 Feema – Fundação Estadual de Eng. do Meio Ambiente Rua Fonseca Telles, 121 – 15 andar Cx. Postal 23011 20940-200 Rio de Janeiro – RJ Phone: ++ 55 (21) 2589-3724 Fax: ++ 55 (21) 2589-3283 E-mail: presidê[email protected] Site: www.governo.rj.gov.br

Fepam – Fundação Estadual de Proteção Ambiental Rua Carlos Chagas, 55 – Centro 90030-020 Porto Alegre – RS Phone: ++ 55 (51) 3225-1588 Fax: ++ 55 (51) 3212-4151 E-mail: [email protected] Site: www.fepam.rs.gov.br

Fiesp – Federação das Ind. do Estado de São Paulo Av. Paulista, 1313 – 13 andar – A Sl 1309 01311-923-923 São Paulo – SP Phone: ++ 55 (11) 3549-4268 Fax: ++ 55 (11) 3284-6200 E-mail: [email protected] Site: www.fiesp.org.br

Fundação SOS Mata Atlântica Rua Manoel da Nóbrega, 456 04001-001 São Paulo – SP Phone: ++ 55 (11) 3887-1195 Fax: ++ 55 (11) 3885-1680 E-mail: [email protected] Site: www.sosmatatlantica.org.br

Ibama – Ins. Bras. De Meio Ambiente e dos Rec. Nat. Renováveis SAS, Qd. 05, Lote 05, BL. H – 1 andar 70070-000 Brasília – DF Phone: ++ 55 (61) 225-1686 / 223-6155 Fax: ++ 55 (61) 321-6964 E-mail: [email protected] Site: www.ibama.gov.br

16 Ministério do Meio Ambiente Esplanada dos Ministérios – Bl. B – 5 andar 70068-900 Brasília – DF Phone: ++ 55 (61) 317-1105 Fax: ++ 55 (61) 224-0658 Site: www.mma.gov.br

Organização Nacional Proteção Meio Ambiente Rua Taipas, 512 – 2 andar A Sl. 23 09560-200 São Caetano do Sul – SP Phone: ++55(11) 4226-4485 E-mail: [email protected]

Sabesp – Cia. de Saneamento Básico de São Paulo Rua Costa Carvalho, 300 05429-900 São Paulo – SP Phone: ++ 55 (11) 3388-8000 E-mail: [email protected] Site: www.sabesp.com.br

17 VI – RECOMMENDATIONS

 It is advisable to translate the catalogues into Portuguese. Remember that all competitors are locally established and people tend to take the easiest alternative.

 Since misunderstandings between business people seem to increase in proportion to the distance separating them, it is recommended that exporters visit the market, and get to know their contacts on a first-name basis. You must discuss personally essential topics such as prices and marketing strategy.

 We also recommend our Visiting Program, especially for the first time visitor. The visiting program enables the visitor to make full use of his time by providing a logical flow in the schedule of meetings. Business trips are costly and have time constraints, the visiting program is your most efficient option in using your limited time in the market, effectively.

 Some Brazilian companies are hesitant to express themselves in English, and others are wary of associations that are going to need a long period of (unpaid) missionary work. Anyway, we still recommend you to approach the companies through a letter attached to another set of catalogues, expressing that, as a result of this report, you are interested in negotiating a possible partnership. You can ask for their views on the market potential and details on how they could work together with you. You can send a price list (preferable in US dollars) and, if you are ready to negotiate prices and grant discounts, you must mention. It would be even better if you already mention when you plan to come to Brazil and ask for an appointment. Please let us know if you encounter any difficulties.

 You may be asked to contribute in promotional campaigns and to grant special discounts. Whenever it is possible, help your Brazilian partner.

 As a reference for the composition of a good distribution network, please note that São Paulo is the distribution centre for Brazil and makes up about 40% of all industry and commerce. Therefore, it must be the first target. A distributor should also cover the regions of Porto Alegre, Curitiba, Belo Horizonte and Rio de Janeiro and Bahia. The Northeast region also presents good opportunities but can be exploited later.

18  The currency devaluation has caused a drastic reduction in the import volume of many products. Many import oriented companies have gone bankrupt in the last few years. Therefore, before exporting to Brazil, it is advisable to check the financial situation of your customer/partner. A financial service company we suggest is SERASA. They have a special service to investigate some items that could be of your interest. For further details, please contact:

SERASA SERASA

London – UK Rua Líbero Badaró, 293 14th floor Tel.: +44 171 790 4048 01095-900 São Paulo - SP Fax: +44 171 790 4968 Tel.: +55 11 3150 0273 e-mail: [email protected] Fax: +55 11 232 5974 Ms. Marcia Fleming Mr. Eric Fernando Rodrigues

19 VII – TRADEMARKS AND PATENTS

Recent experience by companies setting up in Brazil has taught us the need for speedy registration.

Brazilian legislation is based on the principle that rights are acquired by registration and not by use. However, use is compulsory after the registration is granted, under penalty of the trademark being forfeited due to lack of use. The first person to register a trademark is afforded legal protection for it.

Added to this, the fact that it is extremely difficult to register on the list of well known marks, it follow that marks considered to be well-known elsewhere (or which could quickly become familiar) are legally more valuable in Brazil and therefore also more coveted than in other countries.

The owner of a foreign brand should always register in their own name and not in the name of their representative.

Companies wishing to register their trademark should use a lawyer. SWISSCAM will be able to recommend some lawyers by request.

20 VIII – BRAZIL MAP

REGION STATES REGION STATE

South-East Rio de Janeiro RJ Centre-West Mato Grosso MT São Paulo SP Mato Grosso do Sul MS Minas Gerais MG Goiás GO Espírito Santo ES Distrito Federal DF

South Paraná PR Santa Catarina SC North Amazonas AM Rio Grande do Sul RS Pará PA Rondonia RO Northeast Alagoas AL Roraima RR Ceará CE Tocantins TO Maranhão MA Acre AC Bahia BA Amapá AP Paraíba PB Pernambuco PE Piauí PI Rio Grande do Norte RN Sergipe SE

21 Brazil

RR AP

AM MA PA CE RN PB PI PE

AC AL RO TO SE MT BA

DF GO

MG

MS ES

SP RJ PR

SC

RS

22 IX – COMPLEMENTARY INFORMATION

A) MERCOSUL

On 1 January 1995, the four members of Mercosul (Mercosur in Spanish), Brazil, Argentina, Uruguay and Paraguay, began to operate a limited customs union and free trade area, creating a single market with a population of over 200 million people and a Gross Domestic Product of some US$ 733 billion.

Between 1991 and 1993 Brazilian exports to Mercosul countries more than doubled from US$ 2.3 billion to US$ 5.3 billion. This is a trend that is expected to continue.

Brazil and Argentina, the largest markets within Mercosul, have complementary economies. A number of Argentinean agricultural products, including wheat, dairy products, livestock, sheep and garlic, are extremely competitive due to lower taxation.

By contrast, Brazilian manufactured and semi-manufactured goods find markets in Mercosul, for example, auto-vehicle components, consumer goods, domestic appliances, textiles, paper, cellulose, chemicals, petrochemicals, steel, leather and footwear. Paraguay is competitive in car parts and components, fruits, glassware and steel products.

Common external tariffs (CETs) varying from 0 to 20% are being applied to about 85% of the nine thousand items traded by Mercosul members. Principal exceptions to the CET are about nine hundred capital goods and two hundred telecommunications and information technology products. In addition, each Mercosul country has its own list of exceptions: Brazil has 175 products on its list, Argentina 232, Uruguay 212 and Paraguay 210. The individual tariffs on these products will converge towards CET by 2001 or 2006. The convergence paths for each of these products on the country lists have been agreed and information is now available on the rates that will be charged in the years before the CET is reached.

The creation of a free trade area means that most products which satisfy Mercosul rules of origin now circulate within Mercosul without attracting duty. However, there are also groups of products which are temporary exceptions to the duty-free principle within Mercosul. Brazil has 29 such products, Argentina has 221, Paraguay 427 and Uruguay 950. Brazil and Argentina are each to have four years in which to reduce intra-Mercosul duties to zero on these goods; Paraguay and Uruguay are to be allowed five years. Details are available on the yearly reductions in duties which are required during this convergence period. These products are also exceptions to the CET regime, additional to those listed in paragraph one.

23 The "Mercosul content" required for goods to be considered of Mercosul origin, and therefore allowed to circulate free from duty within Mercosul, varies according to the type of product. The minimum content for most goods is 60%.

The entry into force of CET, albeit with exceptions, opens up possibilities for variations in the routing of exports to Mercosul countries. Goods for Southern Brazil, for instance, could be routed via Montevideo where port costs are lower. Also investors in Mercosul countries now have direct access to a potential market of over 200 million people - unless they are producing items that are temporary exceptions to the duty-free principle, or fail to meet local content requirements.

In December 1995 the European Union and Mercosul signed an agreement on a framework for future co-operation aimed at progressive and reciprocal liberalisation of trade and greater regional cooperation.

24 (B) SETTING UP A COMPANY IN BRAZIL

Remittance

There are normally no restrictions on the distribution and remittance of profits abroad, although distribution will be subject to 15% withholding tax.

Intellectual Property Law

The National Institute of Industrial Property (INPI) is the government entity in charge of industrial property rights, patents and registration of trademarks. The protection granted to a design patent extends for 10 years from the date on which the request for protection is filed at INPI. Procedures for the granting of a patent are lengthy and time-consuming. After it is filed at INPI, the application remains confidential for 18 months, after which it is published. The applicant must then ask for formal examination of the application within 24 months. Within 90 days of the formal request for examination, the granting, denial or shelving of the application is published.

Trading through the Establishment of a Holding Company Brazilian commercial law provides for several types of companies:

- Unlimited Partnership (Sociedade em Nome Coletivo) - General Partnership (Sociedade em Comandita Simples) - Unlimited Partnership between Capital and Labour (Sociedade de Capital e Industria) - Limited Partnership (Sociedade em Comandita por Ações) - Limited Liability Companies by Quotas (Sociedade por Quotas de Responsabilidade Limitada) - Corporations (Sociedades Anonimas)

The most common forms of enterprises in Brazil are "Sociedades Anonimas (S/A)" and the "Sociedade por Quotas de Responsabilidade Limitada (Ltda)". This is because both participants have limited liability. There are other types of partnerships upon which the law does not confer a corporate identity distinct from that of their partners, namely the "Sociedade em Conta de Participação" (a partnership in which one member is known and the other is secret) and the "Sociedade em Nome Coletivo" (a collective name company).

Registration Procedures:

All commercial companies must have their acts of incorporation submitted to the Board of Trade (Junta Comercial). Submissions should be made to the President or the advocates of the Board of Trade in the State where the company is headquartered, by way of a petition signed and dated by any partner, by attorney or person duly authorised, accompanied by the following documents:

- one original and two copies of the articles of incorporation signed by two witnesses. If the document consists of more than one page each page should be initialled by the partners.

25 - deed or certificate, where the contract is a public instrument. - photocopy of the partners' identity cards.

- a proxy granted by partners resident abroad, signed before a Notary Public in their country of origin, legalised before a Brazilian Consulate, translated by a recognised translator and registered at the Notary Public office.

- personal declaration by each partner or manager of the company that he/she is not barred from engaging in commercial activity.

- forms with data on the company and their shareholders, duly completed, accompanied by proof of payment of filing fees.

The incorporation process may take up to 45 days.

Details on Contracting People Locally/General Idea of Labour Law

Employers (both individuals and corporations) must pay 8% of pay-roll into a Special Labour Fund (FGTS) for the benefit of employees. The latter may withdraw amounts from the fund upon being dismissed without cause, and in a few other cases as set out n law. Companies must also contribute 20% of their pay- roll for the official Social Security (INSS). The law also requires firms to sign employees' work permits (Carteira de Trabalho).

Brazil has a well-developed work market with skilled professionals.

Local Authority Requirements

Local authorities require the foreign company to register the amount of capital at the Central Bank (to remit royalties abroad), their accounting books, annual statement and the formal bills of sales/procurements issued/accepted within a financial year.

Taxes

1. Taxes on income are as follows:

Tax Assessment Basis Rate Period

ISS price of service 5% average monthly ICMS value of operations 18 to 25% monthly IPI value of operations 10% average 15 days COFINS gross invoicing of goods and services 2% monthly PIS gross operational income 0.65% monthly

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ISS - Tax on certain services listed in federal law ICMS - Tax on circulation of merchandises within Brazil IPI - Tax on manufactured products COFINS - Social security contribution PIS - Contribution for the social integration programme)

2. Also, corporate profits (P) are subject to the following charges in this order:

CS - Social contribution on corporate profits, levied at a rate of around 10%. P - CS = P1

IR - Income tax, levied at an average of 37% on the remaining profit. P1 - IR = P2

ADIR - Additional Income Tax, levied by the states at a maximum rate of 5% on the remaining profit. P2 - ADIR = Profits to be remitted Imports Under Drawback

Drawback is the term used to describe an operation which enables a Brazilian company to import raw materials or parts for eventual export as a finished product.

Any product exported to Brazil under drawback is exempt of import duty.

It is possible to import raw materials under this scheme and after processing sell products on the domestic market and to other Latin American countries. To qualify as a Brazilian product within MERCOSUL, however, 60% of the export price must be added locally.

Details of storing imported goods in bonded warehouse facilities

The advantage for a British exporter using a bonded warehouse would be the fact that importers in Brazil only have to pay duties when goods are removed from warehouse. The exporter has the advantage of being able to make a consolidated shipment and supply customers in a much faster way, as goods will have already landed in Brazil.

The exporter is permitted to leave his products in a bonded warehouse for a period of one year, but this can be extended for an additional two years.

The exporter must appoint an agent or representative or consignee, who will be in charge of paying expenses and controlling goods being removed from bonded warehouse.

Although the bonded warehouse is controlled by Government officials, the exporter's representative has access to stock.

27 The cost of keeping goods at the bonded warehouse is roughly as follows (as there can be variations the cost should be checked when considering using a bonded warehouse):

* 0.3% of CIF value of goods every 10 days or full fraction plus * 0.05% insurance which is calculated on CIF + Import Duty plus * R$ 5.11 per ton or R$ 2.05 per cubic metre for mechanical movement of goods (depending which is bigger) - pallets or

* R$ 8.98 per ton or R$ 4.01 per cubic metre for manual movement of goods (depending which is bigger) - bulk

Note: the fee covering movement of goods is a one-off payment.

28 (C) TRADE FAIRS

FIMAI (*) 23-25 October São Paulo – SP www.fimai.com.br

Analítica Latin América – International Exhibition of Technology to Laboratory, Analysis, Biotechnology and Metrology 31 July – 02 August São Paulo – SP www.analiticanet.com.br

FEILIMP – 2nd International Solid Waste and Public Cleaning Exhibition 14 – 16 August São Paulo – SP www.feilimp.exponor.com.br

FICOPAM – International Trade Fair for Environmental Pollution Control 28 – 30 August São Paulo – SP www.cipanet.com.br

FITMA AQUATECH BRAZIL – International Fair of Environmental Technologies 10 – 12 September São Paulo – SP www.fagga.com.br

(*) SWISSCAM is organizing a Swiss pavillion at FIMAI. For further information, please contact Mrs. Ursula Bardorf ([email protected]).

29 (D) USEFUL TIPS

The Brazilian Businessman and Brazilian Industry

- He is well versed in international trading practices and trends.

- He is an able negotiator.

- Because of the dynamics of the Brazilian market, he is a quick decision maker, extremely flexible and fast to detect business opportunities.

- Local industry is quickly assimilating global sourcing strategies and in this context ISO 9000 and 14000 norms are being pursued and implemented.

- Brazil is a large exporter of industrialised products, technology and engineering services, e.g. cars, consumer goods, highways, airports, deep water oil prospecting, hydroelectric generating projects, etc as well as of raw materials and agricultural products.

- Many major Swiss, British, American, German and French multinational companies have been established in the country for many years, e.g. Nestlé, CSD Geoklock, Roche, Clariant, Ciba, Glaxo, Zeneca, Gessy Lever, RTZ, Shell, Rolls Royce, General Motors, Ford, Volkswagen, Siemens, Rhone-Poulenc, etc

- The Brazilian electronic banking system is very sophisticated, but face-to-face dealings with banks can be more troublesome.

Consumer Profile (Middle/Upper Income)

- Increasingly drawn to large supermarket complexes, shopping malls, and factory or bulk industrial outlets.

- Sophisticated buyers, in a society accustomed to a wide variety of choice.

- Strong awareness of overseas trends, particularly North American, including health matters.

- Ready acceptance of new products and novelties (because the Brazilian consumer in general has for many years been deprived of access to imported products).

- Emotional and extravagant buyers, especially at Christmas and summer holidays. Brazil has numerous "special dates" such as Mothers' Day, Children's Day, Father's Day, Secretary's Day, Valentine's Day, which boost sales enormously.

30 Exporting to Brazil

The initial approach to Brazilian companies is particularly important. A mailshot or catalogue is likely to end up in the bin. Brazilians expect face-to-face contact with their suppliers. It will nearly always be necessary to appoint an agent or distributor. Due to regional differences and the size of the country, in some cases it will be necessary to appoint more than one agent. The agent will expect support, expecting you to visit the market at least once a year. He will also expect support in marketing the product.

Direct approaches in English or (better) Brazilian Portuguese will give the best results. Many Brazilians speak some English and it is possible to transact much business in English.

It is worth remembering that after the opening of the Brazilian market in 1990, the country has been flooded with foreign products. You will face strong international competition and pricing.

Brazilians look for commitment to their market. A clear catalogue, prices in US dollars FOB, or preferably landed at Brazilian port, are an indication of this.

Visiting Brazil

December/January/February contain the Summer holidays and Carnival. July is the Winter holiday, therefore any business trip to Brazil should avoid these months if possible. Best time to do business is March, April, June, August and September.

The distance between the cities of Sao Paulo and Rio de Janeiro is 429 km or approximately 6 hours by car or 50 minutes by air shuttle service.

Brazilian companies often avoid, but not always, setting up meetings more than one week in advance.

Despite a tropical climate in much of the country, it is customary to wear a suit and tie.

There are two airports in the city of Sao Paulo and two in Rio de Janeiro. Details are as follows:

Rio de Janeiro Santos Dumont – in town, domestic services, shuttle service to São Paulo AIRJ (Aeroporto Internacional do Rio de Janeiro - Galeão) – international and some domestic services, about 30 minutes drive from Central areas.

São Paulo AEROPORTO INTERNACIONAL DE GUARULHOS Cumbica Via Dutra – Rodovia Airton Senna (Former Trabalhadores)

DOMESTIC AIRPORT - CONGONHAS AEROPORTO DE CONGONHAS – Av. Washington Luís

31 This Market Report was produced by

Andréa Rangel, Trade Officer Rodrigo Voltani, Commercial Assistant

SWISSCAM São Paulo Av. Das Nações Unidas, 13797 – 21º andar – Bloco II 04794-000 São Paulo - SP Tel.: 55 11 5507 4947 Fax: 55 11 5505 4255 Website: www.swisscam.com.br e-mail: [email protected] e-mail: [email protected]

“Whereas every effort has been made to ensure that the information given in this report is accurate, the Swiss Brazilian Chamber of Commerce accepts no responsibility for any errors, omissions or misleading statements in that information and no responsibility is accepted as to the standing of any firm, company or individual mentioned.”

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