Brazil’s E-Commerce Market Is Booming

With some notable policy fixes, Latin America’s largest economy will drive business growth across the region. Here’s how your company can ride Brazil’s e-commerce wave.

From the outside, Brazil’s fast-growing e-commerce market looks like a huge opportunity for retailers.

Simply put, Brazilians have embraced online shopping with their well-known zest and inimitability.

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Brazilian consumers are ranked No. 1 in the world for their overall satisfaction with the online shopping experience.

Even as the country’s economy – the largest in Latin America and the second-largest in the hemisphere after the United States – has struggled to recover from its worst-ever, recent downturn, online purchases have continued to grow by double-digit ratios.

Nothing – not rising unemployment nor inflation, not a series of unsettling corruption scandals that, among other things, resulted in the downfall of the country’s president – could dampen Brazilians’ enthusiasm for online shopping.

And that’s what the “bad times” have been like. Just imagine what will happen when the good times return – as they surely will – to this huge and vibrant emerging market.

Good times for Brazil

But profitably entering Brazil can be quite challenging for newcomers for a variety of reasons, including a tax system that lawyers from Baker & McKenzie have characterized as “fiendishly complex,” laden with “extraordinary penalties” and the prospect of “endless litigation” for businesses that make even honest mistakes.

The bottom line? You can’t just set up a Portuguese language site featuring your products and expect the reais to start rolling in.

First, the good news – Brazilians love shopping online. They really do. In the most recent UPS Pulse of the Online Shopper global study, Brazilian consumers here ranked No. 1 in the world in terms of their overall satisfaction with the online shopping experience.

[Image: Jag Images/Getty]

They also lead the world in their willingness to make purchases on the web from international sellers and in their embrace of online marketplaces – more good news for outsiders eyeing the marketplace.

And unlike their counterparts in other regions of the world, Brazilians are remarkably patient when it comes to order fulfillment. They’re willing to wait seven days for delivery when they’re paying for it and a full 11 days if the delivery is free.

Policy obstacles

This sounds great, but Brazil’s marketplace has regulatory peculiarities and policy obstacles that add costs and time to digital trade and can trip up retailers who samba into the country without doing their homework.

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Logistics pose a particular challenge for companies doing business in Brazil.

Chief among the challenges are high tariffs that increase the cost of imported goods and those “fiendishly complex” taxes.

The country’s fickle customs system, where minor errors or omissions in paperwork can trigger interminable delays in processing, is also an issue.

And a maze of rules and regulations, at times as impenetrable as Brazil’s Amazon rainforest, ranging from consumer protection to intra-country transportation, can also make doing business as challenging as a 19th century jungle expedition.

Exporters and importers for instance are required to register with the country’s Foreign Trade Secretariat (SECEX) and comply with the Brazilian Customer Protection Code – a code so tilted it might well be called “Seller Beware.”

The U.S. Department of Commerce warns that logistics “pose a particular challenge” for companies doing business in Brazil because of the country’s transportation infrastructure. In fact, the World Economic Forum ranks Brazil 107th out of 144 countries in level of development.

In addition to high tariffs, businesses need to navigate a bureaucratic legal environment that can drain their patience and attention, as well as their financial resources.

And while the conviction and sentencing of former President Luiz Inacio Lula da Silva and powerful business executives on corruption charges as part of the “Lava Jato” (Car Wash) investigation is proof that the rule of law works in Brazil, corruption and contract fraud remain problems here – adding to the complexity of doing business profitably.

Tapping into expertise

Still, Brazil has undertaken a number of structural reforms since the 1990s. It has adopted a comprehensive Fiscal Responsibility Law, reduced many trade barriers and reformed its financial sector. But its tax and customs systems have yet to be overhauled.

That’s why the U.S. Department of Commerce encourages small- and medium-sized exporters to work with a reputable local partner when developing new business in the Brazilian market.

Talking with UPS, which has been doing business in Brazil for decades, is a good place to start your in-country networking. We employ 3,000 people in Brazil, provide services in the country through UPS Express, UPS Air Cargo, UPS Capital and UPS Supply Chain Solutions and run brokerage operations in 20 Brazilian cities.

Our brokerage expertise can be a difference maker in expediting clearance. We also service local e-commerce companies, helping them offer a faster delivery to their customers.

When navigating the choppy waters of digital commerce, we’ve seen it all. We can help.

Nadir Moreno is Brazil Country Manager at UPS. She is responsible for small package, contract logistics, freight forwarding and UPSCO (Air Cargo Airline) divisions.

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