The 7 Most Common Problems for Businesses in Brazil
Brazil has attracted foreign investment over the last 10 years, but some barriers are still hard to overcome and directly affect the “doing business” part. These are the most common problems that businesses face in Brazil. Make sure you come prepared!
1. Staff turn-over
Brazilians do change jobs very often. Especially now, with the current professional shortage, Brazilians have stayed as little as three months in a job. In many cases, they are leaving because the other company offers extra BRL 50,00 or provides benefits, like health insurance, for example. This behavior comes from a tradition in which a successful career is directly linked to money and not to the construction of a company or brand.
Most employees leave without any warning, leaving the employer in a delicate situation as he will have to rush to get another employee (and as he needs a new employee with a certain urgency, he may end up accepting a less qualified candidate). Also, when an employee leaves, he creates a lot of problems, like generating costs for the hiring of a new employee, overwork for other employees - what may lead to dissatisfaction and poor development of the workflow -, and the time spent in the training process.
So if the employee is really indispensable, the best option is to ask why he is leaving, consider if what he is asking is fair (usually a wage increase) and calculate if it is worth to let him go.
Brazil still has the highest tax burden of all BRIC countries. When opening a company in Brazil, it is estimated that entrepreneurs spend at least 67% of their profits with taxation matters. Many of these costs go on throughout the year as Brazil has got more than 275000 norms regarding the payment of taxes.
Among the most common taxes charged in Brazil, we have:
- CIDE: paid by those who import or commercialize items and assets covered by the tax. The rate is of 10%.
- COFINS: paid by companies who collect taxes based on added value. Rate ranges from 3% to 7,6%.
- CSLL: charged over every legal entity resident in the country and over those that are treated by tax legislation. Rate ranges from 9% to 15%.
- Import Duty: charged over the importer, the recipient of the international shipping named by the sender, the one who is acquiring the good and the bidder of seized or abandoned products. Rates change according to the good.
- IOF: paid by both legal entities and private people. Rates range from 1% to 25%.
- IPI: paid by the industry owner and by the importer of the goods. Rates range from 0% to 300%.
- PIS/Pasep: paid by legal entities, including non-profit makers and organizations held by the government. Rate ranges from 0,65% to 1,65%.
- IRPJ: paid by public or private legal entities residing in Brazil. Rate ranges from 15% to 25%.
- IE: paid by the exporter of the goods from Brazil. Rates range from 30% to 150%.
- ICMS: paid by private people and legal entities who commercialize any good, by those who import products from abroad, by those who acquire goods seized by customs and those who acquire petroleum products from abroad. Rate ranges from 7% to 25%.
You can find more details about these taxes in our article "The 16 Most Common Taxes in Brazil
Opening a business in Brazil takes up to 185 days, what demands that the company is already solid to have enough capital to wait so many months until it can make some money. Such bureaucracy creates severe barriers to imports, exports and foreign investment, directly affecting the economic growth.
The major obstacles related to bureaucracy are explained in details in the article “7 Challenges SMES face in Brazil, so I will just briefly mention them here.
- Problems getting support from BNDES
- Taxation issues
- Frequent changes in norms and procedures
- Additional costs
- Barriers to import
- Barriers to export
- Delays to get a patent
4. Delays and absenteeism
Strongly connected to bureaucracy, delays affect the workflow in several different ways. If legal procedures to open a company already take too long, they still can get delayed. Holidays and strikes significantly delay the work of government departments, what directly affects companies’ workflow.
Also, as approached in the article “Can Brazilians be on time?”, Brazilian employees tend to be late and even absent. Just like in other countries, absenteeism is mostly caused by diseases, stress and demotivation. As employees who ask for dismissal lose part of their rights, they become late and absent as an attempt to have the employer firing him instead.
According to IBGE, only 7,9% of the Brazilian population has a college degree and a large part of it is concentrated in the Federal District (Brasília) and in states of São Paulo, Rio de Janeiro, Minas Gerais, Paraná, Santa Catarina and Rio Grande do Sul. If you are planning on bringing your company to the North or Northeast of Brazil, there is a great possibility that you will have problems finding qualified workforce.
Another major problem faced by entrepreneurs is to find employees who speak English. According to a research made by Catho online, less than 12% of the Brazilian population speaks English and only 3,4% of this amount is able to talk about any subject in English.
Another problem related to education is the professional shortage, especially in areas related to technology and engineering. It is estimated that out of 130 thousand students who start an Engineering course every year, only 35 thousand will effectively graduate.
The two main reasons are the prices (the cheapest monthly fee for an Engineering course is of BRL 573,00 a month and the average is of BRL 900,00), availability (engineering courses offered by public universities are full time, what is an obstacle for those who need to work) and the difficulty level. More than 50% of the Brazilian students leave high school without knowing Mathematics, Chemistry and Physics, the basis for Science and Technology courses.
The problem has become so significant that the federal government has been investing in technology courses and Engineering through programs like “Pronatec”, “Science without Borders” and the “National “Engineering Plan”
Benefits are what make hiring in Brazil so expensive and is one of the reasons why Brazilians change jobs so frequently: it is not only a higher salary that make them leave, but also the offer of other benefits. We could divide benefits into two categories: mandatory and non-mandatory.
- Paid Vacations
- 13th Salary
- FGTS deposit
- Meal for employees working more than 8 hours a day
- Leave (four months for pregnant women and five days for men who have become fathers)
- Life insurance
- Health insurance
- Cesta básica (the basic grocery items)
- Day care center
- Programa de Participação nos Lucros e Resultados (profit sharing)
- Good quality education for the employee’s kids
Brazil has got 11 federal holidays and each Brazilian city has its own holidays. São Paulo city, for example, has its birthday on January 25th and then São Paulo state has a holiday in July 9th, to celebrate the revolution.
Most Brazilian holidays are of religious nature and very much related to traditions, like Carnaval. Officially, Carnaval is only a holiday on Tuesday, but most people take off Saturday, Sunday, Monday, Tuesday and half of Wednesday. If a holiday happens to be on a Thursday, Brazilians already rely on a practice called “emendar”, which is the Portuguese word for “splice”. Companies are not obliged to give away this day between the holiday and the weekend, however, they are very expected to.
Many companies have their employees working extra hours to compensate for these days and in many cases, depending on your business range, it is the best thing to do as your business partners probably won’t be working either.
Also, with the exception of professionals who have in their contracts that they are expected to work on holidays (such as doctors, nurses, police officers and guards), Brazilians have the right to take off the holiday and if the employer needs him to work, he will be required to pay overtime of 100%. It is important to highlight that the employer must give the option of working on the weekend and not coerce his employee to do so, although this is what happens in many cases.
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