International Business Brazil: REPORT 2013

INTERNATIONAL
BUSINESS BRAZIL
REPORT 2013
INTERNATIONAL
BUSINESS BRAZIL
REPORT 2013
This report is produced by students from the following schools:

Content
18 JOHANNES NYMARK - OPTIMISM ABOUT BRAZIL

23 KEY STATISTICS
INTERNATIONAL
24 POLITICAL AND HISTORICAL OVERVIEW
28 ECONOMY
30 PETROBRAS
BUSINESS BRAZIL
32 THE TRADE RELATIONSHIP BETWEEN NORWAY AND BRAZIL
34 BRAZIL RESUMES PETROLEUM AUCTIONS
38 LOCAL UNDERSTANDING AND KNOWLEDGE

44 POLITICAL STABILITY AND INSTITUTIONAL QUALITY
46 BUREAUCRACY
48 THE BRAZILIAN LABOUR MARKET
52 WORK PERMITS AND VISAS This report is the result of a three week field trip to Brazil, and a
54 HOW TO ATTRACT AND REATAIN TALENT IN A HEATED MARKET year spent in preparation. During our field trip we visited Norwe-
56 BRAZILIAN TAXATION FROM A NORWEGIAN PERSPECTIVE
64 CORRUPTION gian companies, institutions and Brazilian educational institutes
68 INFRASTRUCTURE alike. We hope our work can be beneficial to you, and that you
70 CSR
74 FRIELE CASE enjoy reading our report.
76 HOW TO CHOOSE THE RIGHT BUSINESS MODEL -The IB-team
80 TESS CASE
84 GATEWAYS FOR NORWEGIAN COMPANIES
86 BRAZIL BEYOND 2014
89 AFTERMATH
International Business Brazil 2013 Thanks to:

www.ib.no / ib13@ib.no Arne Elias Corneliussen at Norwegian Risk Con- Ilse Castellanos, Mauro Andrade & Nara Borges at
sulting International Statoil
AUTHORS Ann-Kristin Calisch at Handelshøyskolen BI Aris Tsikouras & Henry Ritchie at McKinsey
Linn-Christel Strifeldt, Carmen Larissa Cornejo, Helene Slette- Johannes Nymark, Førsteamanuensis at NHH José Vicente Allevato at Vector, Rio de Janeiro
moen, Anders Lima Bjølgerud, Oliver Taylor, Tina Tønnessen, Martine Anne Rossvoll & Espen Bakke at the IVT Faculty, Stephane Dezaunay at PGS Brazil, Rio de Janeiro
Solberg, Dias Assembayev, Bård Sve Wallentinsen, Arne Øvrebø Lie NTNU Johannes Nymark, Førsteamanuensis NHH.
Helle Moen, Guilherme de Lemos Mendes & Jon Arne-Christian Haukeland, DnB
EDITOR Hanssen at Innovation Norway Kjell O. Johannessen and Kathy Quist at NCE Node
Tina Tønnessen Daniel Eggenberger at KLM/Air France Torkjell Leira, www.brasileira.no
Helle Klem & Andre Mundal at Royal Norwegian Magne Sangolt & Geir Helgesen at Frank Mohn
PHOTOGRAPHY Consulate General, Rio de Janeiro KPMG
Tina Tønnessen, Dias Assembayev Johnny Håberg, Norsk Eksportråd for fisk NHO
Erik Hannisdal at Inventure Management, Rio de Friele
PHOTO EDITING Janeiro Kuehne + Nagel
Sara Hardy Graversen, Cand.Design, www.sarahardy.com Walker Lima at OSM, Rio de Janeiro Arne Blystad
Alexandre Romay, Daniele Soares, Terje Heimly, Creuna
DESIGN AND CONCEPT Cibelle Maggi, Catherine Holme & Ina T. Pettersen Herma Hulst & Inge Verburg at UTZ
Lars Bakke, Architect MNAL, www.larsbakke.com at Aker Solutions Ida Fjeldstad, Magnus Hasseleid, Robert Nystad,
Astrid Svarva & Ola Lome at Powel Ingrid Bakke, Kristina Brunes & Ronny Liverød at IB
PRINT Knut Jølberg at Tess International Advisory Board
NTNU-Trykk Håkon Bringsværd & Cláudio Adário at BICTess, Rio
de Janeiro
Tony André Havelsrud, Jørn Mastervik, Lars
Granbakken & Lars Kristian Moen at Kongsberg
Maritime
Maria A. Campos & Izeusse Braga at Petrobras
Anne-Lene Midseim & Øyvind Breivik at Hydro
In this report we have tried to answer the ques- Next, we discuss the political stability and institu-
tion: Is Brazil a goldmine or a potential sore spot tional quality of Brazil as a country. The qualities
for Norwegian companies? To do this, we have of political and bureaucratic institutions are crucial
started with a presentation of the country; a more for investment decisions regarding whether or not
information based part, with the goal of giving you and in which sectors you choose to invest. It is also
some background knowledge to understand the widely supported that in order to achieve eco-
country’s current position and state. The country is nomic growth, a country needs good governance.
an emerging economy with increasing importance Brazil scores above world average on factors such
in the world marked. It has experienced economic as political stability and absence of violence, voice
growth since the mid-1990s, and seems to be on and accountability and government effectiveness,
everybody’s mind regarding “where to be and oper- but below world average on factors such as control
ate in the world”. However, there are some sore of corruption and rule of law. This indicates that
spots that a company needs to battle before Brazil Brazil still has some improvement to be done when
becomes the goldmine it has the potential to be. it comes to the extent to which public power is
exercised for private gain and aspects dealing with
The main part of this report is focused on the the extent of property rights protection. It is also
potential sore spots that you may encounter when worth noting that Brazil scores significantly lower
entering Brazil and how you may be able to solve in comparison to Norway on all the reported fac-
them. First we start out with local understanding tors.
and knowledge. Before you enter Brazil it is crucial
EXECUTIVE SUMMARY and absolutely necessary that you understand the

complexity of the country and the way that it oper-
The third sore spot is bureaucracy - perhaps one of
the most challenging aspects of doing business in
ates. We mention three common pitfalls for foreign Brazil. When operating in the country, you need
companies when they enter Brazil. First, the cost to have a lot of patience and understanding that
level is usually higher than you think. Second, you things take time, and why they do. For many for-
may have major cultural differences when it comes eign companies, this is a major headache and seems
to negotiation methods, and third, you must have totally unacceptable, but when doing business in
a good entry strategy. Brazil this is just how things are.
INTERNATIONAL BUSINESS BRAZIL 2013 7

CULTIVATE TALENTS –
“One of the main challenges
for companies in Brazil is at- CREATE CAREERS
tracting sufficiently competent
labor. Many of these com-
panies are high technology
companies specialized in a
specific field”
The fourth aspect discussed is the Brazilian labor spot for Brazil. Things are improving, especially in
market and the issue of local content, lack of quali- relation to hosting of the 2014 FIFA World Cup
fied employees and work permits and visas. One of and the 2016 Summer Olympics, and improv-
the main challenges for companies in Brazil is ing infrastructure is put high upon the political
attracting sufficiently competent labor. Many of agenda. But still, they need to improve a lot to re-
these companies are high technology companies ally exploit the possibilities that the country seems
specialized in a specific field. Coupled with the to hold.
regulations regarding local content this surge of in-
ternational companies has sparked a sharp increase Last, but not least, we discuss the importance of
in demand for highly qualified labor. corporate social responsibility (CSR) in a Brazilian
operating company, as well as the issue of choosing
Later, we debate the Brazilian tax regulations. To the right business model when entering Brazil. As CEMS academic partner
many it may seem like a cobweb of rules, unneces- a Norwegian company operating in Brazil, it is ex-
sarily complex and highly ineffective. Even though pected that you engage in CSR activities. Compa- # 8 in economics,
this might be the case, your company needs to nies are further advised to clearly communicate not FT-ranking
find a way to deal with this. In order to guide you only which CSR activities they engage in, but also
through this cobweb KPMG has written an article the reason for doing so. When it comes to busi-
on this particular subject and how you ought to ness models, it is crucial that you allocate enough Master of Science
deal with it. time to choose the right business model and decide PhD
how you want to establish you corporation in the
We also discuss the presence of corruption in the company. There are many pitfalls, especially in Executive MBA
country, even though it seems to be of diminishing relation to business culture, and it is important to
importance. Brazil has taken large steps in order to do a good due diligence on your partners.
conquer the problem of corruption that seemed to
pervade the country, but still they have a distance
to go.
Infrastructure is also an important factor to con-

sider when you enter a country. This is a major sore NORWEGIAN SCHOOL OF ECONOMICS NHH.NO
8 INTERNATIONAL BUSINESS BRAZIL 2013 INTERNATIONAL BUSINESS BRAZIL 2013 9
INTERNATIONAL
BUSINESS
A unique student project
International Business (IB) is an annual non-profit applications and interviews, and the team then
project carried out by a group of 10-12 students at- works on the project alongside their respective
tending The Norwegian University of Science and studies throughout the year before departure. The
Technology (NTNU), The Norwegian School of IB project provides an exciting and unique oppor-
Economics (NHH) and The Norwegian Business tunity for dedicated and eager students to explore,
School (BI), in collaboration with Innovation learn, and connect as well as being a unique forum
Norway. for contact between its members and the business
sector. A year spent working on the IB project is
The main purpose of the project is to explore and valuable for a future career and an excellent chance
define foreign market opportunities for Norwegian for learning and personal growth.
ventures, and to present companies considering
entering these markets with updated and relevant This year’s project focuses on Brazil, the economi-
information. Founded in 1984 by Innovation cally leading country in South America. With
Norway, the project has since its inception sent large natural resources and easy access to a strong
teams of students to visit all continents, each year workforce, Brazil’s economy has experienced major
selecting a country or region of special interest for growth in recent years, and is expected to continue
Norwegian business. The result of each year’s proj- to grow. The oil and gas and shipping sectors are of
ect is a public report based on extensive research particular interest and importance to Norwegian
in Norway and the target region, contributing to companies starting out or expanding in Brazil, and
improving the reach of Norwegian products and a significant number of Norwegian companies are
ideas beyond our borders. This report is based on already established in these and other sectors. This
information gathered in meetings and interviews represents an excellent opportunity for newcomers
with Norwegian as well as international compa- to learn from the successes and failures of those
nies and organizations in Brazil during January of who have made inroads into Brazil. It also gives
2013, and during interviews and extensive research us in the IB team a great starting point for the
conducted in Norway the preceding year. The exciting challenge of gaining and communicating
project is fully funded through sponsorship from knowledge and insights about this rapidly develop-
businesses and the project members’ academic ing and dauntingly complex economy, and we are
institutions. thrilled to take on this task.
In March of each year, a new team of students is

selected by the preceding year’s group, based on

ACKNOWLEDGEMENT ACKNOWLEDGEMENT
GUNN OVESEN is mentioned is bacalhau, which Norway has HELLE KLEM However, doing business in Brazil is not easy, as
President & CEO, exported to Brazil since the 1840s. We are seeing Consul General, we discussed during the visit of the International
Innovation Norway increasing cooperation and business opportunities Royal Norwegian Consulate General , Business Project to Rio, a fact that will be duly
for Norwegian aquaculture companies as well. Rio de Janeiro reflected in the report. Still there seem to be a
International Business has pointed Norwegian good “match” between Norwegian and Brazilian
companies in the right international direction since We are pleased to support International Business The Royal Norwegian Consulate General in Rio interests which makes business and development
1984. They provide a fresh—and comprehen- in their important project to provide Norwegian de Janeiro is very pleased that the International for mutual benefit possible. One evident example
sive—perspective on opportunities in new markets businesses with up-to-date information on the Business Project focuses on Brazil this year. It was a is relevant Norwegian technology and competence
abroad relevant for Norwegian industry. Experi- Brazilian market, and we hope the report will be true pleasure meeting with the eager and interested in exploring and producing oil in difficult/deep sea
ence shows that companies speak more openly to read thoroughly by all companies considering group of students participating in the project when areas and Brazil’s large investment program within
students than to professional consultants, and that doing business in Brazil. A well-written report on they visited Rio in January this year. It was also this field. Brazil is also” the place to be” in order to
youthful curiosity helps to question established the business climate and opportunities in a new a very timely visit due the important increased take part in future technological development in
industry assumptions. market can for some companies be what triggers a cooperation between Norway and Brazil over the this area.
process leading to an eventual market entry. last few years. This fact is recognized by the Nor-
We are very pleased to note that the focus for this wegian Government through its strategy on the The International Business Project and its report
year’s project is Brazil. With almost 200 million cooperation between Norway and Brazil launched are important for companies and others to get
people and a rapidly growing middle class, Brazil in 2011. better knowledge of the Brazilian market and
is a very large and expanding market. It is still a opportunities as seen from a young, fresh and
complicated country to do business in (Brazil is As an emerging economy with positive political, maybe different angle. The Consulate General in
ranked no. 130 on the World Bank’s Ease of doing social and economic development Brazil is increas- Rio welcomes this contribution to further expand
Business list), and it is Innovation Norway’s plea- ingly interesting to Norway and Norwegian busi- and develop the cooperation between Norway and
sure to be present in the market to help Norwegian ness. Many have already realized this, and in Rio Brazil and hope to see more Norwegian students in
companies succeed there. alone you find some 140 Norwegian companies. Brazil and vice versa in the years to come.
The Norwegian businesses cover a lot of areas such
Most of the approximately 140 Norwegian com- as bacalhau, energy, oil/gas, offshore/supply and
panies that are in Brazil today are in the oil & gas maritime services. In fact Norway is the 7th largest
and maritime sectors. We expect these sectors to investor in Brazil and invests more here than in
remain dominant also in the future. For Brazil- China.
ians, however, what comes to mind when Norway

Travel to South America
by
ACKNOWLEDGEMENT
TROND GISKE Complementing business interests explain how

Minister of trade and industry Norwegian exports to Brazil increased by nearly
200 percent during the last ten years. The total
Brazil and Norway enjoy good and deep-rooted trade in goods between our countries has become
bilateral relations. From the turn of the nineteenth threefold in the last ten years, and the value of
century, Norway has exported salted and dried cod total trade reached 13,6 billion NOK by the end of
to Brazil in exchange for Brazilian coffee beans. To- 2012. In addition comes trade in services which in
day, cod remains important to our trade relation- 2009 was estimated to be 6,8 billion NOK.
ship, representing 21 percent of Norwegian exports
of goods to Brazil in 2012. Yet, Brazil’s diversified There is a great potential for these figure to in-
economy and growing middle class present a po- crease. As highlighted in the government’s Brazil
tential for trade in multiple sectors. Strategy from 2011, Norway explores the potential
120
for a free trade agreement with Brazil within the
More than 100 Norwegian companies are now EFTA-MERCOSUR framework. Norway also
established in Brazil. The extensive Norwegian pursues a bilateral maritime agreement with Brazil,
presence is partly a result of Brazil’s oil and gas with an aim to improve the structure of coopera- weeKLy
exploration and production. In fact, about 25 tion that is already taking place. FLig htS
percent of the specialised ships operating on the
Brazilian continental shelf, such as anchor han-
dling, heavy lift and others for special operations,
It is important that students spend time abroad
during their studies in order to gain valuable to South AmericA*
are Norwegian controlled ships. Yet, Norwegian
companies have expertise in many other areas that
are relevant for Brazil. Common business opportu-
knowledge of countries of interest to Norwegian
companies. Projects like International Business
could be useful both for the companies already
with Air FrAnce And KLm
nities arise in sectors such as aluminium, biofuels, present in the market and companies that con-
fertilizers, hydropower, aquaculture and environ- sider entering the market. Today’s students are key airfrance.no
mental technology. players in making the most of the Norwegian-Bra-
zilian business potential in the years ahead. I am
I had the opportunity to witness the extensive therefore pleased to acknowledge the work done
business cooperation while visiting Brazil, accom- by students from NHH, BI and NTNU in writing
panied by a business delegation of more than 130 this report.”
representatives from 90 companies, in 2011.
* via Paris-Charles de Gaulle or Amsterdam Airport Schiphol.

PURPOSE AND
METHODOLOGY
The aim of this report is to give companies and

other interest groups a presentation of the oppor-
The report is based on comprehensive research and
a three-week field trip to Rio de Janeiro, Brazil. PART I:
tunities and challenges that Brazil might present
when entering the country, and provide first-hand
When we started our work in March 2012 we
knew that it could be a challenge to find interest- INTRODUCTION TO BRAZIL
experience and a behind the scenes market insight ing, unknown content on the Brazilian economy.
written from a student perspective. It is not meant We therefore worked out from different hypotheses 18 JOHANNES NYMARK - OPTIMISM ABOUT BRAZIL
to be exhaustive nor a complete guide, and for we made in advance and tested them during our 23 KEY STATISTICS
readers who want a broader perspective, we refer to stay. 24 POLITICAL AND HISTORICAL OVERVIEW
further reading. 28 ECONOMY
To provide academic depth, we are honored to PETROBRAS
30
It is meant to provide quantitative information re- have Torkjell Leira and Johannes Nymark as co-
garding the current state of the Brazilian economy authors. In addition KPMG, Innovation Norway 32 THE TRADE RELATIONSHIP BETWEEN NORWAY AND BRAZIL
and society. We have written the report with two and Arne Corneliussen from NRCI have written 34 BRAZIL RESUMES PETROLEUM AUCTIONS
reader segments in mind; three informative articles for further refinement of
the content.
1) Norwegian companies that find Brazil interest-
ing and want to identify what successful establish-
ments in the Brazilian marked have in common.
2) Students that want to explore how Norwegian

companies operate in emergent markets and the
challenges they face.
In a world that is becoming increasingly global and

transparent it is no longer a problem for compa-
nies to find information. We have therefore tried
to pass on useful first-hand information, put the
information in the right framework and structure,
and present it in a visual and informative way.
16 INTERNATIONAL BUSINESS BRAZIL 2013

REASON FOR
OPTIMISM ABOUT BRAZIL?
“At the moment, I’m most optimistic about Brazil, not only
because of its significant growth in the past decade but also
because of something that simultaneously declined: its level
of economic inequality”.
BY JOHANNES NYMARK The above mentioned quotation of Bill Clinton

contrasts with what should be considered as more
These words written by the former US president skepticism towards Brazil among political and
Bill Clinton in Time on October 1st 2012 sum economic leaders in our own country. Many have
up some of the challenges of today’s Brazil. In a now become aware of the problems that are still
country where there are big farms of the extension unsolved, of the bureaucratic procedures and of the
of Denmark (!) and where the social and economic social and ecological consequences of a relatively
differences are among the most scandalous in the high economic growth during the last decade.
whole world, it is of vital importance that eco- Roughly 20 % of the households still live below
nomic growth does not contribute to widen the the poverty limit, and the differences in income are
gap between rich and poor. huge.
The enormous natural resources constitute one Some political commentators consider the fact that
of the great advantages of Brazil, and even more Brazil will host the FIFA World Cup in football
so today with a government concerned with the 2014 and the Olympic Summer Games in 2016 as
welfare of the Brazilian population as well as with the ultimate evidence that the country is on its way
diversified commercial relations. Business men and to “the club of the global super powers”. However,
women have for some years been heading for Brazil today constantly more experts think the events
in great numbers, hoping to discover “gold mines” come too early. While president Dilma Rousseff
in this emerging BRICS 1 country, a potential su- is performing an unparalleled process against cor-
perpower in the near future. Norwegian politicians ruption on the highest political level, corruption
have also joined the business leaders in their expec- flourishes in the construction sector. Criticism has
tations for Brazil, especially since oil resources, new also appeared concerning the alleged favoritism of
and more progressive tendencies in foreign policy some middle and upper class areas when it comes
and more modern trends in fighting corruption to the upgrading prior to the sports events of 2014
appeared to turn this South American giant into a and 2016.
key allied in a new global world order.
1: BRICS: Brazil, Russia, India, China, South Africa.

There exist various biased ways of considering the coordinates the program, that consists of direct fi- incomes are reported to increase by about 25 % on
problem of corruption. At the beginning of the nancial support to the poorest people, the creation the average.
new millennium the newly elected Brazilian presi- of low-cost restaurants, the support of subsistence
dent Inácio Lula da Silva was accused of permitting family farming with access to microcredit granted, This is the background and the basis on which
corruption in his own government while the long- education programs aimed at healthy eating habits Norwegian business men and women have to
lasting practice of inveterate corruption implying and procuring water supply even in the most arid work when engaging in Brazil, one of the world’s
political leaders and the business community at all areas, among many other measures. most important economies today. Although a lot
levels was silenced. The same campaign cannot be remains to be done, the political, economic and
run against Lula’s successor Dilma Rousseff, who The Zero Fome program has received varied criti- social development seems to move forward in the
has been vigorously fighting corruption from the cism. The World Bank, who has not had particular right direction. Branches such as oil and gas, ship- “Although a lot remains to
day she assumed the Brazilian presidency, on Janu- success with its development programs in Latin ping, aluminum, water and infrastructure consti- be done, the political, eco-
ary 1st 2011. America, criticized the program already in 2003, tute common activities and common interests for
claiming that it did not have a clear focus and cen- Brazil as well as for Norway, and should guarantee
nomic and social development
The prestigious French sociologist Alain Toraine suring the mechanisms for money donation and fruitful cooperation in the future, with regard to seems to move forward in the
has pointed out another biased way of viewing food gathering and distribution. Less vague, but production, import and export, investment and right direction”
corruption that manifests itself when we reduce perhaps also a bit premature, were the criticisms exchange of experience.
political crisis in a country like Brazil to a question from the political opposition in Brazil when they
of corruption, a point of view that does nothing in March 2005 cited the death of several indig- Let’s finally return to former US president Bill
but nourish our prejudices, leaving the impression enous children due to malnutrition as examples of Clinton when he considers how Brazil has pro-
that people in the South are irrational whereas the the failure of the whole program. Some significant gressed during the past decade: “Brazilians did it by
serious structural and profound crisis are localized facts leave, however, no doubt about the improve- creating a pile of new jobs and paying poor fami-
in the North. ments in the fights against poverty. Children lies to send their children to school and get annual
attend school at a much higher degree than before, checkups. They did it by controlling their energy
When Lula assumed as president in 2002 he child labor has diminished considerably, and more destiny, not simply developing their oil ressources
almost immediately launched the Zero Fome (Zero than 80 % of the so-called Bolsa Família Project but also maximizing their hydropower. And they
Hunger) program, destined to reduce and finally has actually gone to the poorest of the poor. Thus, did it while planning to cut by 75 % the annual
eradicate extreme poverty and hunger in Brazil. less of a poor family’s limited income is needed to rate of rain-forest destruction. Brazil certainly still
Emphasis is on the right to basic food. The Min- pay for food – in public school children receive one has its share of challenges, but its successes have
istry of Social Development and Hunger Combat or two free meals daily – and the poorest families’ been truly astonishing”.

KEY STATISTICS
(Photo: Tony Hall)

Official name: The Federative Republic of
Brazil
Capital: Brasilia
President: Dilma Rousseff
Population: 199,321,413 (July 2012 est.)
Population growth rate: 0.86% (2012 est.)

BI Norwegian Business School is an internationally recognized and accredited, private institution located in Oslo, the
capital of Norway. BI has one of Europe’s largest and most productive academic environments in the area of business
economics and administration, marketing, finance and general management. Major cities: Sao Paulo 19.96 million; Rio
de Janeiro 11.836 million; Belo Horizonte
Bachelor of Business Administration Executive Programmes 5.736 million; Porto Alegre 4.034 million;
This three-year, full-time programme is taught entirely in BI offers part-time Executive Master programmes taught Brasilia (capital) 3.789 million (2009)
English and has an international focus and student body. entirely in English in collaboration with international
The BBA programme will give you a taste of what globali- institutions and partners. BI cooperates with several highly
sation and internationalisation are all about: a taste with a ranked international partners: Fudan University in Ethnic Groups: white 53.7%, mulatto
Scandinavian flavour, which will prepare you thoroughly for Shanghai, Nanyang Business School in Singapore, IE (mixed white and black) 38.5%, black 6.2%,
a career in international business or further postgraduate Business School in Madrid, the University of California, other (includes Japanese, Arab, Amerin-
studies. BBA students choose one of the following options Berkeley in San Francisco and IFP School in Paris.
for their third year specialisation: • Executive MBA dian) 0.9%, unspecified 0.7% (2000 census)
• BI-Fudan MBA Programme
• BBA – International Business • Executive Master of Management in Energy Languages: Portuguese (official and most
• BBA – Shipping Management widely spoken language)
Doctoral Programme
Master of Science BI offers a full-time doctoral programme leading to the title note: less common languages include
BI offers five different two-year, full-time programmes that PhD. The programme’s objective is to develop and educate Spanish (border areas and schools), Ger-
provide professional skills to meet the increasing needs of high-potential individuals to serve the society in academic, man, Italian, Japanese, English, and a
businesses. BI's Master of Science programmes provide a business and other working life communities through
stimulating and multi-cultural learning environment with an research, publication, consulting and other professional
large number of minor Amerindian lan-
international outlook. A fundamental curiosity towards the services within their field of expert knowledge. guages
subject areas unites faculty and students. Our Master of
Science programmes are thorough, demanding and inter- Summer Programme Religions: Roman Catholic (nominal)
active, and require the active participation of students. The theme of the 2013 Summer Programme will be
Intercultural Management: A Scandinavian Perspective.
73.6%, Protestant 15.4%, Spiritualist 1.3%,
• MSc in Business This four-week programme runs from 22 June – 19 July, Bantu/voodoo 0.3%, other 1.8%, unspecified
• MSc in Financial Economics 2013. BI’s Summer Programme provides extensive exposure 0.2%, none 7.4% (2000 census)
• MSc in Strategic Marketing Management to Norwegian shipping, software and other industries
• MSc in Leadership and Organisational Psychology through guest lectures and company visits. Various social
• MSc in Professional Accountancy (taught in Norwegian) and cultural activities are included in the programme too.

www.bi.edu INTERNATIONAL BUSINESS BRAZIL 2013 23
POLITICAL AND
HISTORICAL OVERVIEW
Brazil had been populated for nearly 50 000 years when the
Portuguese “discovered” the country in 1500 AD. The Brazilian
history is similar to its Latin-American neighbors in many
ways; the social inequality, the economic dependence and
the frequent military intervention in the political life. In this
section we will guide you through the modern history of Brazil
from the military regime until today.
MILITARY REGIME tion of huge areas for the benefit of road building, half a year the price peak burst and inflation ran economic plan to stabilize the economy, which
In the beginning of the 1960’s the economic situ- hydro power and new colonization also led to wild again. A similar attempt was again made in quite quickly caused a positive development for the
ation in Brazil was critical. Inflation was high, and several Indian groups being in danger of dying out. 1989, but this was also unsuccessful. Brazil’s main country’s economy.
the government lacked support from the working These conditions led to a strong reaction to the problem was the country’s foreign debt, which at
class and the army. This chaotic situation led to a regime’s lack of sense of responsibility towards the the time was the largest in the world. Cardoso was re-elected as president in 1998, as a
coup d’état in 1964 .This was the start of a nearly social tragedies that affected the population. Hun- constitutional amendment the year before allowed
20 years long military regime in Brazil. The conse- ger rebellions were supported by sectors within At the local elections in 1988, the Labour Party for re-election. His Social Democratic coalition
quences of the regime where many; radical political the Catholic Church, and some bishops called for Partido dos Trabalhadores (PT) under the leader- was able to continue. In particular, measures to
parties were banned and the national assembly was armed resistance against the regime. ship of the trade union veteran Luis Ignacio da attract foreign investors occurred to be fruitful,
dissolved. Despite this, the military regime boosted Silva (“Lula”) prospered and won in the major but the rapidly growing economy still caused the
the economic growth throughout the 1970’s, and The economic growth and the increase in exporta- industrial cities. However, Fernando Collor de country to be vulnerable with a budget and trade
this was mainly a result of an increase in foreign tion were not sufficient to equilibrate the commer- Mello from the right Liberal Party of National deficit. When Russia’s economy collapsed and the
capital in the economy. Nevertheless, this did cial balance. In the 70’s Brazil, like the other Latin Reconstruction (PRN) surprisingly won the presi- Asian financial crisis sent shock waves in the inter-
not mean that living standards were increasing American countries benefited from “easy credit” dency with the enthusiastic support of the modern national economy in 1998/99, Brazil was hit with
for the average Brazilian. In 1974 the minimum offered by banks from more developed countries. bourgeoisie in the cities. Collor implemented a full force. Speculations that the country would be
salary represented half of the amount needed for When Thatcher and Reagan imposed structural comprehensive privatization and import reduction the next “domino” in a global collapse led to dra-
subsistence and 70% of all children under the age adjustment in the beginning of the 1980’s, the in line with IMF recommendations. His confi- matic currency flight. Interest rates ran up to 45%
of 6 suffered from malnutrition. In fact, it was the interest rate escalated and Brazil’s foreign debt grew dent and dynamic style faded as Brazil’s complex and the stock exchanges plummeted.
multi-national companies that benefited from the enormously. These incidents, together with an economic problems piled up and he began to fall
increased economic growth. increasing discontent among Brazilians, led to the victim to the culture of corruption which his voters THE ERA OF LULA AND NEW HOPE
fall of the regime. thought he was going to fight. The accusations The crisis at the beginning of the new century,
During the regime Brazil became a major arms were soon made in public, and Collor was deprived however, was short lived and was less serious than
exporter and installed nuclear power plants. The DEMOCRACY AND ECONOMIC CRISIS from his presidency. feared. But the basic problems of the Brazilian
world’s largest hydropower station was built in In 1984, democratic elections were held. Tancredo economy were still unresolved. The government
Itaipu, on the border between Brazil and Paraguay. Neves was elected president, but died before he A referendum in 1993 stated that Brazil would made efforts to privatize state-owned businesses,
Such projects caused a forced relocation of Native took office. In 1986, the government implemented remain a republic and have a presidential system. which eventually contributed to reducing the
American communities. The regime also started the Cruzado Plan which introduced a new curren- The presidential election in 1994 was won by the budget deficit. In addition, Brazil got a larger loan
the major deforestation of the Amazon jungle cy and a prize freeze in an attempt to gain control former Minister of Finance Fernando Henrique package from the International Monetary Fund
which led to an ecological disaster. The destruc- over the substantial inflation in the country. After Cardoso of PSDB. Cardoso launched a major IMF in 1999, but in order to get this package

the country needed to make cuts in government Lula formed a new force when it came to strength- 10%, or 426 000 km2 of the Brazilian rainforest increased the purchasing power also for the poor-
expenditures. However, in 2002, the national en regional cooperation in South America, and he were cut down. This process was and is still about est of the population, and the proportion living
debt had reached 330 billion dollars, and Brazil sought closer cooperation with the EU - as part of to destroy the world’s richest ecological area. in extreme poverty had been halved, from 16%
experienced severe stock market and currency fall a strategy for more equality in the relationship with to 8%, since the mid-1990s. Tax revenues rose
throughout the year. the United States. A SUPERPOWER IN THE MAKING steeply, and before the financial crisis hit, foreign
Brazil soon took place as the world’s third biggest companies doubled their investments in Brazil in
This time it was the global “tango crisis” in neigh- SOCIAL AND ECOLOGICAL CRISIS exporter of agricultural products, which contrib- one year. But economic crime, corruption, mafia,
boring Argentina that caused problems to acceler- The seemingly unsolvable economic problems had uted significantly to the country’s economic growth violence and a murder rate which was one of the
ate. This and instability in the financial markets major social side effects. Social programs and as- during the global food crisis that pushed prices up highest ones in the world, still represented a barrier
were things that led to victory for the left socialist sistance to underprivileged were all affected by the towards the end of the first decade of the 2000s. for development.
Luiz Inácio ”Lula” da Silva in the presidential country’s poor economy, and the slums in urban New, huge oil and gas discoveries off the coast also
election in 2002. IMF agreed to give the country a areas grew explosively leaving thousands of chil- pointed towards a future as the world’s sixth largest THE PRESENT POLITICAL SITUATION
new loan, the largest to that point, to prevent that dren living on the streets. In 2002 almost one third oil nation, and the state owned oil and gas com- In 2011, Dilma Rousseff was elected as president,
Brazil went towards an economic collapse. But new of Brazil’s population lived below the poverty line. pany Petrobras emerged now as the fourth largest and she claims to be starting to tackle some of
and serious cases of corruption were revealed, and Lula tried to do something about this in 2003 with in the world. With its strong focus on hydropower the abovementioned problems. Her main goal
a general distrust of the elite sparked mass demon- his “Zero Hunger Program”. Political initiatives Brazil takes aim at becoming a great power also in is to eliminate the fiscal deficit, and in order to
strations in the country. also contributed to a steady and strong growth in renewable energy. achieve this she has started to cut taxes for favored
exports, and the trade surplus increased to 150 industries, has invited private investors to modern-
Lula was the first socialist to ever win a democratic billion in Lula’s first year as president. But Brazil In Lula’s last period as president many economic ize four airports and is rushing a banking oligopoly
election in Brazil, and he was the first president was still high on the international statistics of indicators pointed in the right direction. The for- that has helped to keep interest rates up. But there
with a working class background with no formal skewed distribution of land and property, and 47% mer so burdensome foreign debt was repaid at the are still major challenges: her effort to drive down
education. Election promises involved an effort of all arable land was at this time owned by 1% end of 2008, when Brazil became a net creditor in costs is according to many too limited. She was
to bring balance to the economy – and a down of the population. Successive governments before the international financial market. Unemployment responsible for the new protectionist oil regime,
payment on the huge foreign loans – as the basis to had tried to implement land reforms, but this was had dropped significantly, and more and more which has received criticism from many sides, and
improve areas such as unemployment, education, proven to be difficult. people took the step from poverty to lower middle the impression is that she is prepared to settle for
health and poverty. At the start of his presidency, class, which now amounted to nearly half the pop- growth of under 4%. This could hurt Brazil, and
Lula succeeded in gathering a broad majority in The crisis also reinforced ecological problems. ulation. Low inflation and stable currency meant many fear that investors soon will start looking for
parliament behind his policies, and he soon be- Special international attention was devoted to the that the main objective of his political program was higher growth markets in Latin America, such as
came a role model in neighboring countries. state of the Amazon. In the mid-1990s, more than reached. The money transfer scheme Bolsa Familia Peru, Colombia or Mexico.

which indicates that the country is on the right two major factors holding the Brazilian oil-sector
track. In addition to this, large amounts are also back. The most important factor, discussed more
invested in infrastructure development in prepara- extensively in relation to other subjects in this
ECONOMY tion of Brazil’s hosting of the 2014 FIFA World

Cup and the 2016 Summer Olympics.
report, is requirements regarding local content. The
Brazilian economy has a lack of qualified labor and
competence in many fields, and the capacity of the
Since the mid-1990s Brazil has strengthened its macroeco- Since 1993, the country has experienced a substan- Brazilian domestic oil-service industry is not suf-
nomic framework. Helped by favorable international condi- tial fall in poverty and inequality. Brazil’s GINI ficient to reach the Brazilian growth potential. This
coefficient has also dropped considerably in recent obviously hampers Brazil’s growth, and represents a
tions, this has created a stable economic growth in the coun- years, from 60.7 in 1998 to 51.9 in 2012 (CIA problem for international companies seeking to get
try. Extensive changes have occurred rapidly, and Brazil is now World Factbook), but still remains among the a stake in the Brazilian oil-boom.
emerging to become one of the superpowers in the 2000s. highest in the world. This coefficient, measured
on a scale of 0-100, gives an indication of the The local content requirements vary in respect
level of inequality in a country, with 0 represent- to strictness and are decided through the E&P
ing a perfectly homogenous income distribution concession bidding rounds held by ANP, the
and 100 representing all income in the hands of a national petroleum agency. Participants enter not
single person. The reason for this success is mainly only a price, but a local content percentage for all
attributed to a good labor market performance and projects in relation to the concession. The require-
a successful redistribution policy. According to the ments will then be passed down to suppliers and
Brazilian government, about 30 million people sub-suppliers.
have escaped poverty since President Lula took
over in 2003, and President Rousseff has followed Even though local content may seem restrictive, it
in Lula’s footsteps continuing his policies. As a tool also offers opportunities. There is an innate short-
Source: IMF to overcome poverty the Brazilian government has age of local suppliers and for companies willing
implemented the highly efficient conditional cash to invest time and resources in Brazil the market
transfer money program Bolsa Familia, which has certainly exists. The trick lies in figuring out what
managed to relieve poverty at relatively low fiscal services there is a demand for, which currently does
cost. not have an adequate supply.
THE OIL AND GAS SECTOR IN BRAZIL The other major factor is a certain piece of Brazil-
The oil and gas sector is one of the main drivers ian legislation. There has been an ongoing debate
of the Brazilian economy. With estimates ranging in Brazil concerning oil royalties, and how the
from 50 billion to 120 billion barrels in reserves, tax income from oil and natural gas should be
Brazil is set to become a major player in the inter- distributed. The question of distribution has
national energy network. Since the turn of the mil- effectively stopped all new bidding-rounds for
Source: IMF
lennium, the production and export of oil has been concessions, and as of today there have been no
growing at a steady pace, and the country is likely new concession-rounds in pre-salt since 2007.
to rely heavily on its oil production in the future. However, president Dilma has announced that the
After the financial crisis in 2008-09, Brazil’s In order to sustain strong economic growth Brazil
In fact, 63% of all deep water discoveries the last 5 next concessions-round is to be held in May 2013,
economy recovered quickly, largely due to a timely has several major obstacles to encounter, like
years were made in Brazil. whereas the next pre-salt round is expected to be
policy response. In 2010, growth in GDP was improving the country’s infrastructure, reducing
held in November 2013. Whether this will happen
the strongest in two decades (7.534 %), but this poverty, battling corruption and tackling a turbu-
One of the largest oil reserves in the world, known remains to be seen. Brazilian authorities have made
dropped to 1.474 % in 2012. Nevertheless, IMF lent economy.
under the name “pre-salt”, was discovered in 2007 promises previously that have failed to material-
expects an average economic growth of approxi-
in Brazil, and most of the country’s oil reserves ize. Nevertheless, taking into consideration that
mately 4 % until 2017. Investment in infrastructure is put high upon the
are found here. The “pre-salt” layer has gotten Dilma herself has guaranteed the prevalence of new
political agenda and, if well designed, is likely to
its name because the oil found here lies beneath rounds; the issue is high upon the political agenda.
The Brazilian government’s main macroeconomic yield high economic and social returns on invest-
approximately 2000 meters of salt, 1000 meters
challenge continues to be that of maintaining a ments. In a report from Morgan Stanley (2010),
of rock, and 2000-3000 meters of sea. This makes
low inflation rate. Inflation is expected to diminish it is proposed that Brazil needs to invest approxi-
recovery of the oil very difficult and expensive.
gradually, and will according to IMF remain in the mately 4 % of its GDP over 20 years to reach the
But it also makes Norwegian companies especially
upper part of the target range of 2.5-6.5 %, dimin- same infrastructure level as Chile, the infrastruc-
well suited to the technical challenges faced by
ishing towards 4 % in the years to come. ture leader in South America. The government
the Brazilian oil industry, as many Norwegians
has introduced a program to boost infrastructure
have relevant technical competence. There are

With planned investments of US$ 236.5 billion [for Kongsberg Maritime]. The more oil they find,
over the next four years, this company gener- the more ships they will need, the more equipment
ates a lot of business. Clearly, it is important for Kongsberg is able to sell. “
companies establishing themselves in the Brazilian
oil-service industry to be able to sell their prod- In general we find that the maritime industry is
ucts or services to Petrobras. However, in order doing well. As there are only two schools in Brazil
to participate in biddings for Petrobras’ contracts, that educate merchant marine officers, there is a
companies are required to register with Petrobras’ very high demand for this kind of competence. Ac-
vendor list. As all things in Brazil, this may take a cording to Walker Lima, General Manager of the
significant amount of time. To register it is neces- ship management company OSM do Brasil, their
sary to provide information regarding technical main challenge in Brazil is recruitment and retain
capacity, economic stability, HSE systems and so qualified officers. Yet, this may also represent an
forth. This will then be assessed by an evaluation opportunity: If you are able to attract and keep the
team at Petrobras, and if necessary a technical visit right talent, you can gain competitive advantage
will be requested. by being able to offer services that are very high on
demand
WHICH SEGMENTS HAVE POTENTIAL?
As previously pointed out, much of the growth in PETROBRAS INVESTMENT PLAN
Brazil, as well as the potential of the Brazilian mar- Petrobras is planning to invest a whopping US$
ket, is driven by Petrobras. Consequently, it is of 236.5 billion over the next four years, allocated
vital importance to get familiar with their business as above. In order to reach their targets, Petrobras
plan and thereby attempt to anticipate the nature will require 48 new drilling rigs, 250 new supply
of future demand. The business plan is public and specialized vessels and 43 new production
PETROBRAS for those who are interested. Difficult technical
challenges will certainly emerge and companies
platforms (SS & FPSOs). Petrobras has a history of
not being able to deliver in ordinance to their tar-
Petrobras is the most important player in the Brazilian oil and with relevant, specific technical know-how have gets. Even so, the new CEO Maria das Graças Silva
a high potential for success in Brazil. According is more realistic in her approach, and the plans are
gas sector. The company has approximately 80.000 employ- to Tony André Håvelsrud, Managing Director most definitely in place. This opens up a well of
ees and was ranked as the 10th largest company worldwide by of Kongsberg Maritime do Brasil: “Kongsberg opportunities for Norwegian companies seeking to
Forbes in 2012. Maritime (KM) is doing well in Brazil mostly leave a mark on the Brazilian oil industry, as long
because of Petrobras’ expansion plans. Their focus as they are able to overcome the hurdles along the
on exploration and production results in business way.

THE TRADE RELATIONSHIP
BETWEEN NORWAY AND BRAZIL
The relationship between Norway and Brazil has THE NORWEGIAN GOVERNMENT’S BRAZIL
long traditions – the two countries have been STRATEGY
trading partners for over 170 years. Historically, The Norwegian government has urged that it is
clipfish, sugar and coffee have been the most heav- important to establish a good relationship with
ily traded goods. Today, direct investments domi- Brazil, and they are currently working with estab-
nate the relationship, but coffee and clipfish still lishing better access and frameworks for Norwe-
amount to a large share of the trade between the gian companies in the country. This is a part of the
two countries. Furthermore, Norway is a major ex- government’s Brazil-strategy conducted in 2011,
porter of financial capital through the Government and the goal is that
Pension Fund Global, and has larger investments
in Brazil than in any other emerging economy. “Noruega should be a respected brand, and that
The table below shows the bilateral trade develop- Norwegian businesses in Brazil should be associated
ment between Brazil and Norway the last two with quality, expertise, environmental awareness and
decades. As the Brazilian market has grown, so corporate social responsibility”.
has the bilateral trade between Norway and Brazil,
sustaining the increasing importance of this rela- As a result of the growing oil- and gas industry
tionship and urging the support for the Norwegian in Brazil, the demand for shipping and maritime
government’s Brazil-strategy. services is escalating. Similarly to the oil- and gas
industry, Norwegian expertise gives a competitive
Brazil has a vast and diverse geography enriched advantage for Norwegian companies in the Brazil-
with large deposits of natural resources and the ian shipping industry. The metallurgical industry
country possesses substantial market power. This has also potential for a Norwegian presence,
gives Norwegian companies strong incentives to be because Brazil has large deposits of minerals such
present in the Brazilian market. Several sectors are as iron ore, bauxite and phosphates. Norwegian
of particular interest, among these are the oil- and hydropower expertise has also received increased
gas sector, maritime industry and metallurgical attention in Brazil due to current and planned
industry. expansion within hydropower development.
Source: OECD

Still, the pre-salt reserves discovered off the coast the petroleum revenues today. Due to fervent op-
of Rio de Janeiro in 2007, estimated to hold more position from Rio de Janeiro and to avoid regula-
BRAZIL RESUMES PETROLEUM than 50 billion barrels of oil equivalent, remain
Brazil’s true gem. Whereas the 11th concession
tory confusion, President Rousseff vetoed the part
of the bill that affected existing concessions. As
AUCTIONS AFTER round features no pre-salt acreage, the Ministry of
Mines and Energy also announced a pre-salt auc-
a result, the new legislation only covers revenues
from the still unlicensed fields.
FOUR-YEAR ABSENCE tion for 2013, currently planned for November 28
and 29. The exploration of pre-salt fields requires Following the discovery of the pre-salt fields in
ultra-deepwater technology and know-how. 2007, then-President Lula proposed an overhaul of
Furthermore, the ministry scheduled Brazil’s first Brazil’s oil laws to enhance the government’s stake
concession round for unconventional oil and gas in the enormous reserves. Passed by Congress in
for December 11 and 12. According to the ANP, late 2010, the new regulations include a shift from
Brazil’s energy regulator, the country’s shale gas re- the current concession agreements to production-
serves remain unmapped. However, the ANP pre- sharing agreements for all unlicensed pre-salt fields.
dicts the Maranhão, Parecis, Piauí, São Francisco The production-sharing agreements guarantee
and Tocantins basins may together hold up to 12 Petrobras a minimum 30 percent stake in all pre-
trillion cubic meters of unconventional gas, consid- salt projects, effectively making the state-controlled
erably higher than the EIA’s 6.4 trillion reserve producer Brazil’s sole pre-salt operator. According-
estimate. However, exploration through fracking ly, several international petroleum companies could
entails a significant environmental risk. As this view the upcoming shale gas licensing-round as
technique remains nearly non-existent in Brazil, the main opportunity to operate blocks in Brazil,
environmental regulation may prevent a shale provided they receive the required approval from
boom mirroring the United States. the federal environmental regulator, Ibama.
NORWEGIAN RISK CONSULTING Pará-Maranhão and Potiguar basins, particularly Many hope this marks the return of regular conces- As Brazilian politicians now appear dedicated to re-
INTERNATIONAL - NRCI promising. Of the 117 additional blocks, 65 center sion rounds boosting activity all across Brazil’s pe- engage with the oil industry, the expected increase
in the Foz do Amazonas basin and the rest in the troleum sector. The lack of new available areas hit in activity might highlight the sector’s remaining
In May 2013 Brazil holds its 11th licensing round, Espírito Santo, Pernambuco-Paraiba and Tucano the service and equipment industries particularly challenges. While few contest the massive poten-
the first in more than four years. Ever since the Sul basins. hard, as oil companies scaled back their exploration tial of the petroleum reserves, strict local content
previous oil auction in December 2008, inter- activities. Indeed, some companies warned that requirements and particularly the lack of skilled la-
national oil companies eagerly await a chance to The geology along Brazil’s equatorial margin, without new concession rounds, Brazil’s explora- bor continue to create headaches for international
either join or increase their stake in one of the labeled one of the current global exploration hot tion activity risked drying up completely by 2015. oil companies operating in Brazil.
world’s most promising petroleum markets. Mean- spots, mirrors that of recent discoveries along the Industry sources expect international majors such
while, politicians offered mostly empty promises western coast of Africa. With blocks located over as Royal Dutch Shell and ExxonMobil to domi-
as Congress struggled to agree on a new model a large geographical area, the 11th auction round nate the 11th licensing round, as the road from
for distribution of oil royalties. The lack of new raises demand for both offshore and onshore drill- potential discoveries to production may prove too
oil auctions left industry actors doubting Brazil’s ing rigs in northeastern Brazil. Increased explora- long for smaller companies. Besides, Brazil’s private
actual potential, causing several to pursue opportu- tion activity off the northeastern coast also suggests oil companies may lack funding to participate
nities elsewhere instead. the emergence of a maritime cluster in the region. in the auction due to investments in ongoing
The northeast remains Brazil’s poorest region, projects. Private-equity companies present a source
On January 23, however, the Ministry of Mines but currently a rapid development narrows the of funding for smaller private exploration com-
and Energy scheduled Brazil’s 11th licensing round gap with the south. Poor infrastructure presents a panies lacking funding. Barra Energia Petróleo e
for May 14 and 15, 2013. Moreover, the ministry challenge, with frequent energy shortages causing Gás illustrates the potential of start-ups benefiting
declared that the auction includes 289 explora- blackouts. Onshore gas discoveries in the Parnaíba from private equity funding. After receiving a $500
tion blocks, up from the 172 blocks previously basin could supply energy to the northeast region, million investment from First Reserve Corporation
announced. The 172 original blocks include 50 home to 28 percent of Brazil’s population. How- in 2010, Barra Energia now holds a 10% stake in
percent onshore and 50 percent offshore. The ever, this necessitates the construction of a network Petrobras’ Carcara oil discovery.
locations constitute nine sedimentary basins: Bar- of gas treatment units and pipelines, linking the
reirinhas, Ceará, Espírito Santo, Foz do Amazonas, gas fields to their markets. OGX became the first In early November 2012, Brazil’s Congress passed
Pará-Maranhão, Parnaíba, Potiguar, Recôncavo company to initiate natural gas production in the oil royalties bill that held up the auctions dur-
and Sergipe-Alagoas. Industry experts consider Parnaíba in the fourth quarter of 2012, indicating ing months of political bickering. The law aims to
the blocks along the equatorial margin, consist- the region’s potential. redistribute oil royalties from the producing states
ing of the Barreirinhas, Ceará, Foz do Amazonas, to the many non-producing states that see little of

Norwegian Risk Consulting International (NRCI)
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Previous conferences have focused on the Gulf
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LOCAL UNDERSTANDING
AND KNOWLEDGE
One of the first potential sore spots we have encountered
in our field work is the importance of having good local
understanding and the right expectations before entering
Brazil. As a Norwegian business leader said it: “If entering
Brazil were easy, everyone would do it “, and this gives a
good indication of how we perceive the Brazilian market.
Brazil is not for beginners, and the Brazilian market BUSINESS CULTURE cal than the Norwegian one. Employees within a discover what motivates the people, if it is that they
is complex. A common mistake among Norwegian Norwegians and Brazilians tend to connect easily, Brazilian business structure will generally expect like the work itself and the learning experience,
businesses is to underestimate this complexity. which might hide the fact that Norwegians and a clearer division between management and other or the acknowledgement/reward given to them by
There are some common pitfalls to be aware of Brazilians have different mindsets. Underestimat- employees, than what a Norwegian is used to. significant others. Brazil scores in the middle of the
before entering Brazil, including the costs being ing such differences can have disastrous conse- band on this dimension, indicating that Brazilians
higher than initially anticipated, the presence of quences for Norwegian companies. The second dimension, individualism, has to do emphasize masculine values far more than the Nor-
major cultural differences in negotiation methods with whether one’s identity is based on a collective wegians, who rank as the second most feminine
and the absence of a superior entry strategy. These Geert Hofstede’s model is often a preferred tool group or the individual itself. Brazil scores rela- society in the world.
issues are so important that if you fail to under- when describing business culture. The model di- tively low in this dimension compared to Norway.
stand them, Brazil might not be the goldmine that vides national culture into five underlying dimen- In practice, this means that Brazilians emphasize The fourth dimension; uncertainty avoidance,
you initially thought. sions; power distance, individualism, masculinity, personal relationships and loyalty. Therefore it is is defined as the extent to which members in
uncertainty avoidance and long-term orientation, important for Norwegian managers to establish a different cultures accept ambiguous situations
COST LEVEL which are measured on a scale from 0 to 100. Since relationship based on loyalty in order to do busi- and tolerate uncertainty. Brazilians score high
Compared to other emerging economies like China the model makes culture quantifiable, it allows ness in Brazil. It is also important to note that the on this dimension and therefore tend to have a
and India, the cost level in Brazil is significantly us to compare the cultural differences between preferred communication style is context-rich. This strong need for rules, bureaucracy and laws in
higher. In fact, the level is approximately that of Norway and Brazil. The scores presented in the means that Brazilians often do not express directly order to structure life. The complicated Brazil-
Norway. The government claims that the high table on the next page indicate to what extent each what they mean; the message must be under- ian regulations reflect this dimension; regulations
costs are attributed to currency, but it is also closely characteristic is prevalent in the respective cultures. stood by its context. This dimension represents a tend to cover every possible scenario, making the
related to the vast bureaucracy. One of many As such, the table can be a good early indicator of common pitfall for Norwegian companies, since bureaucratic system rigid and complex. In addi-
examples is the tax burden, which has risen from which challenges Norwegian companies can expect Norwegians are more straightforward in their com- tion, a high score in this dimension states that
22% of GNP in 1988 to 36% today. In addition to to meet when doing business in Brazil. munication style. the Brazilians are emotionally driven, something
taxes being high, the tax regulations are extremely that is evident in their body language. This fact
complex; which is why some even refer to them as a The first dimension, power distance, is defined as The third dimension, masculinity/ femininity, refers often increases the level of enthusiasm and energy.
“cobweb of rules”. It is necessary and recommended “the extent to which the less powerful members to the importance of values traditionally held by Nonetheless, Norwegian managers must be careful;
that you get help from experts to handle the laws of institutions and organizations within a country men and women. Feminine values refer to values our perception of constructive criticism might be
and regulations in Brazil, at least in the beginning. expect and accept that power is distributed un- like compassion, care for others and quality in interpreted as a personal offense in Brazil.
Furthermore, the high cost level underlines the equally”. Brazil scores 69 on this dimension, while life. Masculine values refer to competition, success
importance of having sufficient financial muscles in Norway scores 31. This means that the Brazilian (defined as the “best in the field”) and personal The fifth dimension; long-term orientation, refers
order to be successful in Brazil. business structure is significantly more hierarchi- achievements. The essence in this dimension is to to the extent to which a society shows a pragmatic

future-oriented perspective rather than a conven- here, to be stressed out and complain that things
tional historical short-term point of view. Brazil take more time than necessary. According to Helle
scores 65 and therefore places itself in the category Moen, Director of Innovation Norway in Brazil,
long-term oriented. Norway is more short-term the only solution is to relax: “After you have been
oriented with a score of 44 in this dimension. For operating in this country for a while, you under-
Norwegians, quick results are expected and there stand that delays are perfectly normal and plan
is often a larger focus on the bottom line from day accordingly. By some manners, most things gets
one. This is different from the Brazilians, implying solved in the end.”
that Norwegians need to be more patient when do-
ing business in Brazil. As mentioned earlier, Hofstede states that Brazil
has a low score on individualism. This signifies the
HOW DOES THIS AFFECT DOING BUSINESS IN importance for Norwegian managers to establish a
BRAZIL? relationship based on loyalty and trust in order to
Before entering Brazil you need to have a good do business in Brazil. Compared to Norwegians,
understanding of their culture and how they do Brazilians have a greater mistrust of society. As a
business. Compared to Norwegians, doing business consequence, relationships are necessary in order to
with Brazilians can be more complicated. While achieve success in the market. Nevertheless estab-
Norwegians do not need much time to decide lishing a relationship is a time consuming process,
whether or not they want to do business with you, and business managers have to keep in mind that
Brazilians need to have more personal contact, get transactions usually take longer time in Brazil than
to know you and most importantly trust you. in Norway.
This could be a potential pitfall for Norwegian During the first meeting with potential business
business leaders, and many who lack an under- partners, you can expect a great deal of small talk
standing of the Brazilian business culture are left before the meeting properly starts. This process
with an impression that Brazilians are almost is crucial, as the tone you set here might impact
impossible to do business with. It is quite typi- further development of your relationship. As such,
cal for Norwegians that have never been in Brazil, one should take the time to interact with busi-
and who are not used to the way business is done ness partners at a personal level before getting

into business. According to Consul General Helle a deal, this is not necessarily the case. When you to them, deadlines are almost never considered in the case in Brazil. To be able to succeed, a certain
Klem, “Brazilians often have a different perception have arrived back in Norway after a successful the same serious manner in Brazil. level of preparation, long-term commitment and
of time”, which implies that things may take longer meeting with a potential Brazilian partner, ready financial strength is vital. Hence, the export model
time than we are used to in Norway. to set up a contract, you may actually learn that Employees are seen as nothing more than em- might be a better solution than investing directly
your counterpart do not share the same impres- ployees. They are not seen as partners, like in the in Brazil for small businesses.
It is also important to note that the preferred sion. As such, you might have to return to Brazil to west, where employees act more instinctively and
communication style is context-rich. This means re-negotiate, or start looking for another business are more proactive. In Brazil employees need to be Another complicating factor is the requirement for
that Brazilians often do not express directly what partner. It is therefore important to never interpret told how to do their jobs. Persuasion, negotiation, local content. Since this is a regulation imposed
they mean; it must be understood by its context. “yes” by its literal meaning. equality and democratic leadership are all charac- by the government it also applies to Norwegian
This dimension represents a normal pitfall for teristics that describe the way western companies companies. Rules for local content raises the labor
Norwegian companies since Norwegians are more As previously mentioned, Brazilians need to estab- are used to operating, while Brazilian companies costs and makes it more difficult to find skilled
straightforward in their communication style. It is lish a personal relationships before entering into an are better described by characteristics such as con- employees. This represents an obstacle that some
not uncommon that Brazilians appear extremely agreement. You may come across situations where trol, monitoring, directing and obedience. companies may have problems to overcome, and
emotional during a meeting, particularly from a they choose business partners based on personal that one should be aware of and equipped to meet.
Norwegian point of view where one expresses as relationships, rather than criteria such as cost or ef- ENTRY STRATEGY Having a strategy to meet the challenge may prove
little feelings as possible. It is important to under- ficiency. Examples of business that have made suc- One of the managers we have talked to during our to be critical.
stand that emotions are merely an expression of cess in this respect are found within the Norwegian field work said: ”My impression of Norwegians is
commitment and interest and do not indicate a sector of fish export, where the focal companies that they operate less aggressively compared to oth- Due to the cultural differences, you cannot expect
lack of control or anger. You should also be careful have forged relationships based on trust. This has er nationalities when entering Brazil”.” This quote that a Norwegian relatively flat business structure
when expressing criticism, because this could often resulted in 170 years of trade. implies that Norwegian companies must “take a will be efficient in a Norwegian company operat-
be taken the wrong way. bigger first step” into the Brazilian market in order ing in Brazil. The power distance is much higher in
In business meetings there is also less emphasis to succeed. This is because of the high cost level Brazil, and you need to respect this when establish-
The Director of Innovation Norway, Helle Moen, placed on absolute punctuality, and if an agenda and the general high complexity in the market, and ing your business. Brazilians prefer to have clear
said the following: “You rarely have a bad meeting is produced, do not expect it to be followed. The implies that you need a good pre-entry strategy for hierarchical command lines to relate to, otherwise
in Brazil, because Brazilians prefer not to say no”. relationship is seen as more important than time entering Brazil. they will get confused. Hence, it is important to
This underlines the importance of understanding related issues, and all issues on the agenda will choose a structural form for your company which
how Brazilians communicate: even though you get eventually be covered, but not necessarily in the For instance, small companies can generally ma- fits the Brazilian culture and values. The Norwe-
the impression that they are positive to doing busi- intended order. While western companies treat neuver with relative ease compared to bigger com- gian leadership style, which is more feminine, is
ness with you, and that you are not far from closing deadlines very seriously and try their best to stick panies, especially in Norway. This is not necessarily probably not the right choice neither.

The qualities of political and bureaucratic institu- mitment to such policies. Brazil is approximating
tions are crucial for investment decisions, both the world average with a score of 0.08, while Nor-
when deciding whether or not to invest in the way ranks significantly higher with a score of 1.73.
country, and which sectors to choose. The graph This indicator is especially important for Brazil, as
above compares Norway and Brazil in terms of it combines many of the available indicators related
various indicators of governance: The index ranges to bureaucratic red tape in an aggregate index. This
from 2.5 and -2.5, implying that a value of 0 repre- issue is discussed in the next article in this report.
sents the average of the world sample. Further, the
higher the score is, the better the expected gover- Control of corruption refers to the extent to which
nance of the focal country on a worldwide basis. public power is exercised for private gain, and
includes both trivial and grand forms of corrup-
The variables Political stability and Absence of vio- tion. With a score of -0.07, Brazil scores below
lence represent the likelihood that the government the world wide average, supporting the general
will avoid being destabilized or overthrown by anticipation than corruption is more outspread.
unconstitutional means, including political violence Norway seems to have this aspect under control,
and terrorism. Norway has a score of 1.19, whereas with a score of 1.94.
Brazil scores substantially lower with a score of
0.29. This implies that Norway is considered as Rule of law measures the extent of property rights
more politically stable than Brazil; yet, both coun- protection, enforceability of contracts, indepen-
tries are above average of the world sample. dence of the judiciary and effectiveness of the legal
system. With a score of -0.18, Brazil scores below
Voice and accountability refers to the extent to the world average, indicating that the effectiveness
which a country’s citizens are able to participate in of the legal system needs to be improved. This is
selecting their government. It also encompasses the the lowest score for Brazil out of the five parame-
degree of freedom of expression, freedom of asso- ters, and indicates that this is perhaps, compared to
POLITICAL STABILITY ciation and free media. Norway has a score of 1.57,
whereas Brazil scores 0.51. Both are substantially
the rest of the word, a point where Brazil needs to
improve substantially to attract foreign investors.
AND INSTITUTIONAL QUALITY above the world wide average of 0, but Norwegians
are considered to have more influence than Brazil-
Norway has a score of 1.88, indicating that there is
a huge difference in how the rule of law is enforced
ians. in Norway versus Brazil and is something that one
It is widely supported that in order for a country to achieve economic growth, needs to be aware of when entering the country.
good governance is necessary. Otherwise, the country will not attract factors Government effectiveness gives an indication of the
that are necessary for economic development, such as foreign direct invest- quality of public services, quality of civil service,
degree of independence from political pressures,
ments from other countries.
quality of policy formulation and implementation,
in addition to credibility of the government’s com-
with construction permits, property registration as things properly:
well as getting electricity takes longer time in Rio
THE LABYRINTH de Janeiro as compared to São Paulo. “If Norwegian companies are not careful enough in
the certification and licensing process they might en-
OF BUREAUCRACY BUREAUCRACY AND TAXES
The bureaucracy also affects the amount of time
counter major problems along the way. Being careful
will therefore be a key to success in Brazil. However,
spent while paying taxes, where the time to comply it is costly to have people to follow up all the different
“Get a good lawyer and accountant!” taxes in Brazil is the highest of all participant coun- processes. “
tries (The Paying Taxes Results 2013). The same
report showed that it takes on average 2.600 hours THE BUREAUCRACY CAN LEAD TO CORRUPTION
to comply taxes in Brazil. To put this in a perspec- The high level of bureaucracy is highly connected
tive; the South American average is 619 hours, to the lush environment for corruption. Not
which is significantly less. having the right document at the right time can
cause situations where it might be tempting to
WHEN IN BRAZIL, DO AS IN BRAZIL accept or offer bribe to speed up the process. One
Norwegian companies expecting a similar bureau- of the ways to make sure you do not get trapped
cracy system as in Norway will get a cold shower. in corruption is to be sufficiently prepared when
However, it is perfectly possible to get the right entering Brazil. Doing enough research on the legal
competence to be able to deal with these issues. requirements could be your company’s key to suc-
According to business managers in Brazil, the best cessful market entry. There are plenty of available
advices are to employ a “damn good lawyer”, as articles on the topic, in addition to the possibility
well as learning the language. The simple explana- to ask Innovation Norway for advice. When enter-
tion behind this is that Brazilians know their way ing Brazil it is important to not underestimate the
around Brazil. A good lawyer who knows how complexity of the bureaucracy. Hiring a lawyer and
the bureaucracy in Brazil works could save your a tax accountant that is familiar with the system
business a lot of time in the future. In addition, can save you a lot of time and frustration. In ad-
it could save you from making mistakes that in dition, it can keep you from proceeding to actions
the worst case is illegal. As one of our interviewees that might end up having legal consequences.
stated: “We tried to follow each rule accordingly
and did our best. However, when we realized that
we were missing a crucial document, that in fact
made our previews steps illegal, we decided enough
was enough. This needed a professional”.
The Norwegian system consists of processes that

are most often sequential. While applying for a
construction permit there are a few documents
One of the most common challenges for com- ranked Brazil as 130th out of 183 participating
needed. In Norway you do not get any further
panies in Brazil is navigating through an endless countries. This signifies a slightly drop from 2010
without having “step 1” correct, while in Brazil
labyrinth of rules and legislations. To illustrate; when the country ranked as 120th, thereby imply-
you may continue to the final steps, without even
40% of businesses did not survive more than two ing an increased difficulty of doing business in
having completed the first ones. This often leads
years after establishment, and bureaucracy is the Brazil.
to frustration; even fees, if it is discovered and
most common reason for this problem. However,
they choose to take legal actions. Building your
in spite of the complexity and effort associated According to the report, the amount of paperwork
company under a construction permit given for the
with bureaucracy, there is light in the tunnel if you needed to start a business in Brazil is shocking:
service industry while it is a manufacturing com-
steer your company through the proper steps. on average, you need to go through 13 separate
pany is in fact illegal. Furthermore, to get the right
procedures and 119 days of work to set up a
document, you might have to hand in another
THE “DOING BUSINESS” RANKINGS company. Further, a construction permit averagely
five additional documents with their own require-
The annual global report Doing Business ranks requires 17 procedures and 469 days to finally get
ments. This results in a process that may end in an
countries in terms of the ease with which business authorized.
endless amount of documents.
regulations, protection of property rights, dealing
with construction permits, registering property The report also suggests that there are certain cross-
According to Erik Hannsidal in Inventure Man-
and paying taxes are handled. In 2013, the report regional differences in Brazil. For instance, dealing
agement, there are certain dangers with not doing

Since the Brazilian government opened up the oil tive of Petrobras told us that the company once an-
and gas sector to foreign investment in 1997, the nounced 150 jobs and received more than 110.000
economy has witnessed a surge of international applications. This example goes to show how
companies establishing themselves in the country. popular Petrobras is among Brazilian employees.
Many of these companies are high technology
companies specialized in a specific field. Coupled LOCAL CONTENT
with the regulations regarding local content, this In order to avoid a case of the “Dutch disease” in
surge of international companies has sparked a relation to the oil-reserves in Brazil and to facili-
sharp increase in demand for highly qualified labor. tate growth in the Brazilian industry, the Brazilian
government has adopted a policy of local con-
On the supply-side of the equation, the Brazilian tent. This means that companies have to employ
educational system has not been able to cope with Brazilian workers and use Brazilian-made parts in
the increasing demand. The main reason frequently their production. Such policies, though often very
mentioned is the Brazilian government’s continu- frustrating to non-Brazilian companies, have been
ous underinvestment in education. In the UN applied in other countries to great avail. Norway
education index Brazil ranks as number 83, behind is one example, and the Norwegian approach and
countries such as Colombia, Gabon and Mongolia. success is often referred to as a benchmark.
We shall not go further into details, but the impor-
tant takeaway is that the supply of qualified labor Oil-concessions come with requirements con-
is not sufficient to meet the increasing demand. cerning local content that license holders have to
THE BRAZILIAN LABOUR MARKET This is the case especially with respect to techni-
cians and engineers.
abide by. As these are contractual commitments,
the local content requirements naturally extend
down the supply-chain from the license holders to
One of the main challenges for companies established in Another issue is the ever overhanging presence of all contractors and suppliers. There will however
Brazil is attracting a sufficient amount of competent labor. In the state-controlled oil giant Petrobras. The compa- be a difference as to the degree of local content
essence, this is a problem of supply and demand. ny has a great reputation, and was recently ranked requirements. As Brazil still lags behind in terms of
as the 4th best reputed company worldwide. This, certain competencies, technology-intensive prod-
amongst other things, makes the company the ucts and services will typically be subject to a lower
most attractive employer in Brazil. A former execu- percentage of local content requirement. Providers

and was not able to pay her wages. She came to the and many advocate a revision of the laws. Main
management of the Norwegian company with her arguments are that the situation in Brazil has
problems, and they decided that they would pay changed significantly and that the labor laws are
her wages, while still honoring the contract with outdated and too rigid. Even though revisions are
her agency. Eventually, the agency went bankrupt, sorely needed, our impression is that there is not
which resulted in a lawsuit from the agencies em- enough political will to improve the situation.
ployees who had not been paid wages. The result? There are many other important issues the current
According to Brazilian law the Norwegian com- president Dilma and her administration have to
pany was liable to pay the wages that the cleaner face, and seem to prioritize.
had not received from her agency, in addition to
the extra wages they had paid her and the contract
they had with the agency. The main rule is: “Pay
once and pay correctly. Otherwise you will end up
paying a lot more than you should.”
There is an ongoing debate concerning the CLT,
of other products and services will obviously have mandatory benefits that companies have to pay. It
to deal with a higher percentage of local content. is often said that the cost of an employee is in the
area of 180%-200% of his salary. The table above
The local content policy brings with it several illustrates this with an example of a management
consequences. One of the most important is with position. This makes labor in Brazil very expensive,
respect to the demand of qualified labor, which certainly more expensive than many Norwegians
there already is a shortage of. This, coupled with believe.
large investments, creates a significant pressure
on the labor market. Petrobras alone is planning The judicial system in Brazil is complicated, and it
investments close to 174 billion USD in 2013. is important to be aware that certain things might
be extremely time-consuming. When the Consoli-
COST OF LABOR dation of Labor Laws (CLT) was issued in 1943,
A common misconception among Norwegian the conditions in Brazil were quite different. The
companies is that the level of costs concerning population in general was significantly poorer than
employees is relatively low in Brazil. This is not the today, and it was more common for employers
case. In Brazil, employers must take into consid- to take advantage of their employees. As a conse-
eration several costs related to their employees quence the main concern of the policymakers was
in addition to their wage. One such cost is that to protect employees from further abuse. This has
of educating employees. As there is a shortage of resulted in a labor law that is relatively speaking
qualified labor, many companies find they have to rigid and biased in favor of employees. Describing
take the matter into their own hands. Educating or explaining the labor laws in detail goes well be-
employees obviously comes with costs in terms of yond the scope of this report, but we would advise
reduced efficiency, wages to instructors, facilities companies to be aware that the cost may arise if
etc., but can often be necessary to reach sufficient the regulations are not adhered to as they should.
standards in terms of competence. In addition, the
exceedingly high demand for highly qualified labor As an example, one Norwegian company had
causes an upward shift in wages. contracted a cleaning agency. The agency deployed
a cleaner to clean their offices. After some time,
Another problematic issue is the costs related to the cleaning agency ran into economical trouble

Norwegians automatically receive a 3-month the minimum investment or job creation criteria,
visitor’s visa on arrival to Brazil. The maximum which apply to established companies. Research-
VISAS AND allowed stay is an accumulated 6-month per
12-month period. Business meetings, workshops
ers or other high-level specialists employed by
Brazilian research institutions may also be granted
WORK PERMITS and clients visits can be conducted during this
time, but this visa is not intended for any work
a permanent visa. In this case, the individuals are
usually not entitled to labour rights, but are subject
activities. Foreigners intending to work in Brazil to the Brazilian Social Security System.
Currently, Brazilian authorities maintain a strict immigration need to apply for a visa, and there are two types of
policy in defense of Brazilian workers and the Brazilian econo- visas that may be issued: temporary and permanent AN EXTENSIVE PROCESS
my. By setting local content restrictions upon all international visas. The most challenging part with visas is the process
companies, the government is able to control the inflow of of obtaining it. It involves a substantial amount of
labor to the country. TEMPORARY VISA forms and attestations, as well as extensive interac-
Provided there is an employment contract with a tion with relevant authorities. After all the correct
Brazilian company, temporary visas may be granted documentation has been submitted, The Ministry
for a maximum of two years. To obtain this visa, of Labor processes a work visa in 30-60 days. A
the foreigner must prove that his/her previous pro- realistic time frame is 3-4 months for the whole
fessional experience is in accordance with the work process. The consular processing fees amount to
to be done in Brazil. around USD 500, but it is highly recommended to
let a specialized company handle the visa process,
The visa is renewable for an additional two-year which will charge around USD 2000 per visa.
period or as long as the contract regarding the Because of this time demand and complicacy of
holder’s permanence in the country is valid. the process, companies often need to secure them-
Foreigners are deemed employees of the Brazilian selves against potential unpredicted complications
company, entitled to all labour rights and subject that can happen during operations, e.g. offshore.
to the Brazilian Social Security System. One way of doing it is to have experts in the parent
company in Norway with valid visas, so they can
Without a contract, the visa may be issued for be quickly allocated to Brazil in case they would
foreign individuals involved in specific projects become needed.
that lead to the effective transfer of know-how/
technology to Brazil. The remuneration must be
paid through foreign sources. In this case, the
foreigners are not considered employees of the
Brazilian company and are thus not entitled to
labour rights and/or subject to the Brazilian Social
Security System.
PERMANENT VISAS
Permanent visas are issued to administrators,
managers and directors of professional or busi-
ness corporations, who are already employed by
the company and are moving to Brazil on intra-
company transfer. The visa is valid for five years.
There is a minimum requirement for the parent
company to invest at least BRL 600.000 per visa
in the Brazil-based subsidiary, and to provide evi-
dence that they are bringing value to Brazil in the
form of increased productivity, technology transfer
or social benefits. The investment can be reduced
to BRL 150.000 if the company generates at least
10 direct jobs during the period of two years fol-
lowing the foreigner’s appointment. Visas are also
issued to administrators, managers or directors of
start-up companies, who are not required to meet

HOW TO ATTRACT AND RETAIN TALENT Job security
In order to understand how the Brazilian culture
making your employees feel valued is obviously
important no matter where you are in the world.
IN A HEATED LABOR MARKET works, it is important to have some knowledge of

the country’s history. As previously mentioned, REPUTATION/INTERNAL PRIDE
Brazil has experienced considerable instability and Several of the companies we have spoken to report
As previously discussed, the Brazilian labor market definitely uncertainty. With frequent changes in government, that for Brazilians, it is important that they can
is of the tricky sort. Local content regulations coupled with military coups, hyperinflation etc., the Brazilian take pride in their employer. Mauro Andrade of
people have learnt not to trust easily. This state- Statoil do Brasil mentions CSR as an important
large investments and ambitious growth plans create a talent
ment is also backed up by Hofstede in his afore- tool in their efforts to build internal pride, a view
vacuum wherein competence is a scarce resource. In the fol- mentioned theory of cultural differences. Brazil he has in common with Izeusse Dias Braga Jr. of
lowing section we shall discuss various strategies concerning receives a score of 76 in the Uncertainty Avoidance Petrobras. Braga goes as far as stating that Petro-
how companies can attract and keep skilled employees. dimension, compared to 50 in Norway. This clearly bras reputation is one of the main reasons for
indicates that job security can be a critical factor the company’s success in recruiting and retaining
for workers in search of a job. Always make sure employees. Incorporating CSR into your business
that you are perceived as a trustworthy company culture in accordance to your company’s values
with a long-term commitment. can therefore be a powerful tool in order to build
up internal pride and a strong reputation among
INVEST IN YOUR EMPLOYEES employees.
A study by the Sao Paulo Business School finds
that the most common reason for Brazilians Another important factor concerning the compa-
leaving their jobs is that they don’t feel they have ny’s reputation is obviously the values incorporated
enough prospective for professional growth. into the business culture. Having strong values that
Another survey performed by Universum finds the are clearly communicated and demonstrated can
following factors to be the most critical drivers for have positive effects not only on day-to-day opera-
choice of employer: These two surveys indicate that tions, but also on a company’s reputation and by
career development is very important in Brazil, extension a company’s ability to attract and retain
even more so than in Norway. It is therefore criti- valuable employees. According to Walker Lima of
cal for companies to include career development OSM, incorporating transparency into the business
plans and frequent performance reviews of their culture can increase the capabilities to retaining
employees in their strategies regarding attracting employees. They feel more valued, and a significant
and retaining employees. portion of the problems that occur due to commu-
nication issues may potentially be avoided.
Source: Universum
The problem with investing in your employees’
education is that you never know how long you MINI CASE: STATOIL
will be able to keep them. The high turnover rate Statoil has several CSR-projects going in various
and the prospect of possible career enhancement fields. One thing Statoil has done which we found
can make this a risky investment. The key here is quite interesting is what they call the Corporate
Many of the strategies successfully applied by dental plans, meal allowance, day care allowance to make sure that your employees are satisfied with Volunteer Program. It began a few years ago
companies in Brazil have universal validity, but etc. Many employees in Brazil are willing to ac- the career opportunities you can offer within the when the spouses of expats wanted to take part in
hold special relevance in Brazil due to cultural and cept a lower wage if they receive sufficient benefits company, while also feeling that you invest enough Statoil’s CSR work. This activity then spread to
historical issues. We will also look at some of the instead. Be sure to offer benefits that are not infe- in their education. Obviously, proficiency in the Statoil employees, and after a while the company
measures you can take in order to become more rior to your competitors, although it will not be English language is important for employees seek- developed it into a comprehensive program. Now
attractive for potential employees. necessary to go far beyond what your competitors ing an international career, and investing in Eng- all employees, as well as partners and contractors,
offer. Focus instead on non-economic factors that lish courses should be considered. One company are encouraged to take part, and work directly
CLASSIC/TRADITIONAL MEASURES TO INCREASE can make your company attractive. Aris Tsikouras we spoke to said they have a program in which with the CSR-projects. Statoil even donates R$100
ATTRACTIVENESS of McKinsey says “The real question to recruiting the company covers 90% of the tutoring costs for to the relevant project for every hour’s work by
people in Brazil is: how do you find the non-mon- English lessons. employees in the program. Nara Borges of Statoil
Benefits etary things that people value?” For a comprehen- claims that this is a relatively affordable measure
As in many other parts of the world, it is com- sive overview over which benefits are commonly GIVE YOUR EMPLOYEES GROWTH that helps build internal pride as well as allowing
mon in Brazil to offer your employees additional offered, we recommend taking a look at the Benefit OPPORTUNITIES WITHIN THE COMPANY for networking within the organization.
benefits aside from direct economic compensation Plan survey done by Towers Watson. As indicated by the Universum survey, leadership
and the minimum benefits required by law. The and growth opportunities within the company is
most common are health benefits and insurance, considered important. Career planning as well as

nent establishment (PE) under Brazilian domestic
law. However, branches, agencies and representa-
BRAZILIAN TAXATION FROM tives of non-domiciled taxpayers are treated as
domiciled legal entities and subject to Corporate
A NORWEGIAN PERSPECTIVE Income Tax.
3. INTRODUCTION TO TAX REGIME IN BRAZIL

As one of the world’s leading commodity and natural resourc- The tax regime in Brazil is complex and represents
es producers, Brazil has become one of the most attractive many challenges for foreign investors. Therefore,
countries for investments in the oil & gas sector. Despite these a careful review and planning of the tax situation
should be done prior to entering and investing
bright prospects, however, Brazil is considered as a compli-
in the country. The Brazilian tax system is based
cated place to do business for foreign-based companies with on the principle of strict legality and its main
a highly complex and expensive tax environment. This article principles are defined by law i.e. constitutional
intends to provide a brief overview of the Brazilian tax environ- tax system. Three jurisdictions and tax collection JAN SAMUELSEN
ment from a Norwegian perspective. levels are defined by tax legislation. Thus, taxes
may be levied by the federal, state and municipal
governments. The taxes varies from more ordinary
income taxes, to taxes on gross revenues, and taxes
on incoming and outgoing services.
OVERVIEW
Corporate taxpayers are subject to two taxes on
income, namely the corporate income tax (IRPJ)
BY KPMG 2. USE OF SUBSIDIARIES and the social contribution on net profits (CSLL),
Developing business opportunities in Brazil will both hereinafter referred to as CIT. Profits,
1. BACKGROUND often require establishing a local subsidiary or income and capital gains earned worldwide are
Brazil has developed into a very strong oil and gas branch in Brazil. In general, foreign investors tend subject to Brazilian corporate income taxes. The
regime, with a current production of about 3 mil- to incorporate a subsidiary rather than set up a different rates are normally 15% for IRPJ in ad-
lion barrels per day, expected to increase to above 5 branch in Brazilian territory due to the following dition to 10% on yearly taxable profit exceeding
million barrels per in 2019. The projections show reasons: (i) the shareholders are not responsible for BRL 240,000, and a rate of 9% for CSLL. There-
that the sector in Brazil may double its size on ev- the Brazilian subsidiary’s debts, except for specific fore, it is common to say that CIT is imposed at a PER DANIEL NYBERG
ery five or six years. Needless to say, this also means provisions set forth by corporate, tax, labor and maximum aggregate rate of 34%.
that the country has a significant reserve basis bankruptcy rules, and (ii) the process of establish-
which will create the need for major investments in ing a subsidiary in Brazil is fairly simple and much In addition to the CIT, Brazilian tax laws also
the years to come. less time consuming compared to establishing a impose two social contributions on gross revenue,
branch. namely the contribution to the Social Integra-
Within this scenario, Brazil has become one of the tion Programme (PIS) and the contribution for
most attractive countries for investments in the Oil Further, laws regulating the formation of legal enti- the financing of social security (COFINS). PIS
& Gas sector and a number of large investments ties in Brazil are applicable to foreign and Brazilian and COFINS are imposed, in general, on gross
have been already announced by major players, entities or individuals in substantially the same revenues of the corporate taxpayer.
including Statoil. manner.
The federal government levies taxes on foreign
A major part of the reserves can be found in deep- Nonresident individuals or legal entities may adopt trade (import and export taxes), a value-added
water and sub-salt reserves which open for foreign any type of legal entity recognized by Brazilian tax on industrial production (IPI) and a tax on
companies with leading technology and resources legislation. The most common type of structures financial transactions (IOF).
within the oil and gas area, including upstream is the Limitadas (Limited Liability Companies) or
companies as well as oil service companies. As SAs (Corporations). ICMS (Imposto sobre Circulação de Mercador- JULIO CEPEDA
Norway and Norwegian companies is recognized ias e Serviços) ICMS is a state tax levied on the
as world leading within the area of oil and gas, this Branch structures are not very common, and for import of products and transactions involving
gives great opportunities for Norwegian compa- upstream companies seeking oil and gas conces- the movement of goods, inter-municipal and
nies. sions it is a requirement to have a local subsidiary. interstate transportation services and communica-
Interestingly, there is no clear definition of perma- tion services. In many aspects, it operates like a

value-added tax. net profits to the government, compared to a total
tax rate of 46.8% in the U.S., according to the
Imposto sobre Serviços (ISS) is a municipal tax World Bank.1
levied on the revenues derived from the provision
of services. The tax base is the price of the service TAX LOSSES
and the rates vary from 2% to 5% depending on Under the actual profit system, companies may
municipality. accrue tax losses to offset with its future taxable
profits. In this regard, it is important to outline
IOF is generally assessed on financial operations that there is no tax consolidation in Brazil and,
carried out by the Brazilian taxpayer, such as therefore, it is not possible to offset tax losses from
insurance, currency exchange, securities, loans, etc. other group companies. The main aspects in con-
The tax rates and calculation basis depends on a nection to tax losses that should be considered are Federal Taxes State Tax
number of aspects (mostly type of operation and that tax losses may be carried forward indefinitely. • Corporate Income Tax (25%) • State Value - added Tax - ICMS
maturity). However, the offset is limited to a maximum 30% • Social Contribution of Profits (9% or 15%) (variable rates)
of annual taxable income and no carry back of • Social Contribution on Revenues - PIS and COFINS
As a starting point, Brazilian entities rendering ser- losses is allowed. (9,25% or 3,65%)
vices to Norwegian affiliates (export) are normally • Withholding Income Tax
exempt from PIS, COFINS and IOF and there TRANSFER PRICING • Economic Intervention Contribution- CIDE (10% and
should be no withholding taxes. However, should Brazil is not a member of the Organization variable rates)
a Norwegian entity render services to its Brazilian for Economic Co-operation and Development • Federal Tax i industrialized Products - IPI (variable Municipal Taxes
affiliate the Brazilian tax payer would be subject (OECD), but it has its own regulations on transfer rates) • Tax on services - ISS (2% to 5%)
to PIS, COFINS, CIDE and IOF, however, such pricing. Although Brazil is not a member of the • Import Tax - II (variable rates)
taxes should be tax deductable in the computation OECD, guidelines issued by that organization Tax on Financial Transaction - IOF
of the CIT basis depending on specific circum- were observed by the Brazilian legislature when
stances. CIDE social contribution is triggered on drafting the Law. However, there are important
the payment abroad in consideration to royalties differences between the OECD Transfer Pricing
and technical services rendered by a non resident. Guidelines and the provisions under Brazilian law,
The Norwegian entity would be subject to ISS (2% for example the following:
to 5%) and withholding tax at a rate of 15%..
Brazilian transfer pricing rules does not follow the
TAX REGIMES arm´s length principle. Instead, transfer pricing
Tax payers may select (on an annual basis) between calculation are generally based on pre-fixed pre-
(1) the actual profit regime (lucro real), and (2) sumed profit rates;
the presumed profit regime (lucro presumido) and
There are also a third option of less relevance (small Brazilian law does not allow the use of the profit
businesses only). As the name indicates the actual split method or the transactional net margin
profit regime is based on net income, e.g. with de- method (TNMM) set forth in the OECD Transfer
ductions for most relevant costs. For large business Pricing Guidelines; and The rates depend upon the nature of the payment, derived by foreign controlled or affiliated compa-
operation the actual profit regime in mandatory. contrary to the OECD TP Guidelines, Brazilian the residence of the beneficiary and the existence of nies in proportion to the ownership percentage
Presumed profit regime is a simplified tax method transfer pricing rules do not apply to imports of tax treaties between Brazil and the country where held by the Brazilian parent.
under which the company chooses to calculate its royalties or technical assistance services (on the the beneficiary is located. The withholding tax
taxable base by applying a percentage of its total other hand, more restrict deductibility require- rate for a Norwegian entity with Brazilian source Norway and Brazil has entered into a convention
gross income earned during the quarter (presumed ments may apply). income is normally 15%. As a general rule, income for the avoidance of double taxation of income and
profit). The tax rates will vary for different sources paid to beneficiaries located in low tax jurisdictions capital with effect from 1981. The existing tax to
of income. WITHHOLDING TAX is subject to 25% withholding tax. which the convention applies is the federal income
In most cases, the withholding tax is a repayment tax in the case of Brazil. The convention applies
The Brazilian tax system is complicated and time- of income tax on the individual or entity’s final tax TREATY RELIEF FROM DOUBLE TAXATION the ordinary credit method to relieve double taxa-
consuming. The World Bank calculates that it takes return. However, in some cases it is considered a Generally, Brazilian tax treaties provide for the tion i.e. taxes paid in Brazil on income or capital
a typical limited liability company that is domesti- final taxation. Also, withholding income tax is due ordinary credit method to relieve double taxation; by a Norwegian-resident taxpayer may be claimed
cally owned with 10 to 50 employees nearly 2,600 on most non Brazilian tax residents’ income that however, a few treaties provide for the exemp- as a credit against the domestic tax liability. The
hours per year to comply with tax regulations in has a Brazilian source of payment (e.g., royalties, tion method. Brazil taxes not only foreign-source convention provides that the treatment of techni-
Brazil, compared to 187 hours in the U.S. And the service fees, capital gains, interest, etc.). income derived by resident companies (whether cal services follows the treatment of royalties and
average Brazilian company pays about 69% of its directly or through a branch), but also the income is therefore subject to withholding tax in Brazil.

Actual Profit Presumed Profit
• Taxes calculated on a quarterly basis

• Tax calculated on a quarterly or annual basis
Federal taxes
WHT • Taxable income: Application of a deemed profit
• Taxable income: Company’s profit adjusted by
Service provider Taxation 1 some tax inclusions and tax deductions
margin on gross sales
ISS
Abroad • No tax attributes
Municipal taxes • Utilization of tax attributes (NOLs, amortization of
premium, etc.)
• PIS and COFINS - Cumulative system
$
• PIS and COFINS - Non-cumulative system
• Requires more support documentation

Presumed Profit is optional
PIS/COFINS & CIDE
Contraction party Taxation
Federal taxes • To be eligible, some requirements must be met (e.g.
Brazil 2 maximum annual revenues of R$ 48 million)
• Tax efficient for some activities
There are no special provisions for offshore activi- CAPITAL GAINS and this may be subject to a bid process. Use of take elements. There is a royalty varying from 5%
ties are provided under the convention. Non Brazilian residents’ capital gains deriving from PSC will generally increase the risk for the tax to 10%, calculated based on each month’s market
a sale of an asset located in Brazil, including shares payer, as the project will be taxed on a ring –fenced value of produced petroleum. The royalty is deduc-
DIVIDENDS in a Brazilian company, are subject to withhold- basis, and an unsuccessful project will therefore ible when calculating the 34% CIT.
Dividends paid by a Brazilian entity to Norwe- ing income tax at 15% (25% if the seller is located always be for the tax payer’s sole risk and cost. There is also a system for signature bonus paid
gian shareholders are exempt from withholding in a listed low tax jurisdiction). In case of a sale This is contrary to standard concession agreements based on bids in the concession rounds. As royalty
tax. Dividends may be paid out of net accounting between two non-residents of an asset located where it will be possible to use exploration costs signature bonus is deductible but has to be amor-
income (after taxes) for the year or profit reserves. in Brazil, the representative of the non Brazilian against income from other concessions or other tized over the license period.
resident buyer is responsible for withholding and business activities within the same legal entity..
INTERESTS ON NET EQUITY paying the Brazilian tax on capital gains. Our understanding is that there are currently no For high producing/high profit margin fields there
Another option for remitting income from a PSC’s, and the terms and conditions, including is a type of windfall profit tax ranging from 10-
Brazilian entity to a Norwegian shareholder is the PENALTY TAX the issue of ring fence, have not yet been finally 40% of the produced value less certain specified
Interest on Net Equity, which is a hybrid remuner- Brazil has a very strict penalty tax regime with a set.. A transition towards a PSC regime should not deductions. This is also a deductible item when
ation with characteristics resembling both interest 75% penalty of all incorrect tax payments, irre- have any effect for concession agreements already calculating CIT.
and dividends. spective of the reason behind the adjustment, and entered into.
it does not help to flag the issue as a part of the tax Further there is an Area Retention Tax due by field
INTERESTS return like companies may do in Norway. A tax Companies with concession agreements pay the concessionaires for the exploration and production
Remittances of interest from a Brazilian entity to year is closed after5 years, unless brought up as an same tax as any other companies and there is no of oil & gas. Amounts due are determined by the
foreign parties are subject to 15% withholding tax issue by the tax authorities. ring-fence within one legal entity, neither between Agência Nacional do Petróleo (ANP) on the bid
(or 25% for recipients in low tax jurisdictions). It different offshore projects, nor between offshore and vary depending on field size and geological
should be noted that Brazil has thin capitalization 4. OIL AND GAS EXPLORATION AND PRODUC- and onshore business activity. It is important to characteristics. This area retention tax is gener-
rules (generally 2:1, or 0.3:1 for low tax jurisdic- TION – GOVERNMENT TAKE REGIME mention that Brazilian tax legislation imposes a ally deductible for income tax purposes. Finally,
tions, for the debt to equity ratio) and transfer As a general rule, oil and gas (O&G) contracts in social contribution (CIDE - imposed to foster ANP has been imposing on concession agreements
pricing rules. Both rules may apply on interest Brazil are usually based on concession agreements, R&D in Brazil) over the sale of oil, gas and other a clause obliging O&G companies to carry out
payments, and in this case, the non-deductible which require industry players to incorporate a lo- products derived from petroleum. However, the tax R&D investments. This measure aims to foster
excess amount is added back for corporate income cal entity to carry out activities in Brazil. However, rate of CIDE was reduced to zero in 2012. the technological research and development o new
tax purposes (disallowed) and may not be carried it has been opened for use of production sharing technologies, products and processes for the oil &
forward. contracts (PSC) in certain pre-salt and restricted It is, however, to be aware that companies involved gas industry, as well as to encourage the creation
areas. It has not been set any fixed profit oil level, in O&G contracts are subject other government of O&G centers of excellence and development of

Local knowledge
Global Logistics Network
www.kuehne-nagel.com
“Where can I take the next step

in Norway’s global oil and gas
success story?”
Take a position with Aker Solutions.
To walk with us, visit

www.akersolutions.com
national R&D institutionsThe amount destined Brazilian territory. As a general rule, the import Preferred partner
to R&D may be deducted in the calculation of of goods is subject to a high taxation, which may
the Special Participation and on the income tax be suspended under the Repetro regime. In this
computation as well. Other tax benefits may also regard, it is important to note that the equipment
apply to such R&D expenses. and machines must be imported to Brazil without
currency exchange coverage, i.e. the ownership
The Brazilian tax legislation does not expressly must remain with the non-resident.
define how exploration and development costs REPETRO grants the suspension of some Federal
should be treated for income tax purposes in Taxes such as II, IPI, PIS, COFINS, and in some
the O&G industry. The general income tax rule cases, the State Tax (ICMS) during the import of
determines that exploration and development certain goods and machinery to be used in the re-
A FULL-SERVICE
costs should be capitalized for further amortiza- search and/or the extraction of oil and natural gas DIGITAL AGENCY
tion (when production starts). reserves by way of the utilization of the following
regimes: (i) Fictitious export, (ii) Drawback, (iii)
Abandonment costs when incurred or paid are Temporary admission.
generally deductible for income tax purposes.
Provisions for abandonment costs are not de- THE POTENTIAL OF
ductible. COMMUNICATION
HAS NEVER BEEN
With all the different tax elements it difficult to
get an overview of the overall government take GREATER.
in Brazil, and this will also vary between differ-
ent fields. However, it can be concluded that the WE HELP YOU
government take will be on the high side. UNLEASH IT.
REPETRO TAX INCENTIVE www.creuna.com
The REPETRO tax regime is a special benefit
that applies to the imports and exports of goods
destined to the exploitation of oil and gas in the

CORRUPTION
In a bureaucratic society with low wages for public
servants, there is always someone who accepts
something to make things move smoother, or closes
their eyes in case of illegal actions. When the aver-
age salary of a police officer is R$1,700 a month (or
around 4,800 NOK), it is easy to pay yourself out of a
problem, especially feeling that you are backed up by
the social acceptance of the phenomenon.
Which guidelines should be followed, the ones set Anti-Bribery Convention. The country has laws, benefit. Irregular use of “governmental payment provement of the transparency of public spending
up by the norms of social acceptance or the ones regulations and penalties to combat corruption, cards”, official cars, airplane tickets, etc. is often and allowing social control by opening access to
uttered by the ethical standards of doing business? but their effectiveness is inconsistent. The recent reported in the media. One typical example of the citizens. Establishment of the Transparency Portal
What is the situation regarding corruption in Bra- implementation by the Federal government of poor distinction between private and public is the in 2004, Administrative Agreement Portal (Portal
zil and what is done to combat it? anti-corruption initiatives might not translate the widespread practice of nepotism among politicians dos Convênios) in 2008 and integration of the
situation in the country’s 27 states and 5,651 mu- and officials who frequently employ their relatives SIAFI (Integrated System of Financial Administra-
BRAZIL’S RANKING ON THE CORRUPTION nicipalities. The difficulties of fighting corruption in well-paid positions. Although governmental tion of the Federal Government; the main tool
PERCEPTION INDEX in Brazil are compounded by the country’s high reforms of the last decade have brought some used for recording, monitoring and control of
The Transparency International’s Corruption degree of decentralization, which provides local changes to the constitution, and among others the budget execution, financial and property of the
Perceptions Index (CPI) ranks countries and ter- authorities wide discretionary powers. Moreover, prohibition of the aforementioned governmental Federal Government) to expand its access to citi-
ritories based on how corrupt their public sector is oversight mechanisms at these levels are character- nepotism had been legislated in the judiciary, first zens, have all contributed to improve the transpar-
perceived to be. A country or territory’s score indi- ized by questionable efficiency, which has paved in 2005, and in 2008 extended to the executive, ency. At least, the media has made extensive use
cates the perceived level of public sector corruption the way for several cases of corruption. legislative, and judicial branches of the govern- of the information published on the ‘transparency
on a scale of 0 - 100, where 0 means that a country ment, some cases of it are still found today. portal’, and it has been very active in denouncing
is perceived as highly corrupt and 100 means it is COSTS OF CORRUPTION irregularities.
perceived as very clean. A country’s rank indicates For Brazil, the costs of corruption are big. Accord- INITIATIVES TO FIGHT CORRUPTION
its position relative to the other countries and ing to a survey carried out by FIESP (Federation of There are several different institutions located in Public procurement is also an area susceptible
territories included in the index. In 2012, Brazil Industries of the State of Sao Paulo) in 2008, cor- different regions and states of Brazil with mandates to corruption, sometimes in the form of techni-
ranked 69th (among 174 countries) in the CPI, ruption accounts for at least 2% of Brazil’s GDP to tackle corruption, though none of them have cal specifications favoring a specific supplier in a
doing best among other BRIC countries. However, every year (equal to a loss of 49.6 billion US dol- this specific task. The General Comptroller’s Office tender process, or related to payments in order to
when compared to other major emerging econo- lars to corruption in 2011). This money could be (CGU), which is responsible for internal control, obtain contracts/concessions or licenses/permits.
mies such as Turkey or Chile, the country has a sent to infrastructure projects, schools or hospitals, The Federal Police, which has conducted numer- According to a report made by “A Transparencia
long way to go. A comparison between Brazil and which are in a sore need of improvement. ous operations against criminal organizations as Mexicana initiative (Aug. 2012)”, there are no
some selected countries is displayed in the table on well as politicians and public officials involved in organizations in Brazil that systematically work
the next page DISTINCTION PUBLIC/PRIVATE corruption and fraud, the Court of Auditors, and towards the reduction of corruption in public
A particular problem regarding corruption in the the Public prosecutor’s office have all contributed purchases. In addition, data at the state level is not
A SUBSTANTIAL CHALLENGE country is the poor distinction between public and on this front. easily accessible. However, the international market
Brazil is a signatory to the Organization for Eco- private. In spite of laws and regulations, most Bra- is taking proper action to decrease the level of
nomic Cooperation and Development (OECD) zilian politicians use public funds for their private The government has also been working on im- corruption as the international companies strictly

keep distance from this sort of things, and the level ADVICES FOR NORWEGIAN COMPANIES
of punishment is increasing as the new generations Although examples of corruption practices within The best way to avoid corruption in Brazil is
gradually change the general mindset and ethical the Brazilian public administration are not very generally to pay close attention to all requirements
expectations. hard to find, it is perfectly possible for a Norwe- and follow all necessary steps when dealing with
gian company in Brazil to run business without authorities. Even a small typo in a document can
PROSPECTS FOR THE FUTURE having to pay bribes or commit other illegal acts. have big consequences. For instance, in customs
The anti-corruption strategies carried out by the In fact, paying a bribe would in many cases only clearance, if the shipping documents of imported
governmental institutions are playing an impor- create further complications in future. As Walker goods have any minor mistakes, the shipment As Walker Lima, general
tant role in the fight against corruption. But even Lima, general manager at OSM office in Brazil, would be stalled for several weeks or in worst case manager at OSM office
though important steps are being taken to improve quoted: “In Brazil, if you pay correctly, you pay sent back. Innovation Norway also advises all Nor- in Brazil, quoted: “In Bra-
the situation, the results will take time to come. It only once. If not, you may pay twice”. wegian companies not to use any middlemen or
zil, if you pay correctly,
is further important, in a country with the dimen- agents offering shortcuts for an extra fee, which is
sions of Brazil, to mobilize the general public, as Public procedures are complex, and it is not un- a common practice in Brazil. The “despachantes”, you pay only once. If not,
the former President Lula once emphasized: “I common for a foreign company to discover it has as they are called, deal with practical issues of the you may pay twice”.
think the Brazilian society needs to understand made a mistake or skipped a step in a procedure. bureaucracy on your behalf, but have a different
once and for all, that we are only going to be able It might seem tempting to resolve the problem by attitude towards corruption and bribery. Further,
to truly fight corruption when the civil society, buying oneself out of the situation in order to save if you do not pay your taxes or fees correctly, it
with the instruments made available, can act as a time and avoid the headache. However, in the lon- will catch up to you and you will have to pay the
watch dog”. The leading role in this development is ger term, this kind of actions is unadvised since it double in addition to risk coming under scrutiny.
to be played by the middle class, since it is the one conflicts with ethical standards of doing business, The unanimous opinion among all the Norwegian
paying great part of the taxes and benefiting less and since it may catch up to you in the future. companies is that you should be thorough in pay-
from social policies. Considering the positive ef- ing everything correctly, including taxes, wages and
fects of the improving economy in the country, we Most of the companies we have been in contact potential fees. This way you will be 100% sure of
clearly observe the increasing growth of the middle with indicated that they have not experienced any your finances and can easily undergo audits with
class, and the more people emerge from poverty sort of corruption. Only a few of them have had confidence and without risking to get any further
and join the middle class, the less corruption tends one or two insidious approaches, but in all cases fees.
to be accepted. these had been gently refused without any harm-
ful consequences. This implies that the problem of
corruption is of a manageable character.

INFRASTRUCTURE AND
INTERNATIONAL TRADE
Brazil is facing vast infrastructural challenges, and infrastructure
is cited as the second most problematic factor for doing business,
according to the World Economic Forum’s Global Competitiveness
Report 2012-2013.
Combining this fact with Brazil’s problems that private capital will not rush to fill the gap.
concerning corruption, bureaucracy and taxation, Port infrastructure is vital when it comes to
you start to get the picture as to why importing international trade, but unfortunately Brazil ranks
a container comes at twice the cost compared to 135th out of 144 in this area. The government
the OECD average. For a Norwegian company in has announced extensive investments to improve
problems, and generates a lot of extra work for Ways around this is out of scope for this report,
Brazil the challenges in the area of international the situation, but infrastructure is only part of the
international buyers. “The solution to this problem and for more information we advise you to contact
trade range from coping with this to unpredictable problem. As an example, pilots guiding ships into
is simple”, says Heimly, “Do it 100% correctly. for instance DNB.
financial framework. ports are among the best paid personnel in Brazil, Always. It is very important to have good internal
due to demand. Corruption also adds to the bill in procedures to avoid these customs issues.” Haukeland also mentions that financial directors
The World Economic Forum ranks Brazil 107th some cases, and the high costs are also hurting Bra- All monetary transactions in Brazil must be done will find it difficult to do long-term planning, as
out of 144 when it comes to overall quality of zilian exporters. Still, most Norwegian companies in Real (BRL), and Brazilian companies are not rules and regulations can change over night. An
infrastructure. Especially transportation infra- do not identify corruption as the main challenge allowed to hold accounts in any currency, except if example is the tax on financial operations (IOF),
structure is in a bad state, which seriously affects when importing goods. they are involved in international trade. Having to intended to reduce the inflow of short-term, specu-
the movement of goods. There are plans to build a operate in an environment with a volatile Real is lative foreign currency. The definition of short-
high-speed train link between Rio de Janeiro and Tony André Håvelsrud of Kongsberg Maritime cite one of the biggest challenges for many companies, term has varied greatly over the past years, jumping
São Paulo, but this project is suffering from delays. tariffs around 80-100%, customs clearance time according to Arne-Christian Haukeland of DNB. up and down from one to five years.
Although the Brazilian government plan to spend and bureaucracy as major challenges. Terje Heimly The strict currency regulations prevent inter-
1% of GDP on infrastructure from 2011-14, crit- from Aker Solutions has experienced having goods national cash pooling. Inter company loans are
ics like Morgan Stanley argue that this is far from with customs for several months. A very small common, but cannot be used in connection with
enough, and there is also plenty of reasons to think detail in the import documentation can cause huge cash pooling, which is common in other countries.

This is one of the answers from Petrobras’ repre- HOW TO DO CSR IN BRAZIL
sentative when being asked how to make success For larger companies, many of which are often
CORPORATE SOCIAL in Brazil. The statement certainly indicates the
importance of being perceived as a socially re-
found within the oil and gas sector, CSR may
require a substantial amount of resources. For
RESPONSIBILIY (CSR) sponsible company, attaining local acceptance and
building a good reputation in both business sectors
instance, most major companies in Brazil have a
designated CSR officer –or department through
and communities alike. In fact, it is expected from which their CSR-efforts are funneled, whose main
“Any company committed to CSR will be recognized in Brazil” Norwegian companies that they engage in CSR objective is to link their social and environmental
- Petrobras activities when operating in Brazil. Companies are responsibilities to their core businesses. As such,
further advised to clearly communicate not only CSR often requires focused and strategic planning
which CSR activities they engage in, but also the over the long term in order to achieve sustained
reason for doing so. If a company gets in some effects.
kind of trouble, they might actually meet a better
response from local authorities if they can refer to a A study conducted by students from Copenhagen
continuous record of stakeholder engagement. Business School found that whereas Latin-America
is more focused on its own social progress, Scandi-
CSR: FROM THE HEART AND CORE OF THE navia is focused on global issues such as environ-
COMPANY mental care and poverty in developing countries.
CSR is by no means a new phenomenon in Brazil, This becomes evident when comparing Norwegian
and the tradition has its roots back to the 1960’s. Statoil with its Brazilian counterpart Petrobras.
The concept has however developed from being Whereas both focus on sustainable development,
a matter of philanthropy to concern activities for Petrobras has an outstanding political role in terms
which sustained effects can be clearly demon- of the social programs designed to assist local
strated- both for the company and the community communities in Latin America. The dissimilar
within which the company operates. approaches may be a result of different levels of
economic and political stability. That is, compa-
This notion is also supported by a former manager nies operating in Brazil face different challenges
of Petrobras, who argued that CSR should not be relative to Norway when establishing their CSR
confused with philanthropy. Rather; the concept strategy. One striking difference is attributed to the
is equivalent to building new markets to facilitate differential responsibilities of the respective public
growth and provide for a positive development; welfare programs, as they are less extensive in Brazil
thereby proving tangible benefits for both par- as compared to Norway. In Norway, Governmen-
ties involved. For instance, if Petrobras had not tal institutions are in charge of matters related to
invested in education to give people the compe- professional training, social assistance and social-
tence required to develop edge technology, the cultural activities aimed at employees. Conversely;
company would not have been able to operate whereas in Brazil, the State has been unable to
offshore; which constitutes 85 % of their present meet this demand efficiently, leading to Brazilian
total activity. companies taking the responsibility to prepare
workers for the market and assist them with some
It is thus considered important to implement CSR of their social needs. Consequently, CSR-projects
as part of the company’s core business, thereby in Brazil are often associated with social projects at
making money while promoting sustainability. a local level.
This emphasis might be one of the reasons why
Brazil generally is perceived as highly competent Health, infrastructure and education constitute
and sophisticated when it comes to CSR. They in- the main challenges emphasized by the Brazilian
tend to take the position as Latin-American leader Government, of which education is the number
within the area, and are one of the world’s fast- one priority for development initiatives. A variety
growing nations most committed to global sustain- of measures have been taken to keep children and
ability-practices. Some even say that Norway has a youngsters at school, navigating the country into
lot to learn from them, which is important to keep the right direction. Nevertheless, the school system
in mind for Norwegian companies planning to has not reached a sufficient level of quality, and
enter Brazil. Be humble, and try to learn. the country faces major challenges related to this
area. In Brazil, government therefore puts a special

If a company shows com-
mitment to CSR he will
achieve addition points, and
be able to win this pro-
cess of being a supplier of
Petrobras. Any supplier that
decides to be committed
by CSR he will be recog-
nized by Petrobras.
emphasis on initiatives taken to improve the condi- the industry. To produce the leaf-protection, 200
tions of children and adolescents. This includes local women in the northern region were engaged.
getting them into organized activities, improving Initially, the women did not possess the resources
their English language skills and preventing them required to make a living; however, today they
from “being captured by the Favela”. The con- are suppliers of Petrobras. As such, local people
struction of new schools, as well as improving the were given the opportunity to raise new businesses
general infrastructure, is also considered important instead of contracting major companies to do the
activities in a CSR perspective. A final subject to same job. According to a former manager of Petro-
consider is that the corruption levels are higher bras, there is a substantial social risk associated
in Brazil than in Norway; hence, training staff on with not giving people in rural areas the appropri-
handling corruption becomes an important part of ate conditions necessary to provide for their own
being a socially responsible company. living. They will eventually migrate to larger cities
without having the necessary education for getting
OTHER GOOD-TO-KNOW-FACTS ABOUT CSR a job. As such, they might end up in the favela
In Brazil, approved CSR activities are deductible dealing drugs (Petrobras).
with an amount up to 10 % of various taxes. The
law is applicable for both private Brazilian compa- ”If a company shows commitment to CSR he will
nies as well as subsidiaries of foreign companies. achieve addition points, and be able to win this pro-
Further, according to national legislations, Brazil- cess of being a supplier of Petrobras. Any supplier that
ian companies are required to allocate 1 % of total decides to be committed by CSR he will be recognized
revenue to R&D; 50 percent of which allocated by by Petrobras. ”
the Government and the remaining part allocated
to initiatives selected by the company itself. MINI-CASE: DREAM, LEARN, WORK
The Norwegian Ministry of Foreign Affairs has
MINI-CASE: PETROBRAS supported a CSR project called “Dream, Learn,
In order to maintain the pipelines, Petrobras Work”. The project is established by Norwegian
needs to use a special protection. Traditionally, companies in Rio de Janeiro, and the objective is
the materials used were produced by the industry to provide qualified labor for the maritime sector
in Sao Paulo. However, they discovered that if while at the same time offering education and
they take some special leafs from a special tree in work to underprivileged adolescents. For more
the northern region of Brazil they will obtain an information about the initiative, visit www.dream-
equally good protection as the one produced by learnwork.com.

FRIELE- A GOOD
CASE PRACTICE
The trade relationship between Brazil and Norway has for almost Friele is the largest
two centuries consisted of coffee, sugar and fish. The ships that first coffee producer in
docked in Brazil were filled with fish and they brought coffee and Norway, and has
sugar back to Norway. imported coffee
directly from Brazil
since 1854.
Today, coffee is one of our most treasured con- The UTZ certification is one of their approaches to als and natural resources are preserved and pollution
sumer goods and if you ask an average Brazilian fulfill their CSR strategy. This certification method is reduced. That’s better for all of us and means farm-
of their associations to Norway, they will probably has the main goal of ensuring that all parts of the ers are able to use their land better and longer. All in
say “Bachalaou”. This illustrates the important production chain are profitable and sustainable. In all we can say that thanks to the UTZ program more
role that coffee and “Bachalaou” play in the trade practice, the UTZ organization has an overview and more farmers and workers feel healthy, motivated
relationship between Norway and Brazil. of the conditions of the farms and assists farmers and respected. They get more chances to achieve their
aiming to produce sustainably. This includes help- ambitions and so do their families. Their children
Friele is the largest coffee producer in Norway, ing farmers to operate eco-friendly and improving go to school and are able to grow up in a safe and
and has imported coffee directly from Brazil since their social conditions. The UTZ certified coffee healthy environment.”
1854. This long tradition explains why the Brazil- that the consumer buys can also be traced back to
ian market is so important for Friele. As many the farm where it was produced. - Interview with representative from UTZ certi-
other companies in Brazil, Friele has acknowledged fied
the importance of taking social responsibility in Brazil is one of the countries with largest inequali-
the Brazilian market. Their approach is a good ties in the world; this is an obstacle Brazil has to In addition to the UTZ certification they also
example of how CSR can be successfully imple- overcome in order to fulfill the potential of the support two social projects in Brazil; a cultural
mented in a company’s business strategy. country. The UTZ certification that Friele is en- center and a housing project. One of the effects the
gaged in is a good way of helping Brazil take steps CSR strategy has is the improved living conditions
“With more than 210 years in the coffee market, our in the right direction. in the country. Let this be an inspiration to other
experience is that responsible passion is a key ingredi- companies who consider entering the Brazilian
ent to produce good quality coffee” “By working according to the UTZ Code of Conduct market.
- quote friele.no farmers get better crops. Not only do the farmers pro-
duce more, they achieve better quality at lower costs.
For Friele, quality and responsibility go hand in Because of this, their income increases. Farmers are
hand. The passion for coffee stems from farmers trained to be good business people. This way they are
with a sustainable production. This explains why able to invest in their families, a sound business, the
Friele set requirements to their suppliers in terms people who work there and in their futures. UTZ cer-
of environmental and social standards. tified farmers work with respect for the environment
and in better harmony with nature. Animals, plants
and nature reserves are protected. Water, raw materi-

HOW TO CHOOSE THE
RIGHT BUSINESS MODEL
WHEN ENTERING BRAZIL
When entering Brazil, it is crucial that you allocate enough time to
choose the right Business model and decide in “what form” you want
to enter the country. There are many examples of companies who
have failed to do this, not thinking it enough through and overlooking
the effect that it might have for the company’s performance.
The definition of a business model is that is are we reaching our customers now and through
describes the rationale of how an organization cre- which channels do our customer segments want to
ates, delivers, and captures value. According to the be reached? A company can reach its clients either
Business Model Generation, written by Alexander through its own channels (e.g. store front), partner
Osterwalder and Yves Pigneur, there are 9 specific channels (e.g. major distributors), or a combina-
building blocks that you need to have control over tion of both.
when starting your business.
The fourth, customer relationships, describes the
The first one is your customer segment, which types of relationship your company establishes
defines the different groups of people or organiza- with specific customer segments. What type of
tions your company aims to reach and serve. For relationship does each of our customer segments
whom are we creating value, and who are our most expect us to establish and maintain with them,
important customers? A company has to identify and how are they integrated with the rest of our
which customers it wants to serve in order to build business model? To ensure the survival and success
an effective business model, and there are differ- of any businesses, companies must identify the
ent types of customer segments to evaluate. Do type of relationship they want to create with their
you want to follow the mass market, or do want customer segments and what is expected of them.
to establish yourself in a niche market, where your This building block is especially important in Bra-
customer segment is based on specialized needs zil where the business culture is much more built
and characteristics of its clients? on relationships and trust than in other countries.
This may require that you get more personally
The second building block is value propositions, involved with your customers than what you nor-
which describes the bundle of products and servic- mally would in other situations. In addition, most
es that create value for a specific customer segment. companies operating in the oil-service sector will
What value do we want to deliver to our custom- to a certain extent be dependent on Petrobras. This
ers and which customer needs are we satisfying? relationship may be crucial to success.
According to Osterwalder, (2004), a company’s
value proposition is what distinguishes itself from The fifth, revenue streams, represents the income
its competitors. Value propositions could be either the company makes from each customer segment.
quantitative, like price and efficiency, or qualita- For what value are our customers really willing to
tive, like overall customer experience and outcome. pay, and what do they currently pay? Should we fo-
cus on asset sale, maybe the most common, mean-
The third one is what channels you are going to ing selling ownership rights to a physical good, or
use, and describes how you want to communicate should we take a usage fee and generate revenue
with and reach your customer segments. How streams from the use of a particular service?

The sixth and seventh building blocks are what
kind of key resources and key activities are required is required by the government to choose the bids
to offer and deliver our products and services. with the lowest price, regardless of the quality of
These two building blocks represent the most services rendered. It is also important to be aware
important thing your company must do to make of the relatively high costs in Brazil in relation to
its business model work. What key resources are employees, bureaucracy, taxes and so on.
necessary to create value for the customer, and
what key activities are the most important activities PITFALLS WHEN CHOOSING YOUR BRAZILIAN
in executing your company’s value proposition? Ex- BUSINESS MODEL
The highesT ranked • AFF works with and for executives amples of activities could be to create an efficient
supply chain to bring down costs. Key resources
This framework can help you organize your busi-
ness model to meet the Brazilian market, but
- developing leadership for better
consulTanT company wiThin results are considered as assets for the firm, and could be
human, financial, physical and intellectual. A prob-
adapting a business model to a Brazilian reality
may be a challenge.
leadership developmenT in • AFF is a long term partner for lem with respect to resources is the lack of qualified
employees in Brazil. You have to follow regulations As discussed earlier in this report, there are major
companies in private and public
The nordic region organizations regarding local content which creates boundar-
ies for what employees you are allowed to hire,
cultural differences between Norway and Brazil.
These are all aspects that you need to consider and
and many companies that we have talked to find be aware of when choosing your business model
this problematic. The offshore industry especially and way of creating value. There are several success
struggles with this, where there is a high demand stories about companies doing this extremely well,
for qualified employees. and one common factor among these is that they
adapt to the Brazilian way of doing things. They
Number eight is key partnerships, and describes do not try to change things or “westernize” them.
the network of suppliers and partners that make They all have the same goal: become Brazilian, or
the business model work. Who are our key part- as Brazilian as possible.
ners, and who are our key suppliers? In order to
optimize your operations and reduce risks of your There are also examples of companies that have not
chosen business model, you should nurture your done this as well. One example of a pitfall when
buyer-supplier relationships so they can focus on choosing a business model is overestimating your
their core activity. A common issue in Brazil is that employees and co-workers ability and proactivity.
you often run the risk that your suppliers cannot Employees must be told how to do their jobs, and
deliver. This applies first and foremost to smaller they are used to a control-based system. Assum-
suppliers, but also large companies have been ing that this will not be a problem and ignoring
known to default on contracts. Complementary the Brazilian way of doing things, may lead your
business alliances also can be considered through company to suffer under poor performance. In
joint ventures, strategic alliances between competi- addition it can be difficult in relation to manage-
tors or non-competitors. We would however like to ment. Having Brazilian management can eliminate
stress the importance of knowing who you are in a lot of problems, but it is important to be clear
business with. Setting up a joint venture, or merg- on what you want to accomplish. Finding middle
ing with a Brazilian company can expose you to ground between Norwegian straightforwardness
- helping
other risks, and there are several stories of compa- and Brazilian ad-hoc management can prove diffi-
nies who have done this unsuccessfully. Make sure cult, and transparent communication is important.
to do a thorough due diligence.
This is particularly important when engaging in a
utilities And last, number nine is cost structure, which

describes all costs incurred to operate a busi-
ness model. What are the most important costs
joint venture or M&A processes. There are several
examples of how malpractice in management and/
or among employees hurt business. “Caixa dois”
work smarter
associated to our business model, and which key is one example of such malpractice where wages
resources and activities are most expensive? Is a are paid off the books so as to avoid taxation. It is
cost-driven approach the best solution, or can a important to do thorough research on prospective
value-driven approach be more successful? For partners and to be very clear on what you wish to
companies reliant on Petrobras, a cost-driven ap- accomplish.
Powel AS utvikler og leverer forretningskritiske IT-løsninger og tjenester til energisektoren og til deler av kommunal forvaltning samt proach is likely to win more contracts as Petrobras
entreprenørsektoren. Energisektoren omfatter kraftprodusenter, kraftsalgsvirksomheter, nettselskaper og systemoperatører.
Vi har hovedkontor i Trondheim og avdelingskontorer flere steder i Norge og Sverige. www.powel.no INTERNATIONAL BUSINESS BRAZIL 2013 79
TESSED FOR SUCCESS
In the outer edge of Macaé, the oil and gas capitol of Brazil, a
Brazilian business adventure has barely begun. The adven-
ture was initiated by the Norwegian company Tess, simply by
adhering to their very mission: “Follow your customers”. With a
considerable part of the customer base operating in Brazil, the
decision to extend the business overseas became evident.
Tess is a Norwegian and nationwide supplier of companies were identified as potential partners. It tween the parties concerning their views on future
hoses, couplings and other system solutions with was decided to make some field trips to Brazil to Already in July 2010, only months after they strategy. Whereas Tess had ambitious goals for
corresponding services to the engineering, manu- visit the selected companies, examine their manu- decided to expand to Brazil, an informal intention growth and expansion in the Brazilian market, the
facturing, maintenance, repair and operations facturing facilities and make an overall assessment agreement was entered into between the parties. initial owners of Bic Borracha was satisfied with
market. In 2010, as a consequence of their expan- of factors such as QHSE. The value chain of the The succeeding negotiation process was mainly fo- how things were today. The different standpoints
sion plans and the strategy of getting closer to their companies was also examined closely. Erik Jølberg cused on establishing a close relationship with the were likely attributed to different business cultures
customers, Tess decided to enter the Brazilian mar- participated at the first trip, and was accompanied owners of Bic Borracha, which is an important part between Brazilian and Norwegian companies, and
ket. The pre-entry planning process was relatively by the technical director of Tess; Ansgar Karlsen, at of doing business in Brazil. This involved inviting the partners were not able to come to an agree-
short, and did not require considerable resources in the second trip. them to Norway, bringing the family when visiting ment. As such, the initial owners of Bic Borracha
terms of time and effort. After having carried out them in Brazil and making relationships across gave Tess the ultimatum to either sell back all of
some desk-research in order to confirm the market After these two trips to Brazil, Tess had identi- generations. In March 2011, a formal agreement the shares, or acquire the remaining shares of the
potential, it was decided to acquire 50 % of a Bra- fied a potential new partner: Bic Borracha, a was signed, and the acquisition was finally realized. company. After a long and expensive negotia-
zilian company instead of establishing a subsidiary small family-owned company located in Macaé. The family owned Bic Borracha had now trans- tion process that required considerable resources
in Brazil. The reason was simple, according to the The company was established in 1979, and had formed into the commonly owned BicTess. in terms of time, money and effort, the parties
Director of Tess International; Knut Jølberg: built the position as one of the major suppliers of finally came to a settlement. In October 2012, Tess
hydraulic hoses for the Brazilian offshore industry. PROBLEMS ARISE acquired the remaining shares of BicTess, and was
- We wanted to do it the Tess-way, which is equivalent The company was also included on Halliburton In the following year, almost everything seemed to thus a 100 % owner of the company. BicTess was
with easy and rapid market-entry and immediate and Schlumberger’s vendor lists, which is a long proceed according to plans. The partners commu- now operating as a subsidiary of Tess.
return on investment. If we were to establish a new and demanding process. According to Knut Jøl- nicated frequently; Knut Jølberg traveled to Brazil
subsidiary, the process would have been longer and berg, it was of particular interest that they shared every second month for meetings and supervision, EXPANDING INTO THE FUTURE
more complicated. By only acquiring 50%, we would some of the same customers: and it was arranged for weekly phone conversa- According to Jølberg, the problem with the acqui-
also be able to keep local knowledge and get even tions between the partners. Some new initiatives sition approach in Brazil has mainly been attrib-
faster into the market. - Several of our customers in Norway had operations were also taken in order to improve storage capac- uted to cultural differences:
in Brazil with Bic Borracha as one of their suppliers. ity, HES and QA-routines and customer strategy.
The goal was to enter into partnership with a small The company was also selected on the criteria of being However, in March 2012, after approximately one - Some issues should obviously have been considered
local company operating within the same busi- more similar to Norwegian companies in terms of year of formal partnership, something unexpected more thoroughly before jumping into a partnership,
ness area. After having scanned the market and business culture, additionally to having a simple man- happened. The Brazilian partners had changed especially those concerning how to collaborate with a
contacted several owners to check whether they agement structure, which hopefully should facilitate their mind concerning partnership. Obviously, Brazilian company. This has introduced more chal-
would consider selling 50% of the company, 4 communication and understanding. there had been some significant differences be- lenges along the way than initially anticipated. Yet; if

we had chosen to do things differently, we might not you want to do business in Brazil, you have to pass • Implementation of “Tessification” inch by inch
have been able to realize our plans of rapid expansion. the examination. The examination is simply to • Clear common objectives that are communicated
The market entry in Brazil has also been more success- behave. If you behave, the success will ensue. and evaluated on a monthly basis
ful than that of many other foreign companies, and • Regular video meetings between representatives
the financial results indicates a lucrative business. TESS’ KEY TAKEAWAYS FROM BRAZIL: from Norway and Brazil
Challenges: • Implementation of a fixed set of procedures for
In August 2012, Tess employed a new county • Implementing corporate culture (leadership, at- reporting
manager in Brazil; Håkon Bringsverd, who has titudes, behaviors, etc.)
solid experience from the Brazilian market. This • Creating common systems, procedures and man- Lessons learned:
has facilitated coordination and communica- agement practices • Include a “non-competition”-clause in the con- “At present, they are operat-
tion between Tess in Norway and their Brazilian • Differences related to business culture and leader- tract. The partner can quickly become a competi- ing as a Brazilian company
employees. Eventually, BicTess will take the name ship style tor!
with a business culture quite
Tess Brazil, and the plan is to expand their business • Communication and language barriers. • Clarify common strategies, responsibilities and
by establishing service centers in close associate • Implementing an understanding of long-term goals in advance of signing the contract. different from the Norwegian
to their customers. Changing the company name strategy and responsibility • Provide sufficient internal information when the one, and there are still some
introduces some trade-offs. On one hand, Tess • Communicating and delegating information to agreement is signed, and communicate clearly the areas where they need to
has a credible brand name which can be used to employees in Brazil, which is done in a different implications for employees make improvements”
strengthen their position in Brazil, whereas on fashion to Norway • Develop and implement a continuous integration
the other hand, employing their company brand • Different recruitment systems in Brazil and plan as soon as possible with focus on common
requires that they are able to deliver according to Norway. systems, procedures and practices for supervision,
Tess’ high quality standards. At present, they are • Meeting the deadlines, as Brazil has a different control and management.
operating as a Brazilian company with a business time perspective • Closer supervision in the initial phase (consider
culture quite different from the Norwegian one, weekly video meetings).
and there are still some areas where they need to Key factors for success:
make improvements. This requires changing the • Hands-on management
mindset of the organization, which is a challenging • Recruitment of a well-experienced Norwegian
task. Yet, Knut Jølberg is confident that Håkon is country manager in Brazil with knowledge related
the right man to do the job. According to Jølberg, • Brazilian culture and language
the receipt to success in Brazil is overly simple: - If • Creation of long-term relationships

GATEWAYS FOR NORWEGIAN
COMPANIES ENTERING BRAZIL
Since the time when coffee was exchanged for codfish, Brazil-
ians and Norwegians have been good commercial partners.
The two nationalities have extensive differences when it comes
to culture, climate and language, yet cooperation has been
present in several sectors, such as Oil & Gas and Maritime.
BY GUILHERME MENDES, Norway helps reducing the risk of entering a dif- NBCC ing in Norway (85%) and the Norwegian govern-
INNOVATION NORWAY – RIO OFFICE ferent market. Norwegian companies have access The Norwegian Brazilian Chamber of Commerce ment (15%), now fully owned by the Norwegian
to financing solutions, public funds for innovative (NBCC) is promoting network within the business government. The organization provides long-term
Back in 2006, there were around 60 Norwegian businesses and a wide network. community through events, luncheons, seminars financing for the Norwegian export sector, and the
companies in Brazil. Today, the number has and presentations, being as well a communication guarantee may come from GIEK or a commercial
doubled, not taking into account those businesses Innovation Norway’s office in Rio de Janeiro channel for the Scandinavian business community bank.
operated by agents (approx. 50 companies), and cooperates closely with Petrobras, and there is a in Brazil. For instance, members are entitled to
most of them are concentrated in the Oil & Gas Memorandum of Understanding (MOU) fostering contribute with articles for the magazine Nordic A NETWORK OF GATEWAYS
and Maritime sector. innovative Norwegian technology to supply the Light, a joint initiative by SwedCham and NBCC. Norway has developed a series of door openers for
needs of the Brazilian state owned E&P Company. companies with international potential. In Brazil,
For these companies, it could be very risky, not Another MOU was signed by Innovation Norway Innovation Norway, INTSOK and NBCC have this formula has worked very well. The Norwegian
to say naive, to step in Brazil without any kind and BG Group aiming to identify new technolo- been working closely in cooperation, together with presence has increased significantly within the past
of advice or support. The local market is very gies and promote collaboration on Research and the Ministry of Foreign Affairs (MFA), aiming to years, mainly in Rio de Janeiro.
complex, and small Norwegian businesses would Development. create a better structure for the Norwegian busi-
not be competitive enough to survive on their own nesses in Brazil and following up the Strategy for Experience assisting Norwegian companies in a
throughout the first years, which are considered to INTSOK Cooperation published by the MFA. market abroad leads to the conclusion that Norway
be the phase of highest risk rate. Another source for support is INTSOK, present in is pioneer when it comes to the provision of sup-
Rio de Janeiro. The organization can assist Norwe- FINANCING OPPORTUNITIES port for companies to grow internationally. 70%
Norwegian companies have some sources for sup- gian companies in several ways, such as market in- Concerning financing solutions, Garanti-Insti- of Innovation Norway’s customers claimed they
port, such as financial support, market advice, cul- formation, local advisory, workshops, seminars and tuttet for Eksportkreditt (GIEK) can offer safe would not have carried out their projects without
tural understanding and networking. Institutions market entry projects. The Brazil Entry Program is export credits on behalf of the Norwegian govern- the support from IN.
like Innovation Norway, INTSOK, Eksportkreditt a very successful initiative by INTSOK, aiming to ment. The exporters are thus able to offer credit
and GIEK can provide the necessary helping hand, assist selected Norwegian companies in mapping or finance without bearing the entire risk alone. In such a complex market as Brazil, Norwegian
and some of these organizations are based in Brazil. the potential of the Brazilian market. The program Recently, GIEK and Petrobras signed a Memo- companies have several ways for being one step
involves workshops in Norway about how to do randum of Understanding that allows for up to ahead of the international competition, and for
INNOVATION NORWAY business in Brazil, in addition to business strategy, US$ 1 billion in credit guarantees to cover exports each market entry bottleneck, there is some institu-
Innovation Norway has offices in all Norwegian market screening, partner surveys and a week in to Petrobras, as part of the company’s financing tion able to give them the right support.
districts and in over thirty countries. The offices Brazil meeting potential partners and clients. The strategy for projects included in the 2012-2016
abroad have wide knowledge of both local and program is concluded by a strategy work and a Business Plan.
Norwegian markets, and the local teams know how business plan. In 2012, five Norwegian companies
to overcome the specific challenges that Norwe- composed the agenda of the program. One more gateway for funding is Eksportkreditt,
gian companies may face. Therefore, Innovation previously owned by a consortium of banks operat-

BY TORKJELL LEIRA* signatures to be able to register for national elec-
tions. The political project will most likely focus
BRAZIL BEYOND 2014: As the world is looking forward to the 2014 foot-
ball world championships to be hosted by Brazil,
on sustainability, ethics and the environment,
the issues that brought her so many votes in the
POLITICAL PERSPECTIVES the Brazilian political agenda is concentrating on
the presidential elections in October that year. Al-
last elections.
IN THE B OF THE BRICS though the re-election of president Dilma Rouseff

is the most likely outcome, new actors might
THE JOKERS
No party can govern Brazil alone. The coun-
complicate the picture. Rouseff´s coalition might try is a federation of 26 states plus the Federal
The last decade has been a boom for Brazil. Due to high also suffer changes. That could bring on modifica- District, and is home to a multitude of political
economic growth, massive discoveries of petroleum, success- tions in trade and economic policy, possibly with parties. In the House of representatives (Câmara)
ful poverty reduction and lower deforestation in the Amazon, substantial consequences for international business alone, there are no less than 25 parties. Any
and Norwegian companies. president will have to govern on the basis of a
Brazil has become one of the major global powers. broad coalition of parties with a high degree of
THE CANDIDATES conflicting interests.
As I predicted in 2010, the most likely trio to com-
pete for the presidency in 2014 is Dilma Rouseff, The main regional political power in Brazil, and
Aécio Neves and Marina Silva. accordingly the most attractive partner in Con-
gress, is the Party for the Brazilian democratic
Dilma Rouseff, from the Worker´s Party (PT), was movement (PMDB). The party has no clear
elected in 2010 on a wave of support for former ideological agenda, but it seeks power. PMDB
president Lula. She has continued to pursue Lula´s has been a part of the last five Government coali-
project, economic growth combined with better tions, two with PSDB (1995-2002) and three
distribution, and has achieved the same high levels with PT (2003-present). The support of PMDB
of support in the population. PT was originally a in the presidential elections will be crucial.
socialist party, but governs Brazil with a combina- Aécio Neves and the social democrats are trying
tion of orthodox macroeconomic policies, exten- to convince them not to link too closely to PT
sive state interventions in economic policy and before the elections. However, PMDB president
huge social programs for the poor. Michel Temer is Dilma Rouseff´s vice president
and it will be a big surprise if the party does not
Aécio Neves represents the Brazilian social demo- support PT and Rouseff in 2014.
cratic party (PSDB), the main opponent of the
Workers Party the last 20 years. Senator, former A rising political star in Brazil is Eduardo Cam-
governor of the important Minas Gerais state, and pos. Governor of the influential state Pernam-
grandson of the first civil president elected after the buco, he represents the Brazilian socialist party
military dictatorship (1964-1985), Neves is a high- (PSB), which made huge progress in last year’s
ly respected politician. His party, though, is having local elections. At current, PSB is a part of the
trouble uniting behind his candidacy. PSDB is governing PT coalition, and has said that it will
also struggling to present a credible alternative to maintain loyal through 2013. Next year, though,
the popular PT government. PSDB is traditionally is open for discussion. PSB might continue sup-
more right of centre, and more liberal in economic porting PT and Dilma Rouseff, the party might
policy, than its Scandinavian cousins. present Eduardo Campos as an independent
candidate, or support Aécio Neves and PSDB.
Marina Silva, Minister of Environment in presi- The last alternative is president Dilma´s night-
dent Lula´s government, ran for president in 2010 mare, and her people are now trying to convince
on an agenda for sustainability. Representing the the PSB to stay within the governing coalition.
Green party (PV), she got a surprising 20% of the
votes in the first round. She and her followers left THE RESULT
PV last year after disappointment with its lack of In Brazil, a presidential candidate needs 50% of
renewal, but they are, as we speak, constructing a the votes, plus one, to be elected. The 2014 elec-
new party to participate in next year´s elections. tions will almost certainly, as the last three, go
The name of the party will probably be Rede to a second round between the two candidates
(network) and until October they need 500.000 with most votes. That will probably be a run-off

AFTERMATH
* Torkjell Leira has worked and studied

in Brazil and the Amazon for several
years. His academic background in-
cludes Human Geography (master) and
Portuguese from the University of Oslo.
He is currently writing a book about con-
temporary Brazil, and runs the blog
www.BrasiLeira.no
between PT president Dilma Rouseff and PSDB in 2015. The rigorous macroeconomic policy aim- During our research, we found that the most criti- In the end, there is no consensus regarding leader-
challenger Aécio Neves. Marina Silva will come ing at low inflation, partly compromising growth, cal requirement of doing business in Brazil is to ship styles. Most of the companies we interviewed
third, but with less support than last time. might be adjusted, as may the strict and increas- obtain a thorough understanding of local business experienced benefits with both Norwegian and
ingly expensive regulations applying to local con- culture. The average Brazilian manager will operate Brazilian management ideologies. Through experi-
The power-hungry PMDB will stay loyal to Dilma tent in the oil sector. The overall political project, in significantly different ways than a Norwegian mentation and processes of learning, they were able
from the start. That is almost a guarantee for though, will continue the same: Economic growth one. As such, knowing the differences between to find a balance; thereby promoting an open and
Dilma´s victory. Facing that scenario, Eduardo and poverty reduction. Norwegian and Brazilian management philoso- collegial communication environment while at the
Campos and the growing PSB will probably sup- phies becomes an important aspect of having a same time meeting Brazilian employees’ expecta-
port Dilma from the beginning as well. PSB might, Given an unlikely PSDB victory, Aécio Neves will local presence in Brazil. tions of structure. It is also worth noting that you
though, detach itself from the PT and launch have to construct a new coalition in Congress to should learn the local language. Learning Portu-
Eduardo Campos as an independent candidate in govern. PMDB will easily jump from one side to “In Brazil, it is not enough to sit down and delegate guese is absolutely necessary for expats stationed
the first round, in an attempt to trade support to another, as will several of the smaller parties to the work. You need be on top of the issues.” – Henry in Brazil, and this is especially true for those in
Dilma in the second round for more influence and right. There will be no major changes on macro- Ritchie, Principal of McKinsey’s Rio de Janeiro management positions.
more ministerial posts than otherwise. economic policy or social programs like Bolsa Fa- Office)
milia, but industrial and trade policy will become Second, you need to be aware of the challenges
In the second round, the chance for a re-election of more libearl. The state will become less present in A common advice offered by the Brazilian manag- related to Brazilian bureaucracy. If you do things
Dilma Rouseff is very high. the economy, more state companies and services ers we interviewed was fairly simple: be humble. properly and in the right order, things will likely
will be privatised, and regulations of both market Overestimating your own management experience, sort out in the end- even though it might take
THE CONSEQUENCES and labour forces will become weaker. while not giving Brazilian business culture ad- longer time than expected. A valuable advice is to
Brazilian politics will be business as usual until equate merits, is a potential mistake as Norwegian get help from experts when dealing with Brazilian
after the 2014 elections. At present, there are no Conclusion: Business as usual until the elections, processes do not necessarily apply in Brazil. legislation and tax regulations.
threats to Dilma´s coalition. The last six months changes in a more liberal direction in 2015.
before a presidential election are usually a politi- “Whether a company has a Norwegian or Brazilian Last but not least: Brazil is not for beginners. For
cal standstill, when all attention is drawn to the management is not of significant importance. Rather, most companies, it is strongly recommended to
upcoming elections. it is vital to obtain an understanding of the Brazilian take a large first step, have a good entry strategy
culture, as well as building the culture of the organi- and be well prepared for potential challenges. If
As in the U.S., a president has more liberty in a zation.” you are able to do this, Brazil is likely to be the
second term. Given a re-election of Dilma Rouseff, – Mauro Andrade, Vice President Public Affairs, goldmine that it has the potential to be.
we should expect some changes in economic policy Statoil Brazil

INTERNATIONAL BUSINESS
STUDENT TEAM 2013
LINN-CHRISTEL STRIFELDT CARMEN LARISSA CORNEJO HELENE SLETTEMOEN MARTINE SOLBERG DIAS ASSEMBAYEV
CHIEF FINANCIAL OFFICER CHIEF COMMUNICATIONS HEAD OF PR & BSc in Business and MSc in Petroleum
MSc in Strategic Marketing OFFICER COMMUNICATION Administration, NHH Engineering, NTNU
Management, BI BSc in Business and BSc in Marketing martine.solberg@ib.no dias.assembayev@ib.no
linn.strifeldt@ib.no Economics, BI Communication, BI
carmen.cornejo@ib.no helene.slettemoen@ib.no
ANDERS LIMA BJØLGERUD OLIVER TAYLOR TINA TØNNESSEN BÅRD SVE WALLENTINSEN ARNE ØVREBØ LIE
BSc in Business and CHIEF EXECUTIVE OFFICER CHIEF EDITOR MSc in Mechanical HEAD OF BUSINESS
Economics, BI BSc in Business and MSc in Business and Engineering, NTNU RELATIONS
anders.bjolgerud@ib.no Administration, NHH Administration, NHH baard.wallentinsen@ib.no MSc in Energy and
oliver.taylor@ib.no tina.tonnessen@ib.no Environmental Engineering,
NTNU
arne.lie@ib.no

PREVIOUS
IB PROJECTS:
2011/ 2012: India 1998/1999: The Baltic States 1986/1987: Australia research
excellence
2010/2011: Indonesia 1997/1998: Indonesia 1985/1986: Brazil
2009/2010: Mexico 1996/1997: India 1984/1985: Singapore
2008/2009: Malaysia 1995/1996: South Africa
2007/2008: Vietnam 1994/1995: Chile
2006/2007: Brazil 1993/1994: Hungary
2005/2006: India 1992/1993: Mexico
2004/2005: China 1991/1992: Portugal
2003/2004: Russia 1990/1991: Russia and the Baltic

States
2002/2003: Turkey
1989/1990: Thailand
Research Excellence
2001/2002: Poland
1988/1989: China
2000/2001: South Korea
1987/1988: Italy
1999/2000: Brazil
Faculty of Engineering Science and Technology
NEXT YEAR’S
PROJECT: TANZANIA

REFERENCES
KEY STATISTICS: OSEC - http://www.osec.ch/sites/default/files/Brazil%20 Doing Business - http://www.doingbusiness.org/~/ In Sight Crime (06.02.2012) - http://www.insightcrime.
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Torkjell Leira, http://brasilamazonas.blogspot. POLITICAL AND HISTORICAL OVERVIEW Forbes (05.06.2009) - http://www.forbes. The Economist (12.01.2013) - http://www.economist.
no/2012/06/forvandlingen-1-grunnleggende-grep-pa. Brasil – historie. (06.01.2012) I Store norske leksikon. com/2009/05/06/world-reputable-companies-leader- com/news/americas/21569395-plan-fix-ports-daylight-
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ness-plan.htm atraente-do-mundo-segundo-pesquisa 0fd8a
Quintana, Mercedes: “Historia de América Latina”,
The Norwegian Government’s Brazil Strategy - http:// Madrid, Edinumen, 1999 Møte med Walter Lima, General Manager of OSM do Agência Nacional de Transportes Aquaviários (ANTAQ),
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0311brasilstrategi_webN.pdf LOCAL UNDERSTANDING AND KNOWLEDGE cms-plus.com/Statistics/BRAZIL%20OCEAN%20
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11.januar 2013 Peng, Mike W. og Klaus E. Meyer. 2011. International ness.com/article/brazilian-organization-culture-in-a-
business. London: Cengage Learning. CORRUPTION nutshell
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com.br/download/palestras/2011/1485_MagdaCham- Doing Business - http://www.doingbusiness.org/~/me-
briard_ANP.pdf dia/GIAWB/Doing%20Business/Documents/Annual- World Bank (Jan. 17, 2013)- GDP Brazil
Reports/English/DB12-FullReport.pdf

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INTERNATIONAL

This report is produced by students from the following schools:

18 JOHANNES NYMARK - OPTIMISM ABOUT BRAZIL

38 LOCAL UNDERSTANDING AND KNOWLEDGE

International Business Brazil 2013 Thanks to:

EXECUTIVE SUMMARY and absolutely necessary that you understand the

INTERNATIONAL BUSINESS BRAZIL 2013 7

Infrastructure is also an important factor to con-

In March of each year, a new team of students is

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12 INTERNATIONAL BUSINESS BRAZIL 2013 INTERNATIONAL BUSINESS BRAZIL 2013 13

TROND GISKE Complementing business interests explain how

* via Paris-Charles de Gaulle or Amsterdam Airport Schiphol.

The aim of this report is to give companies and

2) Students that want to explore how Norwegian

In a world that is becoming increasingly global and

16 INTERNATIONAL BUSINESS BRAZIL 2013

BY JOHANNES NYMARK The above mentioned quotation of Bill Clinton

1: BRICS: Brazil, Russia, India, China, South Africa.

INTERNATIONAL BUSINESS BRAZIL 2013 19

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(Photo: Tony Hall)

President: Dilma Rousseff

Population: 199,321,413 (July 2012 est.)

Population growth rate: 0.86% (2012 est.)

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26 INTERNATIONAL BUSINESS BRAZIL 2013 INTERNATIONAL BUSINESS BRAZIL 2013 27

ECONOMY tion of Brazil’s hosting of the 2014 FIFA World

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The Norwegian system consists of processes that

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There is an ongoing debate concerning the CLT,

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IN A HEATED LABOR MARKET works, it is important to have some knowledge of

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3. INTRODUCTION TO TAX REGIME IN BRAZIL

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• Taxes calculated on a quarterly basis

• Requires more support documentation

• Tax efficient for some activities

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“Where can I take the next step

To walk with us, visit

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