Brazil is not a place for beginners or the unprepared. Americans think that globalization means doing things "the American way", but it’s more a two-way learning process. Latin America is an American creation for the sake of convenience.
According to a recent edition of the Financial Times, "its size and strong growth prospects have made Brazil something of an obligatory consumer market for many international companies" and currency devaluation has made the country attractive as a basis for exports of many of these same firms.
Analysts make headline-grabbing statements about the enormous opportunities for Foreign Direct Investment in many sectors such as telecom, power and banking, in spite of the current global downturn and political uncertainty caused by the election of Luiz Inácio Lula Silva as the new president. For those of us who have known and worked with the country for a while, however, the hype is all rather amusing… We’ve been trying to get our companies and colleagues to pay more attention to Brazil for years!
The situation has now reached a point where you ignore Brazil at your own peril. At the same time, stumbling in the Brazilian market by usually successful companies such as AOL, Wal-Mart, Kentucky Fried Chicken and Pizza Hut, demonstrate that it is not enough to make Brazil a priority. It is also essential to know what you want to achieve there, and be willing to do what is necessary.
Brazil is not a place for beginners or the unprepared. The more one knows about the place, the more one realizes how much there is still to be learned. Even Brazilians don’t totally understand how things work in their own country, but that doesn’t keep them from being successful. They just keep on learning and adapting, even making up solutions as they go.
Hence the popularity of such terms as jeitinho, roughly translated as a way of winging it, and jogo de cintura, which refers to the adjustment one makes to the movement of one’s waist, and means flexibility. These are two key ingredients for being successful in Brazil.
Americans have the tendency to think that globalization means doing things "the American way", and that the rest of the world needs to learn from the United States. In this new world of Internet speed, you would think the removal of geographical barriers would be a two-way learning process. However, I still hear very senior U.S. executives comment that American companies don’t need to globalize—they just have to enter the other markets…
Like other nations, Brazil is in the midst of a big push to get its business professionals to learn English and get MBAs in American and European universities. Brazilian business magazines like Exame and Você S.A. constantly feature articles on career development, which include globalization and higher learning. This new educational elite however, is not staying abroad once their degrees are earned and their overseas experience is obtained. Increasingly they are returning to Brazil, to start companies or join the most successful Brazilian corporations. This reality puts unprepared American companies at a disadvantage.
In case you still doubt that globalization should be a two-way process, consider some Brazilian success stories. Brazilian banks, for example, had to resort to various jeitinhos during the years of astronomical inflation, involving the leveraging of technology and computerization. This experience enabled them to survive and even thrive during the inflationary years, and resulted in the evolution of banks into technology companies. Now they use their know-how to cut their own costs and stay ahead in the current hyper-competitive Brazilian financial market. But they are also making waves in the high-tech world, recently offering free Internet access to all their customers and even preparing for spin-offs of their technologies into pre-IPO ventures.
A world-class Brazilian company is the huge publisher Abril. They are a partner in UOL, the most-visited non-English language portal in the world, and the world’s most visited Portuguese language portal. Another Abril venture is the musical website Usina do Som, which receives more than a million hits monthly.
Then there is Embraer, the fourth largest aircraft manufacturer in the world, with over 40 percent of the global market for commuter jets. And steel behemoth Gerdau belongs on the list—it recently bought Ameristeel and joined the ranks of the world’s top steel producers. Gerdau already owned steel mills in other parts of the world, including two in Canada.
To outsiders, Brazil remains an enigma—an unknown, exciting and scary place. Americans in particular build their image of the country based on little solid knowledge, since Brazil is seldom covered in the mainstream media. When it is, the issues are usually larger than life: street kids murdering or being murdered, an economy on the edge of crisis, corrupt politicians stealing millions, soccer players winning world championships, supermodels making splashes or having Mick Jagger’s baby, or the over-mentioned Carnaval celebrations.
I began working with the Brazilian market ten years ago. At that time, I was able to take advantage of everyone’s generally low expectations and lack of knowledge about Brazil to eventually turn that market into a cash cow for my company. I first took care of the A and B countries (Europe and Asia) from the VP of International’s list of country priorities. Getting those tasks done as quickly as possible left me time to devote afternoons and weekends to my passion from the C list—Brazil and other Latin American countries, as well as the poorer Asian nations.
I was able to find good partners in São Paulo, and together we developed the market to the extent that the country went from being on the C list to the A list for my company. Brazil turned out to be a goldmine. The reasons for that:
1) A huge and hungry market for the imaging solution we were offering;
2) Sophisticated and aggressive Brazilian business partners who knew the way around bureaucratic and logistical obstacles of their system;
3) My sheer passion and need to prove my point to my boss—this enabled me to get up to speed quickly on the ABCs of how to do business in Brazil and persevere when I made the inevitable and frequent mistakes. My learning curve was not an issue, because the country was not high-profile for my company at the time and they had few expectations. Times have changed however, and a company can no longer afford such a deep learning curve.
Now, an effective Brazilian strategy consists of two key components: the right person in charge of Brazilian operations from the American side, and the Brazilian partner with whom to work based in Brazil. And the best possible person to drive your Brazilian business is not necessarily someone in a senior position back at head office, without international experience and foreign language skills. Someone with "Latin American" experience and fluent in Spanish but not Portuguese may not be right either. The latter is preferable to the former, but if Brazil is a top priority, why settle for either?
This may come as a surprise to many, but Brazil is not part of the rest of Latin America. You can argue this with me all night long over beers at Bar des Arts in São Paulo, but I will win the argument as soon as you ask any Brazilian at the bar what he or she thinks. Fernando Espuelas’ vision and best intentions notwithstanding, you cannot fit a round peg into a square hole.
Latin America is an American creation for the sake of convenience in dealing with our southern neighbors. One example to prove this point is the fact that you cannot talk about sex in a Mexican office and be professional, and you should talk about it with your boss and coworkers to be considered so in São Paulo. You could say Brazilians are oversexed or the Mexicans repressed, but this value judgment does not help to do business more successfully in either country. The cultures are different, and it is necessary to act differently in each one.
Mexicans, Brazilians and Argentines may appear to be similar to Americans, and therefore part of a region because they are generally more emotional when doing business than Americans are, and they are typically in less of a hurry. Meetings take longer in those countries because they don’t usually start on time, and because participants spend a lot of time in conversations unrelated to the business at hand, to build the relationship.
But overemphasizing these generalities leads to oversimplification, and the result is the wrong business approach. AOL’s decision to enter Brazil with a Venezuelan partner is a real-life example of such a mistake. The final reason to not treat Brazil as part of Latin America is that this irritates many Brazilians.
Another revelation to some is the fact that Brazilians speak Portuguese. Give yourself 10 extra bonus points if you already knew that, and don’t feel bad if you didn’t. I am amazed at how many business acquaintances ask me to bring back Spanish magazines or Spanish music when I go to Brazil on business. I have to politely tell them that I will be happy to do so, even though such items will not be easy to find in São Paulo. Spanish is as much a foreign language to Brazilians as English is. If you doubt me on this one, go ahead and ask a Brazilian again…
Yes, Brazilians and people from other Latin American countries can understand one another, but the grammar pronunciation and even vocabulary are totally different. Furthermore, Portuguese as spoken by Brazilians is different than that spoken in Portugal and reflects the culture and way of thinking of the people. To really understand how Brazilians think about and see the world, a knowledge of their brand of Portuguese is essential.
Portuguese also happens to be a much better language in which to conduct business in Brazil, where relationships are the most important consideration, even over product or company with which one is associated. Portuguese is a much more romantic, softer and poetic language, whereas English is cold and objective and to the point.
Brazilians realize that English is the international language of business and if you insist, they will conduct meetings in it. However, if you want to be as successful as possible, try to speak to them in Portuguese. It shows a true desire to understand the local culture and do business with them. Another benefit is that if you happen to say the wrong thing and accidentally embarrass or offend the other person, you can pretend you didn’t mean it—by using different voice tones and inflections, anything in Portuguese can be turned into a joke: This by the way, is an example of jogo de cintura.
Portuguese is also a necessary requirement for any Brazil strategy because, again, the mainstream international business media coverage of Brazil is superficial and insufficient. Even some of the best agencies, like Reuters and Dow Jones, don’t cover stories in the amount or depth necessary to provide a handle on this market.
I conducted a search on Business Week’s website with the keyword "Brazil", and was appalled to receive a very short list of articles. One of them, titled "Brazil’s Deepening Crisis", started with "In a one-room plaster and wood home in a slum in Recife…" How useful is that for knowing Brazil? Looking for better English-language sources is likely to yield similar results, so why not have your Brazil person reading Brazilian publications and websites? Agência Estado, Gazeta Mercantil, Exame, Isto é Dinheiro, Carta Capital, etc.?
More Than Getting By
Yes, it’s possible to get by in English or Spanish in Brazil but is just getting by what your company intends? If so, why bother in this complicated market at all? The people who said about New York that "if you can make it there you can make it anywhere", had obviously never been to São Paulo!
In addition to speaking Portuguese, the person in charge of your Brazilian strategy needs to have a solid track record in that market. This will automatically mean that they are well-versed in the nuances of this sophisticated culture, have a strong network of contacts, and these assets are directly related to the credibility your person will have with potential partners and clients.
They need to be able to call on the CEO of any corporation or media organization. They need to be able to socialize with the Brazilian crème de la crème after hours. Happy Hours in São Paulo by the way, start around 8:00 pm and birthday parties for coworkers are often held from 11:00 pm to the wee hours of the morning on a weeknight. If you aren’t used to this and aren’t there, you are not going to be seen as a team player and will be less effective. Brazilians will still show up for work on time, too, after being out all night and only getting 2 or 3 hours of sleep.
Some big Gringo faux pas that an experienced Brazil hand won’t commit include being too serious and formal at the office and too informal at Happy Hours. Brazilians infrequently wear suits and ties, and women will often use open-toed shoes without stockings at the office. However, they seldom use jeans or casual clothes on social occasions or when going out after work. I cringed at the sight of some very high-level American executives who wore button-up shirts to the office but then stopped by Happy Hour after working out at the gym—sweatsuit, tennis shoes and all.
Similarly, many expats in São Paulo don’t take the time to notice that Brazilians don’t like to eat food with their fingers. French Fries and pizzas are eaten with forks and the proper way to eat a sandwich is with a napkin or paper wrapped around the outside. These errors may not be fatal but it definitely does not help one to appear sophisticated or on the inside.
More serious mistakes come from having an inexperienced person dealing with Brazilian senior executives. Brazilians, as a rule, are more accessible and it is much easier to get a first meeting on Avenida Paulista than on Wall Street. Even a more junior person from a multinational company will sometimes get a meeting, be served the typical espresso and provided with the opportunity to make their pitch. However, this ease of access can be misinterpreted as success and lead ironically to eventual failure.
If the inexperienced person driving your Brazilian strategy does not take these meetings seriously enough, he could show up unprepared and in an unprofessional manner. For example, Brazilians are not usually on time, so he may decide to show up 10 minutes late, figuring he is always kept waiting for that long in other meetings. In fact, it is fashionable to arrive late if you are a potential client or the pursued party. However, it can be considered disrespectful or rude if done by someone on the sell-side. Especially if the Brazilian executive was educated in a foreign country that is more punctual. The rule then is to show up on time, but be prepared to wait. Make your meetings longer.
In New York City, you are lucky to be given a meeting. Even so, if you don’t start to show value within 10 minutes, the other party may start looking at his watch or even show you the door. In São Paulo, no one would be so rude. However, their time is equally valuable, and if you don’t make your point quickly and effectively, you will probably not have a second chance.
In fact, first impressions are even more important in Brazil, and appearance is reality due to the more emotional nature of Brazilian society. There is an expression in Portuguese: "queimar o filme" (to burn the film), which is similar to the American expression "to burn bridges". However, usually the American version is the result of something that has built up over time and takes longer.
Queimar o filme can happen on the first visit and can take only seconds. It is also much more serious because São Paulo, a city of 20 million, is actually a small town. The elite are such a fraction and they are in a very small world. The benefit is that networking and word of mouth can be much more powerful there, for that reason. So if you behave yourself your contacts multiply like rabbits and you can know "everyone" relatively quickly. The drawback is that if you lose credibility or fail to gain it once, the effect is exponentially greater.
For that reason, you only want the person with the right profile to be meeting and dealing with Brazilian senior executives. Just having a good title and the mandate from your company is not enough and can in fact backfire, as it is taken as an insult. Having someone with the right experience and contacts in Brazil means instant credibility and recognition for your company.
Rice and Beans, Beans and Rice
If your Brazil strategist does not have the respect of the business community in Brazil, it may often take a long time to discover the fact. Brazilians are very polite and don’t want to cause hurt feelings, partly to avoid that queimar o filme when they don’t know when and where a person will surface again. Therefore, they may use a technique known as "enrolar", where the Brazilian executive continues to agree to certain proposals or events without ever signing anything in writing. Frustrated and inexperienced Americans who receive this treatment rant and rave about the unreliable and dishonest Brazilians. Actually it is a reflection of the American’s own inability to get a straight answer because he or she is not being taken seriously.
Other cultural nuances come with experience, and don’t necessarily translate to the bottom line but are most valuable in understanding a market. For example, the first time I went to Brazil, I stayed at the home of a very middle class family. For two weeks we had rice and beans every day and I got quickly disenchanted. I assumed this diet was due to economic circumstances as opposed to an option. After all, who would eat the same thing every day if given the choice?
The following week, I was on a cross-country trip by car through the Brazilian southwest with a very wealthy client and his kids. I was so relieved, sure that I finally would get to try some new Brazilian foods other than rice and beans. Dinnertime had arrived and he asked his three children what kind of food they wanted. I was expecting them to give the Brazilian kid’s version of American kid favorites like pizza, spaghetti, or hamburgers. Not what I would choose, but better than rice and beans.
When the three of them, at the top of their lungs said "daddy, take us out for rice and beans!", my jaw dropped in amazement. Luckily, we went to a restaurant that had lots of difference selections and I got something else. But I had learned something that I was to understand more deeply as the years went by. Brazilian culture is much more homogenous in many ways than is the case in America. Language and food are two of their unifiers.
Transposing this to the business world, if a company is in the food business and wants to enter Brazil, this kind of deep cultural understanding is critical. Pizza Hut barely scraped by in Brazil for some time, and even now would not be considered a major success in that market. Perhaps one reason is they didn’t know that Brazilians believe the best pizza in the world is available in São Paulo’s many pizzerias. Brazilian society includes a large Italian contingent, and they have developed pizza to the Brazilian palate while still keeping it closer to the original than you find in the American marketplace.
It is not true however that Brazilians are not open to foreign foods. One example of a Brazilian success story is the Arab fast-food chain Habib’s. Founder and CEO Alberto Saraiva was born in Portugal and is not of Arab descent. Saraiva originally owned a bakery and had an Arab employee who taught him how to make Arab food. The rest is history—Habib’s has been so successful that Saraiva is now taking the chain to Mexico City and Los Angeles.
For all these reasons, having the right person in charge is essential to any Brazilian strategy. Perhaps the most important reason, however, is related to the second component: the choice of the right partner. First and foremost, relationships are the foundation in the Brazilian business world. Individuals enter and leave companies taking their entire network of partners and clients with them. Sales executives will do a lot more schmoozing and spontaneous gift-giving to their prospects and clients than Americans would.
The time to do this is not when closing a deal, as that smacks of bribery and is offensive. A Brazilian will start doing personal favors from early on in the sales cycle, purely for the sake of creating goodwill and strengthening the relationship. He knows that whether or not he closes that deal, he can add the person to his personal rolodex. Conversely, Brazilians are apt to buy products or services as a personal favor to help a sales exec in need of meeting a monthly or quarterly goal, but only if the relationship has already been cultivated.
The same applies when choosing a partner. Some Americans might try to look for partners whose companies offer complementary products or services, and who have no ability to compete directly against them in Brazil. Or from companies with recognized names back in the U.S.. However, in any country, you are known by the company you keep and nowhere is this more important than in Brazil. The partnership selection process must begin with the individual. He or she should of course be bilingual and have international experience, preferably in your area of expertise.
However, more important is a solid track record in their own market, Brazil, and with their own people. Look for someone with a solid network and respect in their market niche, whatever that may be. Brazilians have been through so much economic and political turbulence that flexibility is built into their psyche. A partner can easily learn a new technology or business model. Much harder is to find someone who is a trustworthy visionary, experienced and aggressive.
One type of partner and partnership to avoid at all costs is the traditional local distributor/representative model. A company considering this option is sending a message to all that they have no intention to localize or customize the product or service to the Brazilian market. Instead they are saying "if it’s good enough for us it is good enough for you…we are going to sell you what we’ve got."
This may seem like obvious advice but it is astonishing to note how many companies are currently considering this type of strategy for Brazil. In addition to portraying an arrogant disregard for local market tastes, a company with the distributorship model is also implying a lack of respect for the Brazilian expertise.
The distributor model is usually one in which the Brazilian takes a subordinate position akin to that of an employee of the head corporation. Control remains at headquarters and the Brazilian’s opinion is secondary. If you don’t show respect for your Brazilian partner and engage them in a true partnership, why should any Brazilian company want to do business with them either? Or if they do want to do business with him for personal ties or other reasons, the Brazilian client company will begin to resent you for not giving your partner more prestige and autonomy in their own country.
In the case of Kentucky Fried Chicken, its Brazilian product was never of the same high quality as in the U.S., which means head office did not have the right partner in place in Brazil to uphold the standards. Evidently, the Brazilian partner was too weak or too incompetent to tell the U.S. that Brazilian customers are more demanding than was assumed.
The choice of partner is a double-edged sword because ideally the right person should be intelligent, aggressive, global, a visionary. He or she has to continually teach you about Brazil and how to be successful there. But that means he is also a threat, because he can and may be even better than you are. Theoretically, a truly effective Brazilian partner would be capable of co-opting your intellectual capital and then cutting you out of the picture. To prevent this from happening, you do not, as an alternative, settle for a weak partner that you can dominate.
Instead, you cultivate and deepen your relationship with this powerhouse so that you work from a position of mutual respect and trust. If you aren’t worthy of a partner in that league, he or she won’t be interested in you anyway, and may even want to work with your competitor. But if you are, get that top person on your side before someone else does. Of course, it goes without saying that any prudent company will also put legal safeguards in place to protect it from partnerships that go astray for any reason.
In conclusion, entering the Brazilian market is not an option for many companies. Once the decision has been made however, the market merits the best investment of time, energy and resources in choosing talented and experienced individuals to drive the business from both countries. As a final check to see if you have paid attention to this article and thought carefully about these issues, try to answer the following question to yourself right now: "Why would Kentucky Fried Chicken’s ‘finger lickin’ good’ slogan definitely not work in Brazil?"
Kirstin Elaine Myers, the author, is the founder and CEO of GloBond International Inc, a global network of executives. She has lived and worked in São Paulo and resides now in Gloucester, Massachusetts. Myers speaks English, Portuguese, Spanish, Japanese and French and is an honors graduate in Political Science from the University of Kansas. Email her at email@example.com
This article appeared originally in InfoBrazil.com
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