Book Review by Lombard Global, Inc.
Written by William Billeaud, President of Lombard Global, Inc. Author Joseph Low is a Senior Advisor of Lombard Global, Inc.
Husband and wife authors Joseph H. Low III (“Joe”) and Claudia Brito Low (“Claudia”) together have over four decades of experience as high-level executives in Brazil. Joe co-launched Nokia’s Brazilian operations and has consulted other multinationals in Brazil and throughout the Americas. Claudia is recognized as one of the world’s foremost experts on business planning and tax law in Brazil. While employed as a tax attorney with KPMG in Brazil, she served on the Conselho de Contribuintes in Brasilia (the Brazilian equivalent of the United States Tax Court in Washington) and became the youngest-ever appointee in the history of the judicial body. She is now a global tax executive for UPS in Miami.
The Book
I know of no other book in the marketplace that provides an introduction on the subject of doing business in Brazil. Even though it was designed as an introduction for market entry, “They Don’t Speak Spanish in Brazil” will also serve executives who have been doing in Brazil for many years. The mix of real “on the ground” business experience, statistics and quantified tax examples will organize you properly for market entry, or make you rethink your Brazil strategy. You’ll always have to use advisors, but it helps tremendously to “know what you don’t know” about doing business in Brazil.
The book is divided into two parts. In the first half of the book, Joe relates his experience and insights to living and managing enterprises in Brazil. In the first chapter, he covers some of the numbers that make Brazil so impressive. In subsequent chapters he talks about business culture and language protocol (did we already say, don’t speak Spanish?), the typical Brazilian (there’s not one), security, bureaucracy, labor issues and talent wars. He further shows that the opportunity in Brazil is no longer just confined to Sao Paulo and Rio. As Joe says, “Invest early, invest big”. In the second half of the book, Claudia provides an introduction to the various aspects of Brazilian law you need to be familiar with, personally and in business. Fittingly, she opens by describing the growing role that women play in Brazil. In the next chapter, she gives an overview of the three levels of taxation: federal, state and municipal. For non-tax experts, she demonstrates how Brazilian taxation is in many ways similar to US and EU taxation. To me, this was very valuable because I then had a little more confidence in following the detail that follows in subsequent chapters. Claudia goes on to describe gross income taxes, complete with example calculations showing debits and potential credits. She covers labor law, operational taxes such as VAT, corporate law and entity establishment, foreign transactions and capital, visas, personal income tax and describes the political landscape and the legal environment. Finally, Joe and Claudia present an appendix which describes the different tax incentives for all 26 states and a glossary of terms.
Joe and Claudia don’t pull any punches about Brazil. Both readily admit that there are real challenges and problems. Security, lack of world class infrastructure and bureaucracy are the most important of these challenges. They add value, I think, by being transparent and acknowledging the problems instead of simply writing them off as the cost of doing business there. Most importantly, the authors demonstrate ways to deal with challenges and show that regardless, you can’t afford not to do business in Brazil.
Some of my key takeaways of the book are:
Brazil’s numbers: Brazil’s GDP is 42% of all of Latin America’s GDP. The state of Sao Paulo has more people than the entire country of Argentina. Therefore, if you don’t have a Brazil strategy, it isn’t a Latin American strategy. Brazil’s socioeconomic class no longer represents a pyramid. Like most developed countries, it’s diamond-shaped with smaller groups of people on the top and bottom and most people in the middle.
Brazilian culture, mindset and talent: In Brazil, status is everything. “Keeping up with the Joneses” is taken to another level. The luxury market is huge in Brazil and wages are rising dramatically for employees such as housekeepers, who are being pushed to the middle class. This has led to a war for talent, not necessarily technical talent, but clearly executive and management talent. For example, if you consider total compensation, Brazilian CFOs are now earning 22% more than their next highest counterparts in London who make $393, 000 USD.
Language: As far as language is concerned, Brazilians don’t speak Spanish. Most business people starting at mid-levels speak English. Therefore, speak English and learn Portuguese.
Bureaucracy and corruption: In dealing with the bureaucracy, do things the right way, don’t cut any corners. It might take a little longer, sometimes a lot longer, but you or your business will earn a good reputation which pays off in the long term.
Opportunities outside of Rio and Sao Paolo: The Rio de Janeiro to Sao Paulo corridor has always been the heart of Brazil. Almost a quarter or 25% of the population lives there. Today, however, there are opportunities all over the country. In order to compete with SP and Rio, many of the states and municipalities in the Northeast, Southeast and interior are booming and producing the best incentives for business in the country.
Taxes overview: Taxes appear extremely complex but are related to taxes in developed countries. The types of taxes are: federal, federal social, state and municipality. State and municipality taxes can offer a tax advantage if you know and can apply their incentives accurately. Brazil has one of the most technically advanced tax systems in the world. For instance, today, company invoices are required by law to originate electronically from a piece of equipment the government provides, the ECE. Additionally, tax authorities have taken the additional step of requiring you to keep your financial books in electronic format on a government website, called SPED. Finally, all federal taxes including VAT and foreign import taxes can be paid through one form, the DARF. Can you imagine one form in the US? That saves time…
Gross Income Taxes: Again, looks intimidating but you may elect the tax regime you choose to figure your tax liability, depending on the nature of your business and a handful of other factors. You may also change your tax regime from year to year. This way, you may elect the tax regime most beneficial to you. The authors then describe the four available methods.
Labor Expenses and Employment Law: The total cost of employee benefits can increase base payroll costs by 60 to 80%. Some analysts calculate that the true costs for a typical multinational can be as high as 200%. Employment law is pro-labor. Lots of holidays and vacation time (mandatory), such as 1 month of vacation after one year of service, long maternity leaves, weddings, and others, ”13 months” of salary. Bottom line: lots of benefit expenses.
Operational Taxes: Similar to Europe’s VAT taxes. You do get credits but they must be managed professionally and accurately. For instance, there is a tax included in the price of fuel. However, if you use that fuel in your business, let’s say to transport goods from your factory to your shipping facility, then the tax becomes a credit in your books. In addition, the tax strategy of service providers should focus on where to incorporate. If, for example, you incorporate in certain municipalities outside of Sao Paulo, the effective tax rate is 2% on gross service sales as opposed to 5 %.
Foreign transactions and capital: You will have to pay something for conducting a transaction in Brazil, but make certain that you select the right business entity and have the right relationships so that you can repatriate the rest of your capital in a reasonable time frame, if you desire.
Brazil transfer pricing: This is a very lucrative business for Brazilian transfer pricing specialists because it’s so complex, but they model it based on the fundamentals and principles of the OECD. Nevertheless, don’t cut corners and pay to get it done right.
Summary of available incentives: You’ll find a number of different programs and development related organizations able to finance qualified taxes. You may be able to build an entire factory without paying a centavo in taxes which frees up further investment or working capital.
In summary, I highly recommend this book. I now try to keep it with or close to me when in Brazil or working on a Brazilian deal. I often can build a case around the details in the book and have a leg up on our network of local advisors and/or government officials who are specifically involved in the deal or project. The book can be purchased on the internet via www.theydontspeakspanishinbrazil.com. Simply click on the “buy book” tab from the top menu and you’ll see the tabs for purchasing in digital format via Amazon or for the printed edition via the publisher, Entrust.
-William Billeaud
"Rarely do you get the perspectives of both an ex-pat and a Brazilian native, both highly successful multinational executives, and both deeply rooted in business practices and social culture. Joe and Cláudia pull together these important aspects to provide an insightful guide to succeed in the most important market in the world today."
- Larry K. Williams, VP for Technology Industry Development
Metro Atlanta Chamber
What they are saying...
"Don't let distant corporate marketing gurus doom you with generalizations. While it's convenient to lump Brazil into 'Latin America', it's also grossly naive. Get this book and learn what you've been missing." Jason Dyer, Chief Marketing Officer, Dallas Morning News.
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“They Don't Speak Spanish in Brazil is a must-buy for any company or executive wishing to do business or relocate to Brazil. As well as providing a down-to-earth summary of the realities behind the common perceptions (and misconceptions) regarding Brazil, the book provides practical guidance on the legal options for setting up a company and demystifies the complexities of Brazilian taxes. The book will be one of the best investments you will make in your conquest to do business in Brazil."
- Martin Smith, Managing Director, SFE In Action São Paulo, Brazil
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A printed copy of this book may be purchased on this website or directly from our publisher, Entrust. Electronic copies of the book is available at Amazon.com and iTunes.
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For twenty years Joe has been a leader in building and developing international business opportunities in Brazil. In addition to having lived in São Paulo, and initiating a multinational’s operations there from scratch, he has held numerous corporate leadership roles primarily focused on Brazil. His MBA is matched by his mastery of Brazilian-Portuguese, historical knowledge, and a deep understanding of what it takes for the non-Brazilian business person to be sucessful here.
Cláudia is a native of Brazil, and a Brazilian bar registered attorney recognized as one of the leading experts in the ever-changing field of Brazilian taxation and business incentive policies. She has been a consultant with a big five accounting firm, a Brazilian federal tax judge, and a business entrepreneur.
Foreword, Introduction, Chapter One: Tomorrow's Here - The Brazil of Today; Chapter Two: What's a Brazilian; Chapter three: Cabs, Coffee, and Crime...
THEY DON'T SPEAK SPANISH IN BRAZIL
A Guide to Life, Management, and Taxes for Doing Business in Brazil
"The most practical tax strategy guide for a very complicated market. They Don't Speak Spanish in Brazil is the best book I've encountered to help navigate a complex market and share some obscure laws that can enhance company profits and cash flows, with plenty of real-life examples on how to enhance any businessperson's foray into business in Brazil."
- Ron Wall, CFO, William Grant and Sons, North America New York, New York
Bloomberg video "The Real Brazil"
Excellent piece on Brazil from Bloomberg's Trish Regan. Just some of the numerous business opportunities now taking place in Brazil are fully covered along with inputs as to how Brazil's business environment and pace of infrastructure development are both improving in anticipation of next year's World Cup and the Olympics coming in 2016.
However, it is of vital importance that one does his/her homework prior to investing in the Brazilian market. The book "THEY DON’T SPEAK SPANISH IN BRAZIL" serves as a cost effective roadmap for anyone contemplating market entry there. Arrive to Brazil appropriately updated on both the potential pitfalls and bountiful opportunities available.
Take a Peek ...
Simply put, this is the market's first book for doing business in Brazil.
THEY DON'T SPEAK SPANISH IN BRAZIL combines the personal and professional experiences of an American expatriate and a Brazilian native, both successful executives at major multinationals. After twenty years of answering Brazil–related business and legal questions for their colleagues, Joe and Cláudia Low wrote a book that provides the fundamental information foreigners need, from everyday living and relevant culture to business management and tax strategies. The authors use personal experiences and hard data to translate cultural characteristics, management tactics, and law to avoid common pitfalls and achieve business success.
THEY DON'T SPEAK SPANISH IN BRAZIL is divided into two parts. The first half focuses on the general business environment at the micro and macro levels: market trends, management caveats, personal safety, corruption and bureaucracy, demographics, and more. The key message is Brazil is not a "copy-paste" market. The authors demonstrate that the country requires a wholly different approach than what business executives use elsewhere in Latin America or other developing economies.
The second half presents the tax and legal basics professionals need to understand. The section begins with an introduction to taxation and recent developments, then goes through a series of explanations and examples of relevant legal issues: legal forms of incorporation, gross revenue taxes and tax structures, value-added taxes, employment law, service taxes, capital transactions, and personal income, among other issues. The appendix includes the only known state-by-state guide to available lucrative governmental economic incentives.
The market needs a practical guide for doing business in the world's fifth largest economy, and the need grows with the approach of the 2014 World Cup and 2016 Olympics hosted in Brazil. This book supplies the demand: thirty-plus CEOs and other professionals have endorsed it as the bible for doing business in Brazil.