The rule of thumb for cracking the Brazilian market

From Ronaldo and Pelé to sugar and coffee, there’s plenty to love about Brazilian exports. And, as Latin America’s most influential nation, with the world’s sixth-largest population and 12th-largest GDP, there’s plenty to love about its import potential, too. 

In the absence of a free trade agreement with New Zealand, Brazil is not always the most obvious destination for Kiwi goods. Fortunately, the relationship between the two countries is friendly, strengthened by the launch of the Latin American Strategy in 2000 and the opening of the New Zealand Embassy in Brasilia and consulate offices in São Paulo and Rio de Janeiro.

The goods trade itself is modest; in the year ended December 2022, New Zealand exported $119.45 million of total goods to Brazil and imported $352.62 million. But, thanks to its large and diverse population, Brazil holds plenty of potential for Kiwi startups with scaling on the mind. The challenge is knowing how to make the most of it. 

Is it hot in here? 

Jacqueline Nakamura is New Zealand Trade and Enterprise’s São Paulo-based trade commissioner for the Mercosur bloc. 

The Mercosur bloc, also known as the Southern Common Market, is a South American trade bloc established in the 1990s. Its combined population is more than 295 million people across Brazil, Argentina, Paraguay and Uruguay, and it is the fifth largest economy in the world. New Zealand engages in regular trade dialogue with the bloc, hoping it will lead to free-trade negotiations. 

From Nakamura’s experience managing the bloc, she says there are plenty of reasons Brazil should be considered a hot market for New Zealand startups. 

It has a large consumer market of almost 210 million people and a diverse population of varied socioeconomic status, ethnic backgrounds and tastes; most of it is young (28 percent are aged under 20) and urban (87 percent). 

The diversity and depth of the market mean startups in Brazil have great potential for scalability – and the numbers speak for themselves. As of last year, Brazil is 10th in the ranking of countries with the highest number of unicorn startups, with 22 of those 23 businesses based in São Paulo. 

While Brazil’s scale can be daunting for Kiwi startups, securing even a small portion of the market can yield significant returns. So, where to start? 

As Brazil already has a lot of big players able to provide the scale the consumer market needs, Nakamura says Kiwi startups should emphasise value over volume. 

“The opportunities for New Zealand startups are very niche and can be across all sectors,” she says.

The tech sector, in particular, is booming for the country, with Nakamura seeing opportunities in fintech, security, resources and energy, healthtech and retail tech.

The recent uptick in the country’s e-commerce market has especially enhanced the latter. Almost half the population bought online during 2021, and the nation’s US$26.1 billion e-commerce market is among the world’s largest for both business-to-business and business-to-consumer sales. 

The tech boom is expected to continue this year, with IDC Technologies predicting Brazil’s tech growth will increase 12 percent, surpassing the US’ predicted nine percent. 

“This is a very interesting moment for the Brazilian economy after the Covid recession,” says Nakamura.

Another reason Brazil is so hot is its many international links, with multinational companies such as Netflix, Airbnb and Amazon using the country to establish global hubs. 

Nakamura says international companies have also been recruiting in Brazil for more than 10 years due to the local market’s training capability, relatively low employment costs, cultural fit, and time-zone advantages. 

For example, she sees the two to three working hours overlapping between Brazil and New Zealand as favourable for Kiwi businesses, especially those with the US in their sights. 

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Getting on the ground

Having helped more than 80 businesses set up in Brazil, Nakamura says that unlike the previous markets covered in this series – Australia and Singapore – Brazil’s scale means that most startups considering the country need to have “some sort of experience in other markets”. 

She’s also found that the regional differences and the diversity of the Brazilian population necessitate having someone experienced based in the region. A local representative can also help make sense of the country’s regulatory environment, which she says can be quite complex – although this might be improving soon. 

The country, which ranks 94th out of 180 on Transparency International’s corruption perception ranking, is currently undertaking economic reforms to reduce corruption and create a more open business environment. NZTE says this will give New Zealand exporters a clearer path to market. However, it still believes the regulatory environment is best approached with in-market partners. 

Christchurch-based tech company Seequent, which provides specialist subsurface software for geo-professionals in more than 150 countries, took such an approach. 

When Seequent began targeting South America early in its global expansion due to its resource-rich geography, it placed local people in-market. Daniela Ximenes, Seequent’s Brazil country manager and director of operations in Latin America, is one such person.

Brazilian by birth, Ximenes, who has worked with New Zealand companies in both New Zealand and Brazil for more than two decades, was hired to set up Seequent’s Brazilian office in 2014 to serve Latin America. The Latin American team, which started with two people, has since grown to about 50, with further offices established in Chile and Peru. 

As each country has its own culture, languages, ways of doing business and legislation, Ximenes says it’s important to “treat each differently”.

You cannot put South America in one basket, she says, as even “within one country, you have a lot of peculiarities”. With this in mind, Seequent has hired local experts for each of its Latin American offices. 

One of the points of difference Ximenes highlights is language. “Most people in these countries do not speak English,” she says. As a result, Seequent makes an effort to work in the market within the country’s language. 

“Everything we serve to the [Latin American] market is created in Portuguese and Spanish. This means they can easily access software and supporting information – and connect with a local team in their time zone who understands local business.” 

Nakamura also says conducting business in the local language is important, particularly for e-commerce and search engine optimisation (SEO): “People usually don’t search words in English unless they need something specific,” she says.

Having people who can connect with customers in their language and who understand local business pays real dividends, says Ximenes. 

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It’s a long-term investment

For Ximenes, succeeding in an international market like Brazil requires finding the “right people” which, in turn, requires investing both time and money. 

She recalls that, in the beginning, hiring adaptable individuals who fit the company culture was crucial for success. Then, once the company became more established, its hires became more specialised. 

Mentors and external advisors also play an important role in Seequent’s regional teams. Ximenes is one such mentor, but the company also engages with industry leaders in the sector and geography as “external advisors provide business gravitas, expert knowledge, local access, and advice to the staff and business”.

Some international team members are also brought to New Zealand to spend time at the Seequent headquarters, helping keep the global company connected and ensuring business values are carried into the chosen market.

Seequent also invested time into better understanding its Brazilian customers by inviting ‘champions’ from certain companies of interest to New Zealand. Ximenes says this move allowed Seequent to drive additional uptake and revenue as “cornerstone, blue chip customers, serve as valuable reference sites”. 

While the company’s initial market entry focused on mining, the business has since expanded into other sectors, such as civil engineering and environmental and energy, with innovative new products based on its core IP.

As Brazilians prefer to do business with those they know and trust, Seequent’s commitment to putting the time into establishing relationships helped open doors in the market. 

Investing time in finding the right people and understanding the market is also high on Nakamura’s list of advice. In her experience, startups flounder when they don’t commit to the Brazilian market as much as they would to the UK or US, thinking it less developed.

“It’s really important to adopt the right business model for the market, understand all the regulatory constraints and processes, and find the right partners, even though it takes time,” she says. 

The general rule of thumb is that the country is for medium to long-term investment, she says. 

“You cannot cut corners in a system like Brazil.” 

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Hot Markets is a monthly series that, as the name suggests, explores markets that look promising for Kiwi startups looking to go global. Find out more about the Brazil market here.‍