It is simply doing it how you need it to match your requirements so there is no break in your design, or supply chain. We know it is very difficult to get things right first time. We work very hard with furniture manufacturers in Brazil to make sure we get it right for you, that’s what we work towards. We do all we can here to make sure we have the correct supply chain and manufacturing processes in place to deliver the product you require every time like clock work.
Brazil Furniture Market
The Brazilian furniture manufacturers industry is characterized by around 19 thousand companies, of various sizes. The sector has grown and has become more professionalized each year. Brazil furniture manufacturers develop products in Plywood, Hardwood, MDF, MDP and Steel providing an option to outsource labor and raw materials to economically developed countries, where furniture design is client-oriented rather than supplier-oriented.
Value in Design
Value is added through more advanced designs, which is one of the goals of the investments made by Brazil furniture manufacturers, with focus on manufacturing higher-value products to meet the needs of both domestic and foreign markets.
Investment in Modern Technology
Brazil furniture manufacturers are focusing on investments to utilize their modern technology, adapting their designs to meet the needs of international markets. The Brazilian government and Brazil furniture manufacturers are committed to expanding their global market presence and opening Brazil’s markets to foreign sourcing.
The special drawback customs regime works as an incentive for the promotion of exports, and to increase competition to help reduce material costs in Brazil, as it reduces the costs of producing exportable products, making them more competitive in the international market. The importance of the benefit is so great that in the average of the last four (4) years, it accounted for 29% of all tax benefits granted by the federal government.
Types of Drawback to Apply to Strategic Sourcing
There are three types of drawback tax incentives:
EXEMPTION: from taxes levied on the importation of merchandise, in equivalent quantity and quality, destined for the replacement of another previously imported merchandise, with payment of taxes, and used in the industrialization of exported product.
SUSPENSION: the suspension of taxes levied on the importation of merchandise to be used in the industrialization of the product to be exported.
REFUND: the refund of taxes paid on imports of imported inputs used in exported products.
The Refund Drawback is hardly used anymore. The export incentive basically comprises of the Exemption and Suspension Drawback incentives.
Location of Manufacturers
The greatest concentration of Brazil furniture manufacturers is in the south and southeast regions, in the states of:
Rio Grande do Sul
Santa Catarina has been the absolute leader since 2008, in the last three years. São Paulo has been the second largest exporter of furniture exports to the United States.Third is Rio Grande do Sul.
Furniture Manufacturers Exports
The growth of exports of Brazilian furniture is a result of investments made in several initiatives to encourage exports over the years.
Brazil has increased its competitiveness in the main world markets thanks to the investments of the industry in design, technology, sustainability and development of products that are bolder and more innovative.
Certain exporting manufacturers have invested heavily in the last decade in acquiring new high-tech equipment, which modernized the industry’s manufacturing base.
The main positive factors that fuelled Brazil manufacturers industry investment in development included:
The opening of the economy to foreign trade: includes a highly sophisticated business sector, that has facilitated the absorbing and adapting of foreign technology into their manufacturing production process.
One of the most sophisticated financial markets in the region: allowing government incentives with low-cost financing for capital investments, financing also covers importation of equipment, production of goods and services for export, and commercialization in foreign markets.
Export incentives are available to producers and manufacturers for promoting Brazilian exports: for imported goods that will be used in the manufacture of products for export, the Special Customs Drawback Regime provides suspension and exemption of import tariffs, excise tax (IPI), and value-added tax on sales and services (ICMS).
In addition, as a means of stimulating the expansion, modernization, and restructuring of its industrial sector, the Brazilian government offers reductions on import tariffs or tax deductions for imported capital goods not available locally.
Brazil has gradually reduced its import tariffs and trade barriers: since opening its market to imports in the 1990s, importation has also been encouraged as a means of regulating internal market prices of certain products as well as supplementing shortfalls in local production.
The low cost of reforestation wood: represents another important competitive advantage.
Brazil Exchange Rate
At the time of writing this article the Brazil exchange rate is at US$ 1 to BRL 3.84, making it favorable to trade and export Brazilian products. However, a word of caution, the Brazil exchange rate can have greater movements than most other currency’s around the world, for example historic data shows the Brazil exchange rate can change from US$1 to BRL 3.8 to BRL3.2 in a matter of 3 to 4 months.
Therefore, depending on the current Brazil exchange rate, Brazilian products for export can become more interesting for a foreign company to purchase, but we recommend a lower currency is always calculated to provide a cushion of protection when signing longer term production and supply contracts.
EU & Mercosure Trade Deal
On June 28, 2019 the EU and South American economic bloc MERCOSUR agreed a trade deal after more than 20 years of negotiations. MERCOSUR consists of Argentina, Brazil, Uruguay and Paraguay. Venezuela is also a member but it was suspended in 2016 for failing to meet the group’s basic standards. The deal aims to cut or remove trade tariffs, making imported products cheaper for consumers while also boosting exports for companies on both sides.
It is set to create a market for goods and services covering nearly 800 million consumers, making it the largest in the world in terms of population. The EU has also concluded trade agreements with Canada, Mexico and Japan, however, the EU deal with MERCOSUR could see savings on tariffs that are four times as big as those made in the Japan deal.
The deal could significantly change the way Europeans do business in a country like Brazil, which has one of the world’s most closed economies. High tariffs have historically kept European competitors at a disadvantage against national industries.
Challenges of Doing Business in Brazil
As Brazil was named a BRIC nation with great future growth and opportunity, since 2015 Brazil has faced a financial crisis, a strong recession which halted its growth and so it is still considered a developing nation, which means that several areas of the economy remain under developed, and considerations must be made to that effect when looking to do business in Brazil.
Bureaucracy: The reform of the laws and regulations for opening and running a business in Brazil has improved but not adapted sufficiently, presenting many hurdles to overseas corporations.
Corruption: While Brazil is among the world’s leading investment destinations and is formally a well-functioning business environment, corruption and bribery are still serious obstacles.
Financial: Credit risks in Brazil are growing, and insolvencies are forecast to again increase as financial conditions in the market tighten.
Taxes: Brazil’s tax regime is one of the driving forces behind its complexity. More than 90 taxes, duties and contributions are charged in Brazil, and all taxes are based on different government spheres of federal taxes, state taxes and municipal taxes.
Corporate transparency: Brazil’s diverse and varied economy means that many companies moving into the country choose to do so in partnership with local companies. This makes the transition less disruptive for consumers, as well as giving the company essential insight on the local economy.
Infrastructure: Being on the world stage for the football World Cup and the Olympic Games pushed the Brazilian government to urgently improve the country’s infrastructure, auctioning road, railway and airport concessions as well as cutting financial transaction tax on several major projects.
Technology: Brazil has been hampered by a lack of technology during its development, however there are concerted efforts to improve this. Indeed, many technology start-ups have grabbed the headlines of late, and large corporations have also pledged a commitment to the economy.
Local labor force: Businesses should seek expert advice before employing in Brazil. Unions have a lot of influence in Brazil, and although their achievements have led to a more developed labor market, businesses should be aware of how they operate. Non-compliance can lead to fines and a soured reputation.
Export and import barriers: Businesses can often be confronted with complications when exporting and importing goods. Most imported goods are held in port for some time while the correct procedures take place and the average cost per container is relatively steep. High duties may make an export too expensive for the Brazilian market.
Working with Brazilian furniture manufacturers will leave you positive, seeing the investment made for advanced technology, the technical know how and changes in production processes in the sector. The investment made by Brazilian furniture manufacturers has left us impressed, with the level of modern technology for increased automation, customization, and information technology to connect the end to end process increasing production volume, with greater speed at lower cost.
The investment in equipment has allowed for great improvement in quality control with equipment intelligence identifying problems, an advanced logistics processes delivering your products on time.
The people in the production process whether on the factory floor or the technical teams in charge of developing your products with the highest focus in delivering the right price, on time, with highest quality and customization in a product will leave you surprised at the level of the technology, understanding, capability and capacity.
Brazil is a wonderful country with great potential, and very hospitable people who once they commit to your project will begin to understand clearly your requirements and work with you, and partner with you to ensure your product is developed correctly and as efficiently as possible.
Communication is a great problem in many cases, that is why a company such as Ameri Marketing helps you to overcome this uncertainty and communicates to you constantly between you and the manufacturers to help and aid in supporting both sides to reach a successful conclusion.