The Latin American Payments Blog
Why the Asia/Brazil relationship is only set to grow stronger
Trade between Brazil and Asia is a vital relationship between the two. The likes of China, Japan, India and more regularly trading goods and services with the country; helping both economies to flourish.
Historically, there has been a long and prosperous economic relationship between Brazil and China. Trade relations actually dating back to the start of the early nineteenth century. In 1974, the two countries began official diplomatic relations; enjoying a positive relationship based on non-interference, equality, and mutual benefit.
Over the nearly four decades since that agreement was created, the diplomatic partnership has grown from strength to strength. Trade between the two countries in 2019 was worth a total of $98.142 billion United States Dollars (USD). This actually makes China the main trading partner of Brazil. Edging out the likes of the United States, Argentina, Netherlands, and Japan.
The historical and economic relationships between Brazil and Asia doesn’t start and stop in China, however. Japanese investment in the country took off in the 1950s when companies from Japan realised the potential market for its various manufacturers. As well as Brazil being a fantastic source for the raw materials it needed to undertake the business; meaning global brands such as the Pilot Pen Corporation, Yanmar Diesel and Toyota Motors flocked into the country. In fact, Toyota even chose Brazil as the location for its first non-domestic car assembly plant!
The growing ties
Over the last ten years, that relationship has only grown stronger and more profitable. An increasing number of businesses from Asia (China, Japan, and South Korea) are opening their products and services out to the Brazilian nation (and vice versa).
The period between 2008 and 2016 saw Japanese countries invest an average of $3 billion USD into the region. Whilst in 2010, 2011 and 2012 South Korean investments averaged at around $1 billion USD a year. China was equally invested in the region, with the Chinese government investing nearly $38 billion USD into the country in the five years between 2010 and 2015.
Although in more recent years economic activity across Brazil might have stagnated slightly it has not deterred investment from abroad. In fact, infrastructure investments by Chinese companies are actually on the rise. In 2017, a leading conglomerate of companies, the HNA Group, acquired part of the rights to manage the Rio de Janeiro-Galeao International Airport. Joining their growing grid, port, and other infrastructure portfolios.
Piers of HNA Group have followed suit with similar investments. For example, the State Grid Corporation of China purchased Brazil’s largest electricity distributor, and the China National Petroleum Corporation acquired various Petrobras run facilities.
It is not just large conglomerates and national corporations that are discovering the benefits that operating in Brazil offers. Many small businesses and companies have found a growing market for their goods and services.
What do Asian businesses need to consider when trading with Brazil?
In recent years Brazil has begun to relax its economy and open it up further. It is still towards the lower end of the 2018 Trade Freedom index created by the World Heritage Foundation. This traditionally meant that importing goods for uncompetitive markets was too expensive. Forcing companies to either open up factories within the country or simply not trade there.
Whilst some of these barriers are still off-putting, they are slowly being broken down. Brazilian government is driving the change to entice more businesses to trade with the country. As the world’s ninth-largest economy based on GDP, many companies in Asia are looking to begin trading with Brazil. But there are a few considerations these businesses need to incorporate before entering the country:
One of the biggest hurdles facing companies is communicating with suppliers and end-users. Aside from the obvious language differences, Brazil also has very different cultural differences. Such as less importance on punctuality but more responsiveness when it comes to meeting and engaging with each other. Similarly, Brazilians prefer to negotiate with people rather than businesses, so personal relationships are very important.
One of the most important ways of marketing yourself in Brazil is through social media. Brazil is ranked fifth in the world for social media usage. Typically Brazilians spend more time online than they do watching TV!
On average, internet users spend between 4.5-5 hours a day online (that’s 10% of the world’s overall social media usage!). So it is vital companies looking to operate within the country know how to successfully market themselves via social media; it is a guaranteed way for brands to reach potential customers.
3. Accepting payments
Many companies struggle with accepting payment in Brazil. 29% of the 212 million people living in the country are classed as unbanked (you can read more about in our blog here [LINK]). In addition to that, many Brazilians do not have a means of international payment; preferring to purchase goods in cash or via Bancario Boleto (check out our blog on those here [LINK]).
Being able to accept local currency is vital for success in Brazil. There are two companies in particular highlighting how important it is. AliExpress is the most successful Chinese e-commerce site in Brazil, selling more products than anyone else. With over 73 million online buyers in the country, it is a huge potential market. The owners of AliExpress knew to take full advantage of these customers, they would need to be able to accept all local payment methods.
Using a local partner, AliExpress launched in Brazil in 2013 and quickly became very popular. CTO Dongbai Guo stated at the 2018 Ecommerce Brasil Forum, that their ability to accept Boleto was the key aspect of their success.
Another success story is that of mobile gaming giant Garena. Although Latin America might not be the first region to jump to mind when it comes to gaming, Singapore-based Garena has proven that it can be a very lucrative market. Research has also shown that players in Latin America spend over $5 billion annually on mobile, computer, and console gaming.
By adopting the ability to accept local payment from players in Brazil, Garena was able to maximise its ability to reach even more players; helping to unlock the full potential of this untapped market.
How you can begin trading in Brazil
With a growing economy and huge potential market place, it is no wonder so many businesses in Asia are looking to begin trading in the region. In order to maximise the opportunity, companies will need to accept local methods of payment. These are local credit cards and Boleto Bancario, but this can be incredibly complex and difficult to implement.
In order to accept local methods, the payment process will need to be handled by a local entity. Whilst you could set yourself up, it would require a local expert to help you navigate through the various regulations, laws, and taxes. These require very advanced knowledge. This is why many companies, such as AliExpress and Garena, use the experience of a local financial agency.
Epag is one of these companies. It has been able to help dozens of Asian companies open up a channel into Brazil. With unrivaled knowledge of the market and use of the very latest technology, they remove the need for any local entities or Brazilian bank accounts. Collecting payments in the local currency, they are then able to remit the amount anywhere in the world in either Euros or USD; without charging any hidden fees.
So, if you are thinking of expanding your operations from Asia. And are interested in unlocking what Brazil has in store for you, then get in touch with the epag team today to find out more.