Brazil's Economic Performance and Trade with Dubai
1. EXPORT TO
BRAZIL
October 2009
Country Overview
Brazil’s prudent macroeconomic management sustained economic performance in recent years, evidenced by continued economic growth,
steady reduction of inflation, and considerable strengthening of the external position. Yet, Brazil is facing main challenge to sustain this level
of growth potential, as this requires consolidating macroeconomic stability by improving the efficiency of the public sectors, strengthening
institutions, and improving business environment. The economy is largely dependent on the export of agricultural commodities, but the eco‐
nomic growth is affected by the variations in rainfall which helps to rise in commodities’ production. The current account balance witnessed
a deficit in 2008 after five years of significant surpluses and further deficit is projected in 2009. Inflation stood at 4.5% and 4.8% in 2007 and
2008 respectively, this is due to increasing prices of food, metals, chemicals, oil and services. Brazil continues to face considerable difficulties
in implementing economic reforms, mainly in tax and business regulation. In the longer term, Brazil will also need to invest heavily in infra‐
structure to sustain growth. Investments in roads, railways, ports and the energy sector are required.
Brazil’s economy is endowed and well developed with rich natural resources and comparative advantage in main areas like agriculture, min‐
ing, manufacturing and services sectors. Brazil is the world’s top and largest producer of orange juice and coffee, and the world’s second to
produce soya and meat and the third to produce corn. Besides that, Brazil produces 40% of the sugar traded on world markets and output is
rising by nearly 20% every year. Brazil is also rich with tropical fruits, cotton, cocoa, tobacco, and forest products, this is driven by increases in
productivity and cultivated area. On the industrial level, Brazil’s Industrial base is one of the largest diversified of any emerging economy
which accounts for almost 40% of the GDP and it encompasses automobiles, equipments, machinery, petrochemicals, steel, cement, textiles
and consumer durables. The service sector in Brazil is sophisticated and accounts for around 50% of GDP, including: banking, telecommunica‐
tion, computing and commerce. The infrastructure base is an important component for any nation’s economic development. But in Brazil, the
infrastructure base is obsolete and inadequate, the education and the public health system are far below the expected level for a country like
Brazil. Nevertheless, the government has taken initiative to encourage foreign investments of about US$236billion in order to enhance the
contribution to the nation’s economic development and simulate Brazil’s economic growth by 2011. This plan includes: housing, building air‐
ports, sea ports, constructing highways, development of energy projects and improving water and sewage systems. Tourism industry in Brazil
represents 6.2% of the total GDP, with no surprise, Brazil’s tourism industry is the largest in the Latin America region and the thirteenth larg‐
est in the world. Few years back, the government initiated a public investment program that spent US$670mn on the development of both
transportation, and tourism infrastructure. The majority of visitors to Brazil come from Argentina; an initiative was also launched to attract
visitors mainly from UAE, China and India. United states remain Brazil’s leading trade partner, followed by Argentina, the Netherlands and
Mexico. On the import level, USA remains also the main source of imports, followed by Argentina, Germany, China and Niger.
The prospects for the Brazilian economy are moderately positive after negative growth in fourth quarter of 2008 and first quarter of 2009.
The adverse period of the crisis is almost getting towards slow recovery stage; hence the Brazilian economy has the opportunity to start grow‐
ing again as early as second quarter of 2009. The level of domestic demand in Brazil will certainly assist the economy to recover through the
support of strong fiscal stimulus, credit availability and expansionary monetary. However, the external demand will not support increase in
exports at least for the year 2009. Exports are projected to drop to 19% while imports contract 21%. Higher interest rates for emerging‐ mar‐
ket debt will further deteriorate the current account, nevertheless it is to be expected that an extensive decline in income debit repatriation
of profits from multinational corporate operating in Brazil due to lower commodity prices and lower exports. This exemplifies that both ex‐
ports and imports will show substantial declines, in view of the fact that there is no indication that external demand might enhance neither
the domestic demand for imported goods is picking up. The recent recession had imposed constraints on imports particularly on raw materi‐
als. Brazil’s economy is much more diversified today, and remains dependent on exports of iron ore, soy and other farm products and raw
materials but much less so than in the past. Most the country's gains can be attributed to orthodox macroeconomic policies such as a floating
exchange rate, tight fiscal restraints and inflation targeting. Brazil’s major imports are: Mineral fuels, oils and waxes, Mechanical boilers, Elec‐
tric machines, automotive vehicles, tractors and parts, Organic chemical products, Optical instruments and photographic equipment, Plastics,
Pharmaceutical products, Fertilizers, and Rubber and derivative products. Brazil’s major exports: Automotive vehicles and tractors, Mechani‐
cal boilers, machines, devices and instruments, Mineral fuels, oils and waxes, Casting iron, iron and steel, Meats, Sugar and confectionary
products, Electric machines, devices and materials, Fruit, seeds, and Aircraft and related parts
Economic Performance 2005 2006 2007 2008 2009F 2010F
Nominal GDP (US$ bill) 882.4 1088.9 1333.8 1573.3 1296.7 1411.9
Population (mill) 186.8 189.3 191.6 194.1 196.6 199.2
GDP per capita (US$) 4723 5752 6961 8107 6596 7088
Real GDP (%) 3.2 4.0 5.7 5.1 -1.5 3.0
Current Account Balance (US$ bill) 13.98 13.64 1.55 -28.30 -18.39 -27.8
Current Account Balance/GDP 1.6 1.3 0.1 -1.8 -1.4 -2.0
Nominal Exports of Goods & Services (% ) 22.3 19.1 19.3 22.5 -35.0 22.0
Inflation (%) 5.7 3.1 4.5 4.8 4.3 4.5
Source: Moody’s
2. Dubai’s Trade with Brazil
Trade flows between UAE and Brazil had grown consistently over the past four years. Dubai is looking forward to increasing the volume of the bilateral trade
between the two countries. Trade relations between Brazil and Dubai have witnessed major developments in the past years. In 2007, Brazil exhibited the high‐
est growth of 154.3% in terms of exports from the Emirate posting AED29.5 million as compared to AED11.6 million in 2006. Base metals and products thereof
are the most in demand goods Dubai is exporting to Brazil reaching a 107 % increase or AED20.5 million between 2006 and 2007 from AED9.9 million. Also
during last year, exports of textile products were valued at AED8.1 million, a huge leap from the AED 242,000 in 2006. Brazil is one of the targeted markets for
Dubai and is concentrating its efforts to increase exports for its national manufacturing companies. Based on the figures from Dubai World’s Statistic Depart‐
ment, Dubai exports to Brazil in the first half of 2008 have increased to AED655.7 million, which is 426% jump compared to the same period last year.
Dubai’s Total Export Trade with Brazil by HS Section 2009
HS Section HS Section Description Total_ Export Value_AED
05 MINERAL PRODUCTS 16,758,198
03 ANIMAL/VEGETABLE FATS/OILS 17,082,240
10 WOOD PULP, CORK, CELLULOSE MATERIALS, PAPER, & PRINTING 17,123,625
11 TEXTILES 23,008,169
17 VEHICLES, AIRCRAFT, & TRANSPORT EQUIPMENT 24,178,772
06 CHEMICAL OR ALLIED INDUSTRIES 48,979,424
13 STONE, CEMENT, CERAMIC, & GLASS PRODUCTS 61,107,757
04 PREPARED FOODSTUFFS 61,177,029
15 BASE METALS AND PRODUCTS THEREOF 76,724,685
07 PLASTICS AND RUBBER PRODUCTS 77,330,437
16 MACHINERY, ELECTRICAL AND ELECTRONICS EQUIPMENT 213,263,974
Source: Dubai Export Monitor
Key Opportunities
Dubai’s Total Export Trade with Brazil by HS Code—2009
HS Code HS Code Description Total_ Export _Value_AED
85258010 Digital still video cameras 11,703,471
Chocolate & other food preparations containing cocoa, but not containing
18063290 11,778,985
alcohol, in blocks, slabs or bars, not filled, weighing not more than 2 kg.
Refrigerating or freezing chests, cabinets, display counters, show‐cases & simi‐
84185000 lar refrigerating or freezing furniture, other than combined refrigerator‐ 13,755,029
freezers, fitted with separate external doors & refrigerators of household type.
Palm oil & its fractions, whether or not refined, but not chemically modified,
15119000 14,555,515
excluding crude.
24022000 Cigarettes containing tobacco. 15,692,000
Plates, sheets, film, foil & strip of polymers of vinyl chloride, containing by
39204300 17,364,633
weight not less than 6 % of plasticisers.
19053100 Sweet biscuits. 21,493,733
Reception apparatus for colour television, whether or not incoporating radio‐
85287210 27,088,343
brodcast receivers or sound or video recording or reproducing apparatus.
69089010 Glazed ceramic flags & paving, hearth or wall tiles 40,333,961
84119900 Parts of gas turbines, other than of turbo‐jets or turbo‐propellers, n.e.s. 60,013,983
Source: Dubai Export Monitor
Medical equipments:
There are only a few high‐quality Brazilian manufacturers of advanced medical products thus Brazil’s reliance on imports should continue for
some time. There are some 3,000 equipment and supply distributors in Brazil, but only 3.3% of these firms can be considered large compa‐
nies. Besides the attractive size of the Brazilian medical market, an interesting trend in Brazil is the growing market for home health care prod‐
ucts, which has increased dramatically in recent years. Brazil has approximately 150 home health care companies which are increasingly
viewed as good ways to cut hospitalization costs while offering better services for patients. Brazilian health insurance companies are responsi‐
ble for paying 99% of the costs related to home care treatment, and as such, exporters could take the opportunity of the market demand for
home health care products growing dramatically during the coming years. Further opportunities for exporters: More advanced medical equip‐
ment, Disposables, Diagnostic devices, and Implants and components.
3. Steel and Iron:
Total Brazilian steel imports have been growing steadily in quantity but not in value, the country has imported larger quantities of less expen‐
sive steel in the last years. There are three major areas of opportunity for exporters: Brazilian steel manufacturers are interested in precision
equipment that would reduce downtime and achieve improved quality control. Also, consultancies for managing downtime and minimizing
changeover costs might find Brazil an attractive market. Second, Brazilian manufacturers are running at almost capacity, so there are short
term shortages for a variety of steel products, allowing UAE manufacturers a point of entry. The third area of opportunity is the domestic
demand exists for specialty steel products that Brazil does not yet produce in sufficient quantity.
Market Entry
Dubai Exporters should invest time in developing relationships in Brazil since the Brazilian business culture largely depends on personal rela‐
tionships. Dubai exporters are highly recommended to visit Brazil to meet one‐on‐one with potential partners. Attending local trade show
could be another option to entry the Brazilian market. Besides this, a qualified agent or distributor would be very helpful for UAE firms to get
involved in public sector procurement. Exporters should consider careful selection of an agent as the agent or distributors should be ac‐
quainted with thorough and complete national coverage. an agent or distributor can significantly reduce the set‐up costs and time taken to
enter the market. Exporters are highly recommended to consult a legal firm and have a written agreement to help them limit their liabilities
for product defects, better ensure payments, protect a trademark, define warranty terms, and avoid any legal issues. Moreover, Clauses re‐
lated to exclusivity and performance targets may be included within the agreement.
Pricing
Exporters should consider the risk involved in currency exchange rate, since the pricing is very competitive factor in foreign trade business and
the linkage between one country and its partners in the global economy. The Brazilian currency is the Real, and it is quoted on all the main
foreign exchange markets. Exporters may get acquainted with minimal knowledge of spot exchange rates and currency markets prior to sign‐
ing any final sales contract and should carefully consider the pricing while dealing with large contracts. The price of products sold in the do‐
mestic Brazilian market often reflects financing cost; hence price negotiation is intimately correlated to the supplier’s payment terms. It is not
unusual for a company to select a supplier whose prices are higher than the competition based solely on payment terms. In Brazil, the tax
burden on imported and locally manufactured products is the heaviest in Latin America. Thus, to become competitive in the market, several
companies are reducing profit margin and implementing efficient logistics systems to reduce costs. It is vital Dubai exporters to calculate the
import‐related costs, since such costs are usually high in Brazil.
Import Tariffs and Documentation
In Brazil, imports are subject to a number of taxes and fees, in addition, duties are paid by the importer and are calculated on the basis of the
sum of the price of the merchandise, insurance and international freight – CIF value. The tax rate applicable on imported goods varies ac‐
cording to the Harmonized system code, and most taxes are calculated on cumulative basis. Import costs include three types of taxes:
• The import duty: The Import duty is a federally mandated product specific tax levied on a CIF (Cost, Insurance, and Freight) basis. In most
cases, Brazilian import duty rates range from 10 to 35%.
• IPI‐ Industrialized Product tax: The IPI is a federal tax levied on most domestic and imported manufactured products. It is assessed at the
point of sale by the manufacturer or processor in the case of domestically produced goods, and at the point of customs clearance in the
case of imports. The IPI tax is not considered a cost for the importer, since the value is credited back to the importer. Specifically, when the
product is sold to the end user, the importer debits the IPI cost. IPI tax rate ranges from 0 to 15%. In the case of imports, the tax is charged
on the product's CIF value plus import duty. A product’s IPI rate is directly proportional to its import tariff rate.
• ICMS‐ Merchandise and Service Circulation tax: is a state government value‐added tax applicable to both imports and domestic products.
The ICMS tax on imports is assessed ad valorem on the CIF value, plus import duty, plus IPI. Although importers have to pay the ICMS to
clear the imported product through Customs, it is not necessarily a cost item for the importer because the paid value represents a credit to
the importer. When the product is sold to the end user, the importer debits the ICMS, which is included in the final price of the product
and is paid by the end user. Effectively, the tax is paid only on the value‐added, since the cost of the tax is generally passed on to the buyer
in the price charged for the merchandise. The ICMS tax is levied on both intrastate and interstate transactions and is assessed on every
transfer or movement of merchandise. The rate varies among states: in the State of São Paulo, the rate is 18%. On interstate movements,
the tax will be assessed at the rate applicable to the destination state. Some sectors of the economy, such as mining, electricity, liquid
fuels and natural gas are exempt from the ICMS tax.
4. Labeling and Marking Requirements:
The Brazilian Customer Protection Code requires that product labeling provide the consumer with precise and easily readable information in
Brazilian Portuguese, this label is placed on the product in Brazil by the importer:
Description of the product
The weight (metric) according to local standards
The composition of the product
Product’s validity (sell‐by date or expiry)
Country of origin
Importer’s Name and address
Any special warning on risks to consumer’s health and safety
Special labeling regulations apply to imported pharmaceutical specialties, antiseptics, beauty and hygienic preparations and foodstuffs.
For UAE firms to become an approved supplier of foodstuffs, their local importer has to prepare a Brazilian Portuguese translation of the
company’s labeling and submit it. Exporters should provide the following information: Product name‐ Ingredients and country of origin‐
Special storage instructions – Net weight – in metric units‐ Date of production‐ should be identified on master carton‐ Expiration date – shelf
life, established by the manufacturer‐ Manual instruction accompanies any specific product, it must be in Brazilian Portuguese.
Foreign Trade Integrated System (SISCOMEX) is a computerized system to monitor imports established by the Brazilian Government, this
system is to facilitate customs clearance and reduce the amount of paperwork previously required for importing into Brazil. Brazilian import‐
ers must be registered in the Foreign Trade Secretariat’s (SECEX’s) Export and Import Registry and receive a password given by Customs to
operate the SISCOMEX. The SISCOMEX creates electronic import documents and transmits information to a central computer.
Required Documentation:
The documentary letter of credit is a contract signed between the exporter and the Brazilian buyer. The Brazilian bank will make payment
provided that the requirements of the Letter of Credit are met and in accordance with strict compliance of the Letter of Credit.
The commercial invoice should be completed by the supplier in the country of origin and state full details of the goods. The following docu‐
ments should show the import license number issued by SECEX (the Brazilian Foreign Trade Secretariat): commercial invoice‐ bill of lading/air
waybill ‐ Sanitary certificates for the shipment of certain goods. Other general required documents are: Customs Import Declaration‐ Simpli‐
fied Import Declaration‐ Declaration of Customs Value‐ Import License‐ Commercial Invoice‐ Pro Forma Invoice‐ Air Waybill‐ Bill of Lading‐
Certificate of Origin for the Brazilian importer to obtain the necessary import license‐ Packing List ‐ Some goods may be subject to additional
documentation, such as sanitary certificates, licenses, permits and certificates of free sale.
Country Snapshot:
Area: 8,514,877 sq km
Population: 198,739,269
Population growth rate: 1.199% (2009 est.)
Labour Force
Number in labour force: 100.9 million (2008 est.)
Sectors: Agriculture: 5.5%, industry: 28.5%, services: 66% (2008 est.)
Unemployment: 8% (2008 est.)
Key Industries:
textiles, shoes, chemicals, cement, lumber, iron ore, tin, steel, aircraft, motor vehicles and parts, other machinery and equipment
Imports: $176 billion f.o.b. (2008 est.)
Import Commodities: Machinery, electrical and transport equipment, chemical products, oil, automotive parts, electronics
Sources: CIA – The World Factbook, Intute World Guide, Government of Dubai – Dubai Trade statistics
For further information contact the Research Section, Dubai Export Development Corporation, P.O. Box 123336,
Dubai, UAE, Telephone: 04‐429 8888 Fax: 04‐4298899 email: research@dedc.gov.ae website: www.dedc.gov.ae