Three years in Brazil: what I learned?

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There is a saying among Brazilian “gringoes” (Portuguese for foreigner) that if you survive your first year in Brazil, you are likely to stay here forever. Often time, expats would spend their first few months in Brazil simply getting used to its peculiar way of being. The locals call it “jeitinho brasileiro” (the Brazilian way), but it can get even more confusing – the relaxed “jeitinho carioca” (Rio-lifestyle) is in stark contrast with the hectic “jeitinho paulista” (São Paulo’s hustle-and-bustle); Brazil is simply too big and diversified to preserve just one dominant culture. This has significant implications on the business relationships, investment, recruitment, and leisure.

I recently completed my 3 years in Brazil, full of learnings and immense travel. What implications can I draw from living and working in this remote, 200-million strong country?

Ordinary expat? You won’t pass.

According to the survey made by the expat services provider, Brookfield, Brazil presents one of the highest relocation challenges globally, second only to China. Excessive bureaucracy and language barriers are among the key hampering factors.

Similar results were recently obtained by Internations. Its 2016 Ease of Settling In Index sheds light on the issues of adapting to local culture, high costs of living and political tantrums which swamped the country in 2014 (remember the president’s impeachment?). The participants of the HSBC’s Expat Explorer 2015 survey weren’t too optimistic about Brazil neither; all-in-all, the land of cachaça and samba ranked last among the 39th countries surveyed.

The story goes in circles. Brazil ranks poor at almost any international ranking while the prospects for improvement are grim. Why would I then choose the world’s least expat-friendly country to live at?

‘Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital.’ -Aaron Levenstein-

While one might hold to global ratings, the consistent entrepreneur is always on the hunt for opportunities, and Brazil is full of those. The truth about a great majority of expats is that their opinions are influenced by experiences from living in highly-developed, mostly Western, countries.

In Brazil, you bound to local culture, not vice-versa. One simply cannot expect that the country, which for geographical and historical reasons has been one of the most isolated territories in the world, will be full of ordinary experiences. I tend to joke that if you want to be successful in Brazil, you need to effectively become 50% Brazilian (culture-wise). I used a set of tactics to help me adapt faster and I have to admit that among all 8 countries I lived at, Brazil gave me the biggest headache (PS. It’s over 🙂:

  • Language. Portuguese grammar is one of the most sophisticated in the world. Starting private classes from day 0 is crucial. There are many Latin expats who assume that by adopting Spanish you can learn solid Portuguese. That’s not the case – take the classes, write emails in the local language, practice different dialects and take it for granted that your porter might actually speak worse Portuguese than you. Brazilians aren’t used to hearing foreigners speak their language; be stubborn.
  • Customs. Hug and kiss if they ask you to. Brazilians really do give a kiss in a cheek when they meet business partners. Be positive, don’t openly criticise. Brazil is a classical example of a relationship-driven culture and our Western process-driven cultures simply don’t apply here. I fast learned that by being kind and patient I can gain more than by following my impeccable plan. I now kiss everyone, twice, then joke that I am from Rio (they only kiss once in São Paulo, what a shame).
  • Relationships. I set a goal to meet at least 3 entrepreneurs every week. My hint would be to use the lunch time, because it’s important to Brazilians and such meetings have a higher quality. I also became a big fan of using Whatsapp for business; it’s 2-3 times more effective then emails, which Brazilians don’t tend to answer. São Paulo is one of the world’s largest event venues; I normally participate in at least 2 events a month, also as a speaker. Finally, there are multiple forums and venues for meeting people, among them LinkedIn, Internations, Gringoes.com, or Meetup.com. My network of contacts in Brazil is of such high quality now that Brazilians themselves often ask me for intros and help with funding 🙂

    These three tips are crucial when it comes to settling in. Once you’re in you’re in. And if you succeed, please consider supporting me in increasing the number of expats in Brazil. It seems that there are very few of us left here 🙂

    The data show a 62% decrease in foreign worker permits in the first trimester of 2016, compared with the same period in 2014, according to Brazilian Ministry of Labour.

    Brazil is actually a very entrepreneurial society

    Brazil always looked to me like a land of opportunities, especially when it comes to technology. It would be illogical to assume that an underserved market, where just one single state boast of more than 44 million inhabitants, doesn’t have at least a few strategic windows here and there.

    For people in Brazil, starting a business is often a tool of survival. Now, if we define entrepreneurship as one’s own ability to run or co-own a business, Brazilians appear as the third most entrepreneurial country in the world. Up to 14% of all adults engage in business ownership. High unemployment and equally high living costs drive Brazil’s ambition as an entrepreneurial society.

I, too, saw “dreams through air” and eventually decided to pursue my own business. My initial thought was to start a mobile marketing consulting company, something Brazil visibly lacked. Known as an ex-CMO of one of the leading urban mobility apps, Easy Taxi, I fast gained a portfolio of high-profile technology companies and within one month I was completely booked. That made me rethink my plans and instead of helping others pursue their dreams, this time I decided to embark on my own adventure, as well as join other entrepreneurs on the go.

Today I am the CEO of Flapper, the private aviation marketplace, as well as partner of Journey Space, the company poised to redefine airport experiences. I invested all my savings in my entrepreneurial ambitions and I am happier than I ever were. Simultaneously, I act as an advisor to three companies, essentially trying to help them understand Brazil through data. How hypocritical, isn’t it? A gringo who once didn’t know the word in Portuguese now acts as an advisor to Brazil-based businesses.

On a more practical note, there are a number of recommendations I can jot down for foreign entrepreneurs who target Brazil as their next market:

There is more than one way to open a business in Brazil

A general belief is that ‘gringo’ companies need open a foreign branch to operate in Brazil. That’s not entirely true; quite the opposite – a foreign representative office is tied to more bureaucracy while it does the same job. All in all, you will end up setting up either a Ltda (limited liability company) or a S/A (~corporation, more sophisticated). In great majority of the cases, both partners of the company (takes two to tango in Brazil) can be foreign and the process isn’t that complicated (~1 month to get things done). The challenges are twofold: (1) Investor visa, which takes up to 3 months to obtain and requires a minimum investment of R$150,000 (ca U$50k) + pledge to hire 10 Brazilian employees in the first two years of operation (very recent). You can also invest R$600,000 (ca U$200k) to have it off the head; and (2) Brazilian “administrator” of the company – you need someone local to be a front man.

Now, it’s time for two more insightful observations. First, it’s widely accepted for foreigners to first come here and work for 2-3 months, then pick up their visa in Argentina or Colombia and come back the following week. Secondly, if you just require a small local presence, don’t open an official legal entity at all. Simply hire a local person under “Eireli” (Individual Entrepreneur) and make your local country manager a representative of the company X. Mobile payments can be processed through gateways, among which Ebanx seems to be the most popular (serves, inter alia, Spotify). There are also a number of financial boutiques that can help transfer first funds; the banking system is highly bureaucratic and ‘under surveillance’.

If you need the help of an expert, hire a dedicated lawyer specialized in locating foreign companies in Brazil. I recommend Suchodolski Advogados ($$$$) or OdonSombra ($$$), which additionally specializes in Internet businesses. More materials on how to set up a company in Brazil can be found on the blog of my Norwegian friend Egil (LINK), who also runs similar location services; you can also download this e-book (in Portuguese, sorry) by our accelerator, ACE: http://goace.vc/como-estruturar-juridicamente-sua-startup/

Hire with utmost care

According to my recent interview with a leading lawyer office, in some sectors, up to 60% of all legal cases related to labor law refer to foreign-owned companies (which form a tiny % of all businesses in Brazil). It’s with utmost sadness that I have to inform you that many Brazilian employees take advantage of their foreign superintendents and search for loopholes that can get them extra income. This refers mostly to two cases: (1) part-time workers, such as promoters, who enforce their rights to full-time employment, and (2) dismissed employees, seeking for extra compensation. In one of my past companies we used to have up to 10 cases a month. It quickly became a full-time job for one lawyer to handle them.

Another challenge stems from a combination of poor screening process and the culture of speed hiring – “na hora”. To give you a point of reference, in Sweden my statutory minimum period of notice amounted to 3 months, while in the Philippines you only knew that someone left the company when they don’t show up for a few days in a row. So, Brazil is somewhere in the middle. People generally leave quickly (say, within 2 weeks) and reference letters are rarely used. Hiring is largely focused on your soft skills.

Hence, we can conclude that to a foreign entrepreneur, Brazil is an employee’s market. How to fight the system? First, don’t hire part-time employees. Use marketing agencies to handle promotional activities. Second, do your job when screening the candidate. ALWAYS ask for the endorsements and check their ability to handle quantitative work. Contracts come before oral agreements, remember.

Once you pass through all of that, you will be rewarded by working with smart and cheerful team, ready for any challenge. Brazilians are used to hardship, trust me. They are some of the most creative people in the world and I’ve met many brilliant minds during my 3 years in this tropical country.

Brazil has billion-strong investment funds, but not for your business

Just a few lines above I mentioned that Brazil is a land of opportunities. Such statement holds for the majority of industries, people, and places, but not all of them. In 2015, nearly 50% of all VC money in Brazil went to just two sectors: health and education.

I second on the fact that majority of the countries have some “specialization”, but in Brazil it’s about the fact that entrepreneurs acting in niche sectors simply don’t receive any attention. Talking about startups, specifically, Brazilian investors are particularly comfortable and invest in proven, risk-free businesses at the growth stage only. This resembles more a philanthropy than a startup investment. The three grave mistakes of Brazilian businesses are the following:

They only invest in post-revenue startups…

…mostly in B2B sector (unless #1 holds)

Fear of innovation (unless #1 and #2 holds)

In the last 6 months I identified more than 50 investors that I consider relevant to the local startup scene. Very few would invest in your disruptive technology or a social app, even if you have 1MM users. “It’s not their beach”, as the local saying goes. If you want to come to Brazil to build a product that will change the world, consider finding a foreign investor. Mainstream entrepreneurs will find plenty of opportunities, really!

Brazil has extreme (price) contrasts (like any tropical country)

The cost of car maintenance in Brazil amounts to 3x the amount you’d pay in an average European country. Employment costs (insurance, contribution to retirement fund, food card, etc.) equals 80% of the salary. Expensive rentals overlook favelas, where water and electricity are free…

Like it or not, but Brazil is a country with two parallel worlds and you will have to understand both if you want to live here comfortably. There is also a very restricted third cohort of millionaires and billionaires, which the majority of the population won’t even have a chance to meet in person.

Up to 27.8% of Brazilian population belongs to the Middle Class. This represents a thriving, underserved cohort, which awaits your entrance to the market. But be careful, combining high costs with a multi-million audience equals unprecedented capital requirements. That’s where the majority of the companies get burned; one simply cannot consider Brazil as a test market. You either bet on it 100% or you go elsewhere. You don’t play with Brazilian consumer market. You conquer it.

What’s next?

As Carlos Alves de Souza once said “Brazil is not a serious country”, the key is to combine your expertise with the Brazilian way of being. In a complex, diversified market such as Brazil, turning your local knowledge into a competitive advantage is the only way to go. And once you taste the success, there is no way back. Brazil is addictive.

Myself, I will continue living my peculiar life, powered by technology and inspired by sharing economy. On a personal front, I sold all my belongings and practice what I refer to as “The three bag theorem”. I only own three bags – the first of them is used on a daily basis, the second one – on a weekly basis, while the third one is used from time to time. When you think about it, that’s exactly how life works. There are just so many things we don’t need; why not become more mobile?

I rent a small apartment in Rio de Janeiro, while I also travel to São Paulo twice a week for professional reasons, where I stay at Airbnb (since February 2016). It just works! I don’t own a car; a mix of Easy Taxi and Cabify fully covers my needs. The food comes on-demand, too (thank you iFood) and I use Vaniday to get my weekly massage. I used sharing economy in all spheres of my life. It is poised to revolutionize your life too and Brazil is a perfect venue to launch your next venture. See you soon?

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Paul Malicki is a passionate mobile marketing and emerging markets expert and an advisor to multiple startups. He is the CEO at Flapper and an Advisory Board Member at Splyt. Paul previously acted as a Global CMO of Easy (Easy Taxi), the LATAM’s leading taxi app. He recently published his first book on mobile, the Chief Mobile Officer’s Guide to Growth, available exclusively at Amazon: LINK.