Exporter Country Profile – Brazil

Economic Overview

Brazil’s $1.3 trillion economy is bigger than those of India and Russia, and its per-capita income is nearly twice that of China. The Brazilian Economy is the largest in Latin America, and the 9th largest worldwide. Brazil has a large service sector that comprises 66% of the economy of Brazil, with the industrial sector making up 20% of the total economy.

The economy of Brazil is supported by diverse economics institutions like SACN, Mercosur and Cairns Group. Local economists and social scientists say the booming trade-oriented economy and innovative government programs are lifting millions from poverty and shaking what was once a certainty: that a person born poor in Brazil would surely die poor.

Rodriquez Consulting forecasts Brazil as a high growth potential market for the yachting industry, with the 12th annual São Paulo boat show having demonstrated a 12 per cent year-on-year increase. One of the key factors affecting the growth of the market was the reduction in state value-added sales tax from 25 per cent to 7 per cent in the states of Rio de Janeiro, São Paulo and Santa Caterina.

Boating in Brazil

In spite of thousands of kilometres of navigable coastline, and a general predisposition to outdoor and watersports activities, a severe lack of infrastructure and economic constraints have resulted in a relatively small boating market in the largest South American country. Brazil has great potential for boating activities considering the temperate climate and extensive waterways. However, currently boating activity is very concentrated along the Southern Coast and is still economically relatively insignificant. In comparison to other countries of a similar size, nautical activity is very small and the number of boats per capita very low.
Geographical Advantages

Extent of Brazilian Coastline: 8,500 km
Number of large dams: 129
Estimated total reservoir surface: 36,000 km2
Navigable rivers: 30,233 km
Number of Boats in Brazil
(source: http://www.sportnautica.com.br and http://www.acobar.com.br/index3.htm)

Estimated number of total registered boats in Brazil: 329,473
Number of sports and recreational boats (47,8 %): 157,779
Where are the boats?
Rio de Janeiro 9,4%
São Paulo 7,2%
Boat per capita: 1:1,600

The Boating Business in Brazil
(source: http://www.acobar.com.br/index3.htm)

Registered Boatyards: 116
Marinas, Yacht Clubs and Boat Garages: 654
Hotels and resorts located on the Coast, rivers, lakes and reservoirs: 856
Nautical stores, brokers and tourism dealers: 1,518
Boat repair and services shops: 1,242
Direct jobs offered by the industry: 100,000
Boating Associations
Brazil’s status as a major yacht builder got a boost late in 2008 when representatives from the country’s major players came together to form a national association, which goes by the moniker of Superyachts Brazil. The new organisation, similar to in nature to associations in other countries such as Superyacht Base in Australia, is intended not only to increase Brazil’s visibility in the world of major yacht builders, but to enhance Brazil’s status as a major charter destination.

The meeting, held in December 2008 at an Inace Marine-owned resort in Fortaleza, focused on common problems, international marketing efforts, the state of Brazilian marinas and other infrastructure issues, as well as legal barriers to building yachts and chartering them within the country. A few days after the meeting, the association scored its first success when it succeeded in convincing the federal government to relax its chartering regulations. Steve Buckley, an American charter broker specializing in the Brazilian arena and who set up the government meeting, was
optimistic. “They pretty much gave us the green light,” he said. “Chartering is now legal in Brazil. Their policy now isthat foreign-flagged boats can come down for a three-month cruising permit (extendable for three more months) and they won’t interfere with charters. No taxes, no nothing.”

By most standards, Brazil’s yacht-building industry is small, with only three manufacturers of major vessels, with each builder specialising in a different sector of the market. The best-known is Inace, based in Fortaleza, which makes fishing vessels and ships for the Brazilian Navy and has found a niche in the yachting industry constructing expedition vessels and trawlers. MCP Yachts, based in Santos, east of Sao Paulo, has been around since 1980 and makes classic motor yachts up to 130 feet. The third and newest yard, Sunboats, created by the scions of a major Brazilian conglomerate, is a sailboat builder that’s expanded into catamaran motor yachts up to around 100 feet. Sunboats has contracted Thierry Stump, one of Brazil’s leading naval architects, to build its burgeoning fleet of yachts.

Between Rio de Janiero and Sao Paulo is a beautiful coastline dominated by two major areas, speckled with hundreds of forested, beachfront islands, a placid weather pattern and dozens of protected anchorages. However, there are only a handful of full-service marinas in the area capable of handling yachts up to 120 feet, and Brazilians yacht owners are reluctant to charter their vessels locally.

Improving the infrastructure to accommodate more large yachts is another major task for the association There are currently plans in place to expand the capacity of marinas to handle megayachts, and both MCP and Inace are capable of haulout repairs to all but the largest yachts.

With the establishment of the association, the boating industry in Brazil looks to go from strength to strength. With an improved infrastructure and increased marketing efforts, it is hoped that the Brazilian Boating market will exist as a fantastic trade partner for exporters in the near future.

Import Duties and Sales Taxes

Products delivered to Brazil are subject to import duties. Brazil’s government sets product classifications that determine rates for specific imports. Where exceptions meet the best interests of the Brazilian economy, import duty rates may be negotiated.
Brazil imposes two major taxes on imports, namely the industrial products tax (IPI) and the tax on the distribution of goods and services (ICMS). Foreign exporters must also be aware of the federal Social Integration Program tax (PIS) levied on gross revenues from domestic sales of goods and services and the Contribution for the Financing of Social Security tax imposed on most gross revenues.
Like Brazilian import duties, ICMS and IPI taxes vary depending on product type and assessed importance to Brazil’s economy. ICMS is a state tax payable at all stages of sale – from manufacture to consumer. ICMS tax rates range from 7% to 25%, and average 18% in Rio de Janeiro.
Strictly speaking, IPI is a tax imposed on manufactured product imports. Thus international traders receive tax credits from IPI payments for raw material shipments, certain semi-processed imports and packaging materials. IPI tax rates are higher on non-essential and luxury items such as cigarettes, cosmetics and liquor.
In addition, Brazilian importers typically pay a minimum of 1.65% for PIS and 7.6% for Cofins taxes. Exempt from PIS and Cofins are products such as fruits, vegetables, eggs and pharmaceutical inputs.

Product Licensing

Importers must register with the Brazilian International Trade Secretariat (SECEX), and secure import licences before any products are shipped. Brazil’s automated import system SISCOMEX allows importers or customs brokers to enter information from a pro-forma invoice directly into the system. SISCOMEX indicates if an automatic import licence may be issued, or if additional information is required for products such as weapons, radioactive materials, medical equipment and food.
Boat Shows

Rio Boat Show

The Rio Boat Show, Latin America’s largest boating exhibition, takes place at the picturesque Marina da Gloria in Guanabara Bay from 8 – 14 April 2010, and will show off a wealth of sea-themed attractions. Exhibitor space at next year’s Rio Boat Show in Brazil is quickly filling up, with around 50 per cent of all available space now accounted for.

At a preview party held recently, event organiser GR MAR Eventos unveiled a new-look floorplan for the 2010 event, with an improved layout designed to help the flow of visitors.

Boatbuilders that have already confirmed their presence at Latin America’s largest boat show include Intermarine, Real Power Boats and Schaefer — all of which are preparing to launch new products.

During the preview meeting, show president Ernani Paciornik and Paulo Renha, president of Brazilian marine manufacturers association ACOBAR, both discussed the opportunities to be gained at this year’s show on account of Brazil’s recovering economy.

Sao Paolo Boat Show

The 12th annual São Paulo boat show, held last year, attracted 150 exhibitors and filled 30,000sq m of the Transamerica Expo indoor exhibition centre. The organisers claim it generated sales of RS185m (US $108m), a 12 per cent year-on-year increase.

Ernani Paciornik, the show’s president, commented: “The 2008 event suffered as a result of the international financial crisis. The Brazilian boating industry started to recover at the beginning of 2009 and we are definitely now seeing clear signs of increased business activity.”

The six-day show attracted 42,000 visitors, had 240 boats on display and a large variety of boating equipment exhibited by importers and retailers. The Brazilian company Intermarine was one of the highlights of the show, displaying amongst several other models the Intermarine 760 flagship.

Schaefer Yachts had higher than expected sales at the show. Schaefer’s president, Marcio Schaefer, commented: “We did good business at the show. Those consumers who did not buy last year are now coming back as market conditions are more stable.”

Boatbuilders with smaller boats in the 30,000 Reis range also reportedly did well at the show. Lenilson Bezerra, the ACOBAR marine industry association’s executive director, commented: “Everyone was positive as the growth trends will continue into 2010 and beyond.”
Conclusion

Brazil represents one of the world’s largest economies, and offers massive amounts of water space which are currently being severely underutilised. However, with the advent of the brand new Brazilian Boating Association, and the ever-improving boat shows on offer, the country looks to provide good opportunities for exporters in the near future. The newly relaxed rules on chartering within Brazilian waters also indicates a trend towards more purchases thereof. It is an exciting time for the Brazilian Boating Industry, and the country looks to be one well worth investigating for potential opportunities.

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