Brazil Business

Rousseff says, “Nothing will destroy Petrobras”

Kenneth Rapoza from Forbes reports the Brazilian president stands strong with the oil giant.  Mired in a political scandal involving money laundering and bogus government contracts, Brazilian oil firm Petrobras is being used by the political opposition to derail President Dilma Rousseff.  Not one to mince words, Dilma had some Monday morning advice for presidential hopefuls: “No one and nothing will destroy Petrobras,” she told a gathering of Petrobras employees in Pernambuco state today.

Later this week, Congress will begin one of its favorite tasks since the Workers’ Party took over the government nearly 12 years ago: inquiries into wrong doings by the party. The last and most famous inquiry was into the so-called ” mensalão” scandal, which involved heavyweights from the Workers’ Party closely affiliated with then-president Luiz Inacio Lula da Silva. The pay-for-play scandal led to the downfall of many of the party’s lead singers, and now the opposition — led by the Social Democrats, know as the Tucanos — hopes the same can be said about Dilma.

Dilma is slipping in the polls. That doesn’t mean she won’t be re-elected in a second round of voting. Still, the opposition thinks her decline is a sign they can further chip away at her…and the possibility of 16 years of Workers’ Party rule.  The party, long seen as the ugly and poor labor left in a country whose main opposition is a more elite and educated left, captured Brazil’s heart in 2002 with the Lula election.  Surprisingly, the economy — including Petrobras — has been growing quite well ever since.

Today, barring the return of ex-Workers Party senator Marina Silva to the fore, Dilma is seen heading into a run-off election with Tucano senator Aécio Neves from Minas Gerais state.  If history — and poll data — is to be trusted, the Workers’ Party will yet again triumph over their “ refined” rivals.

Enter Petrobras.

This oil giant is the mud they’ve chosen to sling at her.

Petrobras is being investigated for overspending by several hundred millions of dollars on a Texas oil refinery.  In addition, a government agency is investigating allegations that Petrobras management — namely Nestor Cervero, who was fired last month — took bribes in exchange for steering contracts to SBM Offshore, a Dutch oil-production ship leasing company.

Petrobras CEO Maria Graça Foster will face questioning by the Senate on Tuesday over the oil refinery, which sits at the center of the scandal.  She will be asked how the company failed to notice that it was being more than triple the market rate for the Pasadena refinery.

Petrobras is Brazil’s largest company by market cap, and one of the most important contributors to the economy.  In 2007, it became the darling of the global oil and gas industry when it struck black gold deep under the ocean bedrock off the coast of Rio de Janeiro. Market analysts quickly gave Petrobras a price target of $60 per share.  It hit over $72 in May 2008 when the country was granted investment grade status for the first time.  The share price is now in the low teens.

Even though investors have always viewed Petrobras as the state-owned-enterprise that it is, Dilma has made it clear that under her, Petrobras is more a function of the state than the market.  Petrobras has been used to control inflation as it usually sells gasoline and diesel below market rate.  Prices are only high at the pump because of Brazil’s exorbitant taxes.  Petrobras is also involved in Brazilian cultural activities and has become a vital part of arts and entertainment funding.

“Petrobras is bigger than all of us,” Dilma told a gathering of oil workers, cheering her name. “Petrobras is as big as Brazil.”

Brazil replaces technology minister

As Brazil places more emphasis on its technology agenda, president Dilma Rousseff has brought in a new minister with a clear remit of defining priorities and delivering them fast.

The Science, Technology and Innovation Ministry (MCTI) will now be headed up by economist Clélio Campolina, a former professor at the University of Minas Gerais and a specialist in economic development, with a PhD on the subject from the University of Rutgers in the United States.

When taking over from previous minister Marco Antonio Raupp on Monday (17), Campolina said president Rousseff had invited him to take up the job with the specific brief of giving continuity to the ongoing MCTI programs, but more importantly, create a project to drive economic growth through science and technology and boost the quality of Brazil’s output in that field.

“Brazil is in a hurry and has the ability to define and prioritize areas of technology and science that are critical to the transformation of the Brazilian business environment,” Campolina said.

“We need to have a big program [science and technology] program for Brazil, have a forward-looking vision and deliver fast,” he added.  Read the story here. 

Local Data Storage in Brazil

While Brazilian politicians try to agree on the country’s first set of regulations around data and internet governance, local storage requirements are most likely to be solved first.

ZDnet reports that Brazil’s “internet constitution,” the Marco Cival da Internet, was due to be voted last October by the House of Representatives. However, disagreement between politicians and ISPs – particularly around the point of providers being required to treat all data that goes through their network in the same way – meant that the bill is yet to become law.

Despite all the to-ing and fro-ing between public representatives and companies around net neutrality, requirements that data collected about Brazilian internet users is to be stored locally are pretty much agreed on within the government. This was initially presented as a mechanism to protect citizen data – but the government is now becoming much more aware of the value of information.

During the Mobile World Congress last month, Brazilian communications minister Paulo Bernardo reinforced the point that local storage plans will go ahead and criticized the likes of Google and Facebook.

“Google told us that it could not hand data over to the Federal Police in Brazil because the information was stored in the United States, so the company has to comply with the laws of that country. Then they told us that they store the data in a random-access system – it is not possible to believe in everything they say,” Bernardo told trade publication Convergência Digital.

“What is certain is that data is turning into money and we can’t afford to be out of this business. Data will be the motor of the economy in the next few years. Datacenters of companies like Google and Facebook also have to be in Brazil,” he added.

The requirement to force companies to store data locally has been criticized by businesspeople and activists alike, such as World Wide Web creator Sir Tim Berners-Lee, who said this is an “emotional reaction” to the NSA spying episode and will not have any practical impact in reducing espionage risk.

Brasscom, the Brazilian IT trade body, warned that the local data storage provisions will mean an increase in costs incurred by local IT companies and prompt these firms to move their operations elsewhere.

And small business owners who rely heavily on cloud services to operate their businesses are also not happy about the government’s intentions. That is the case of Bidu, a insurance price comparison start-up, who stores all its data on systems operated by Amazon Web Services and Google.

“[If the government requires local storage], Brazil will take a massive backward step. It would be such a big setback for Brazil that small companies would be a lot less competitive,” says Bidu’s founder, Eldes Mattiuzzo.

Why Brazilians are so optimistic these days? The inhabitants of the largest economy of Latin America were always seen as having a very positive vision of life, buy now they seem to be overoptimistic. The well-known BBC presenter Robin Lustic went to Brazil to find out what makes them so happy: “For millions of them, the past few years have brought greater wealth, more jobs – and with them, it seems, more happiness. In four years’ time, Rio will host the World Cup final, and two years later, in 2016, the Olympic Games. What more could anyone want?” – says him, adding: “Over the past decade, average income for the least well-off in Brazil has risen by more than 70 per cent. For the richest, incomes have risen by just 11 per cent. As a result, the gap between the rich and the poor has narrowed. Between 2003 and 2008, more than 30 million people were lifted out of poverty.”

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Photo: Matt Hintsa

© Connection Consulting 2009

It was virtually impossible to find imported products in Brazil before 1990. The Brazilian government made use of protectionist measures such as limiting quotes and extremely high taxes to discourage importing of goods. This picture however changed when ex-president Fernando Collor de Mello broke the importing barrier by reducing the average importing taxes and abolishing many limiting quotes.

Although it became easier to import products, there are still other challenges that companies will face when bringing their goods into Brazil. Besides of meeting prohibitions on the import of certain items such as used clothings, cars and machinery, importers have to deal with complex cascading taxes and charges that increase significantly the cost of importing products into the country. In most cases taxes (both federal and state) and other charges will add about 100% to the importing cost, depending on what type of product and which state is the final destination for the import.

How to start importing

All importers must be registered at Foreign Trade Secretariat (SECEX) through a system named Sistema integrado de comércio exterior (Siscomex). This system registers, monitors and controls international trades with Brazil. You will be able access to Siscomex from banks, broker agencies or terminals on foreign trading related governmental agencies. It is also possible to access the system from your office if you obtain a password at Federal Revenue Secretariat.

You will be registered at Siscomex as importer or exporter at Registro de Exportadores e Importadores (REI) the first time you are importing goods. The next step is to obtain an importing license if your product requires one. There are two types of license:

* Automatic license: Automatic Licenses are granted to most imports into Brazil.
* Non-automatic license: These are necessary for products that require approval from other ministries or agencies, such as National Petroleum Agency (ANP), Brazilian Institute of Environment (IBAMA), Ministry of Science and Technology (MCT). The list of products that require non-automatic licenses can be found here.

It is important to make sure you have the necessary license before you ship the goods, as some items are not allowed to enter the country without the documentation in place. Unfortunately, if your product is under a non-automatic license regime, it may take several months before you receive your license.
RTS – Simplified taxation regime

If you you are planning to import your products using the regular mail service or couriers, you may benefit from a simplified taxation regime when your import has a value under USD 3000. RTS however doesn’t apply for alcoholic beverages, tobacco and smoking related products.

The fixed import tax is 60% of product value declared in the commercial invoice plus the freight and freight insurance costs if these are not included in the value of the goods. The procedure to pay the tax will depend on the carrier you choose:
Regular mail

If the goods worth less than USD 500, taxes (import tax and ICMS) are paid at the post office when you are picking up the goods. For goods that worth above USD 500 and below USD 3000, you must register the import at Siscomex to obtain a Declaração Simplificada de Importação (DSI). In addition to ICMS (VAT) you will be required to pay BRL 150 for customs clearance.
Couriers

Courier will calculate and pay the necessary taxes directly to the Federal Revenue Secretariat, and the addressee will be charged later.

*Written by Connection Consulting, a business consultant boutique for foreign technology companies that want to develop business opportunities in Brazil. Connection Consulting have the HQ in São Paulo and offices in London and San Francisco. For more information see: http://connectionconsulting.com.br/ or contact them at info@connectionconconsulting.com.br