Brazil being the world’s seventh largest economy in the world, it can be an attractive market for our

electronic security equipment; after carefully reviewing several options of entering into Brazil market, I

would recommend entering the Brazilian market by establishing a “Joint Venture” with local company.

As we are U.S. based company, we will need support from a Brazilian organization to accomplish our

goals and gain support from local people and regulatory authorities.

According to Commercial Guide for U.S. Companies, local presence is highly recommended in

Brazil due to the complex legal and customs system, also U.S. companies may find themselves at a

competitive disadvantage due to the government laws and regulations, so wholly owned subsidiary is

not a good option. Exporting is not a better option for Brazil market because importing taxes and duties

are high in Brazil, and gaining support from local community is tougher through this method and

competitors may gain advantage during this timeframe. As per law No. 12,349, dated December 15,

2010 all the public tenders should give preference to the firms which has local manufacturing, so we

would gain advantage from manufacturing locally. Apart from that, Brazilian firms pay approximately

additional 40% on the imports, so by manufacturing locally by establishing join venture with domestic

company, we can provide competitive prices and make a bigger margin on the sales. Strategic alliances

is not a better option because, as per Brazil constitution companies competing for public tenders will

need to have majority ownership of Brazilians, so when the alliance is terminated, local company can be

turned as a competitor in market and also raise severe trade secret conflicts. We can reduce this risk by

establishing a joint venture and setting up licensing and management contracts.

Although Brazilian market offers many opportunities to investors, Brazilian economy is not

growing at expected rate; according to International Monetary Fund (IMF) latest statement, Brazil will

go through a recession and growth in Latin America and Caribbean is expected to drop below one % in

2015 and modest recovery expected in 2016, so by choosing joint venture option, we can reduce risks.

References:

http://www.buyusainfo.net/z_body.cfm?

dbf=ccg1%2Cbmr11%2Cmrsearch1&search_type2=int&avar=19999&country=Brazil&month1=1

&month2=7&year1=2011&year2=2015&logic=and&loadnav=no

http://www.buyusainfo.net/docs/x_1919553.pdf

http://www.imf.org/external/pubs/ft/survey/so/2015/car042915a.htm

http://www.imf.org/external/np/tr/2015/tr070915.htm

Ball, D. A., Geringer, J., McNett, J., & Minor, M. (2013). International business: The challenge of global competition. New York: McGraw-Hill/Irwin.