Credit Card Services in Brazil: A Strategic Reference, 2006

How to Strategically Evaluate Brazil

Perhaps the most efficient way of evaluating Brazil is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to credit card services are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries

Demand/Market Potential Driven Firm

Relative Accessibility

Accessibility/Supply Averse Firm

In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).

Latent Demand and Accessibility in Brazil

This report provides a detailed overview of factors driving latent demand and accessibility for credit card services in Brazil. Latent demand is largely driven by economic fundamentals specific to credit card services. This topic is discussed in Chapter 2 using work carried out in Brazil on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for credit card services in Brazil. I use the term “micro” since the discussion is focused specifically on credit card services.

Chapter 3 deals with macro-accessibility and covers factors that go beyond credit card services. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Brazil:
Openness to Trade in Brazil
Openness to Direct Investment in Brazil
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks

Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in Chapter 3, which is a general overview of investment and business conditions in Brazil. Chapter 3 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Brazil. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier. SHOW LESS READ MORE >

1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate Brazil 1
1.3 Latent Demand and Accessibility in Brazil 3
2 CREDIT CARD SERVICES IN BRAZIL 4
2.1 Latent Demand and Accessibility: Background 4
2.2 Latent Demand: Market Composition 4
2.2.1 Regulatory Agencies 4
2.2.2 Classification of Institutions under the SFN 5
2.3 Market Data 5
2.4 Latent Demand: Dynamics 7
2.4.1 Credit Cards 7
2.4.2 Debit Cards 8
2.4.3 Store Cards 9
2.5 U.S. Participation 9
2.6 Latent Demand: Leading Segments 10
2.6.1 ATM Terminals 10
2.6.2 E-Banking 10
2.7 Accessibility: Market Entry 11
2.8 Key Contacts 11
3 MACRO-ACCESSIBILITY IN BRAZIL 13
3.1 Executive Summary 13
3.1.1 Government Role in the Economy 13
3.1.2 Infrastructure 14
3.2 Political Risks 14
3.2.1 Economic Relationship with the United States 14
3.2.2 The Political System 14
3.3 Marketing Strategies 15
3.3.1 Distribution Channel Options 15
3.3.2 Agents and Distributors 15
3.3.3 Franchising 16
3.3.4 Direct Marketing Options 16
3.3.5 Joint Ventures and Licensing Options 17
3.3.6 Creating a Sales Office 18
3.3.7 Selling Factors and Techniques 18
3.3.8 Advertising and Trade Promotion 18
3.3.9 Pricing Issues 20
3.3.10 After Sales Service and Customer Support 20
3.3.11 Selling to the Government 20
3.3.12 Intellectual Property Risks 21
3.3.13 Hiring Local Counsel 26
3.3.14 Performing Due Diligence and Checking Bona Fides 27
3.4 Import and Export Regulation Risks 27
3.4.1 Taxes and Fees Assessed on Imports 28
3.4.2 Customs Regulations 31
3.4.3 Import Licenses 31
3.4.4 Export Controls 32
3.4.5 Documentation Required for Trade 32
3.4.6 Temporary Goods Entry Requirements 32
3.4.7 Labeling and Marking Requirements 33
3.4.8 Restrictions on Imports 34
3.4.9 Standards 34
3.4.10 Free Trade Zones and Warehouses 37
3.4.11 Membership in Free Trade Arrangements 39
3.5 Investment Climate 39
3.5.1 Openness to Foreign Investment 39
3.5.2 Conversion and Transfer Policies 40
3.5.3 Expropriation and Compensation 41
3.5.4 Dispute Settlement 41
3.5.5 Political Violence 41
3.5.6 Performance Requirements and Incentives 41
3.5.7 Right to Private Ownership and Establishment 42
3.5.8 Protection of Property Rights 42
3.5.9 Transparency of the Regulatory System 43
3.5.10 Bilateral Investment Agreements 43
3.5.11 OPIC and Other Investment Insurance Programs 44
3.5.12 Labor 44
3.5.13 Capital Outflow Policy 45
3.5.14 Major Foreign Investors 45
3.5.15 Efficient Capital Markets and Portfolio Investment 46
3.6 Trade and Project Financing 47
3.6.1 Banking System 47
3.6.2 Foreign Exchange Controls Affecting Trade 48
3.6.3 General Availability of Financing 48
3.6.4 How to Finance Exports and Methods of Payment 49
3.6.5 Availability of Project Financing 52
3.6.6 Banks with Correspondent Banking Arrangement 53
3.7 Travel Risks 54
3.7.1 Travel Advisory and Visas 54
3.7.2 Infrastructure for Conducting Business 55
3.7.3 Country Data 56
3.8 Key Contacts 56
3.8.1 Brazilian Government Contacts 56
3.8.2 Brazilian Trade Associations and Chambers of Commerce 62
3.8.3 Market Research Companies 87
3.8.4 Commercial Banks 91
3.8.5 U.S. Mission in Brazil 93
3.8.6 Attorneys in Brazil 94
3.8.7 U.S. Government Agencies 98
4 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 102
4.1 Disclaimers & Safe Harbor 102
4.2 Icon Group International, Inc. User Agreement Provisions 103