EMERGING MARKETS: BRAZIL · competing with expats for available housing and placements in schools, and is also putting more pressure on basic household maintenance providers and labor

As one of the “BRIC” (Brazil, Russia, China, and India) countries, Brazil has been among the leading emerging market locations for several years. Since 2006, it has moved up 10 places in Cartus’ own top destinations rankings and was ranked No. 3 of the four top projected destinations in Cartus’ recent “Mobility Challenges in Emerging Markets” survey. Yet it was also named one of the most challenging assignment destinations by Cartus survey respondents—and the challenges are often unexpected, which leads to major issues for assignees and mobility programs on the ground.

G ro w t h C re a t e s N e w R e a l i t i e s i n B r a z i lRated the world’s eighth wealthiest economy by the World Bank, Brazil was one of the first emerging markets to recover from the effects of the global financial crisis, with consumer and investor confidence, a reviving export economy, and high interest rates making it an attractive destination for foreign investment. The realities of this growth trajectory are often unanticipated by mobility program managers who may be prepared for the challenges of remote locations but are often surprised by the challenges in major cities, where much of the expatriate volume is centered. In these locations, an increasingly wealthy middle class is putting unprecedented pressure on housing, schooling, and transportation, and changing perceptions of assignees and managers alike.

Rio de Janeiro and São Paulo are among the most expensive locations in the Americas, with São Paulo’s housing pricier than both New York’s and London’s, according to recent industry reports. Countrywide, in fact, real estate prices escalated an astounding 26% in the last year alone (according to Brazilian Forbes Magazine, May 18, 2011). Apartments in Rio de Janeiro, Porto Alegre, and São Paulo are reported to have had the largest increase in the world in the past 12 months.

K e y C h a l l e n g e A re a sInput from companies and from Cartus experts working in Brazil points to key issues in several areas. More information, as well as Program and Policy Recommendations, can be found in specific sections (click on topic below to move to section).

TransportationHousing & RentalsEducationHousehold Goods ShippingVisa & ImmigrationCompensation & PayrollCultural Issues

In addition to the difficulties surrounding housing, also under more pressure than ever are schooling, transportation, and basic settling-in needs, due to a number of economic developments in the country. The recent discovery of oil reserves is leading to a simultaneous influx of expatriate volume and an expansion of wealth among Brazilians. This, in turn, is creating a boom mentality, in which an increasingly wealthy middle class is competing with expats for available housing and placements in schools, and is also putting more pressure on basic household maintenance providers and labor of all kinds. In addition, the scheduled World Cup (2014) and Olympics (2016) have begun to cause shortages at hotels and other available temporary housing options, which are already in limited supply.

Other areas directly impacting assignees are a lengthy visa and immigration process, complex household goods transport requirements, and Brazil’s restricted currency status, which mandates that many payments to local vendors, including landlords, be made in local currency—a requirement that impacts many financial transactions, including payroll decisions.

T R A N S P O RTAT I O NTraffic is a major concern in Brazil’s main cities—one that defines choices of school, housing, and commutation patterns. Lack of road improvements and expansion, and a workday that often extends into the night, cause roads to be clogged and noisy and travel times to be extremely extended. For example, the local norm in São Paulo and Rio is one hour for a five- to 10-mile trip. Beyond the congestion, Brazil’s inter-city roads

M A R K E T W A T C HInformation from Cartus on Relocation and International Assignment Trends and Practices.

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http://www.cartusmoves.com/emergingmarkets

B r a z i l i n B r i e f• Type of government: Federal Republic

• Currency: Real (R$1.61 per U.S. dollar, as of 8.16.11); currency is controlled by the Central Bank.

• Weights and measures: Metric system

• Climate: Brazil has six climatic regions that vary from subtropical to semiarid to tropical rainforest.

• Seasons are opposite to those of the United States, e.g., July is cooler than December.

• There is no official religion, although the predominant religion is Roman Catholic (about 70% of the population).

• There are four time zones in Brazil. The time in Brazil most visited by foreigners is three hours behind Greenwich Mean Time (GMT-3). This is true of Rio de Janeiro, São Paulo, Brasilia, Curitiba, Porto Alegre, etc.

are widely recognized as among the most dangerous in the world. Outside of the major cities, state roads (especially in the South) can be excellent, but federal interstate roads are often very poor due to lack of maintenance and confusing or nonexistent signage.

Additional tips for assignees:• Public transport is not generally considered an option for

expatriates due to high crime rates and security issues.

• Cars cannot be imported into Brazil, and car rentals or purchases are difficult to obtain (only foreign diplomats who hold diplomatic visas may import a motor vehicle).

P o l i c y & P ro g r a m R e c o m m e n d a t i o n s• Almost all companies provide some level of transportation,

with typical support consisting of a car and driver or a company car while on assignment in Brazil.

• Due to security concerns, some corporations provide expats with armored vehicles with drivers. This may cost between $80,000 and $100,000 per vehicle.

H O U S I N G & R E N TA L SHousing availability—and price—are major issues in Brazil. The economic boom that is behind the large increases in real estate and rental prices is also intensifying the issues for assignees’ home search and lease processes. Until fairly recently, landlords in the major cities were eager to rent to expats because of their guaranteed financial backing, but currency restrictions and rental requirements can be onerous for landlords. Consequently, they are beginning to favor local renters, who are now financially able to compete for the rental spots—without the headaches.

Some of the challenges that have most impacted companies and assignees are:• Landlords will accept payments only in local currency (the

“Real”); payments from abroad are not accepted. Given the pressure on housing, the first person to arrive with cash in hand often gets the apartment, so expats need to be prepared to pay in local currency to avoid losing their choice of rentals.

• Local norms and customs allow the landlord to cancel any offer agreement —even signed leases—if payment is not provided up front. Offer letters and leases without payments carry no weight in Brazilian courts.

• Leases do not require a security deposit, but assignees must have a “guarantor” in order to sign leases. The guarantor is responsible for all financial obligations related to the property: repairs, common charges, etc. (This role is commonly filled by the company or sponsoring entity.) Absent a guarantor, the owner will require the tenant to pay liability insurance (fiança). This cost is typically two to three percent of the total lease amount and must be paid prior to the move-in date. Documentation is required to apply for this insurance.

• Minimum period of rental is 30 months.

• All lease negotiations must be completed prior to signature; there is no allowance for customer demands or adjustments after the lease has been signed. Sometimes these requirements are quite basic—some properties do not include appliances, lighting fixtures, or toilet seats—and landlords are typically unwilling to spend money on repairs or other accommodations.

• Most expats prefer to live in “expat communities,” but available options in those areas are decreasing in Rio and São Paulo, and the prices are escalating. As an example, costs in São Paulo’s most expensive neighborhood, Jardim Paulista, increased by 40% in the last 12 months alone. Prices for a three-bedroom property in a preferred expat community in São Paulo can range from R$5,500 to R$15,000 (approximately $3,400 to $9,300 USD) or higher; as much as R$33,000 ($20,500 USD) for a VIP property. In Rio, three-bedroom properties can range from R$3,500 to R$16,000 ($2,200 to


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$9,900 USD). Even when accommodations are available, some of the areas pose concern for expats, as often even gated communities are situated near favelas (slum areas) in many main Brazilian cities. However, moving beyond the perimeters of certain areas brings other challenges: remote locations are growing but still lack infrastructure for expats.

• Temp living options, including hotel accommodations— especially options that would be considered safe and cost

effective—are difficult to find.

• Given the traffic situation in Brazil, where many main roads are frequently congested at key times, traffic patterns can, and should, factor into housing decisions.

• Many properties do not include appliances or light fixtures.

• Furniture rentals are available only in São Paulo, Rio de Janeiro, Campinas, and Curitiba.

For more detailed information on housing prices and household tips, visit the Cartus microsite at https://www.cartusmoves.com/emergingmarkets/.

P o l i c y & P ro g r a m R e c o m m e n d a t i o n s• If your global policy includes a pre-assignment trip as a

flexible option, it is recommended that trips be provided to all assignees going into Brazil. Assignees should be prepared to spend an inordinate amount of time in traffic and, as Brazil does not have a multiple listing service, assignees need to be prepared to work with a trusted destination services provider, who will coordinate meetings with multiple real estate firms.

• Given the requirements to pay landlords in local currency, combined with the pressure on housing, companies may want to explore options for advancing allowances to employees, either via lump sum or another form. This requires setting up a bank account, which should be done well in advance, as certain documents are required to establish an account. A decision concerning whether the company will serve as guarantor should be made in advance as well, along with arrangements to procure insurance, should that be the direction determined.

• In some areas—especially in São Paulo—many companies’ housing budgets are proving insufficient to secure rentals at the prevailing high rates. Companies are advised to review housing budgets/tables every six months at minimum.

• Cost-of-living calculations from clients do not always include maintenance and property taxes, so be sure to factor these into formulas.

• In calculating total monthly rent, include gas, electricity, water, taxes (IPTU), and the condominium fee. Apartments or homes with shared grounds will have condominium fees and a property tax (IPTU). The condominium fee is the responsibility of the tenant. The IPTU, though technically the responsibility of the landlord, is normally paid by the tenant as part of the rental agreement.

E D U C AT I O NMost expatriates’ children attend private/independent and international schools. Public schools have a lesser reputation and are generally not considered by expatriate families. The international school offers the curriculum of the expatriate home country; in the larger metropolitan areas, numerous curricula are available. However, availability of the options preferred by most expatriates is under extreme pressure in the major cities.

• Limited spaces are available in the most desirable schools, as long waiting lists exist. A recent check of available slots for the international school in São Paulo showed a waiting list of more than 800 students. Expats are now competing with locals for available spots.

• Expats should not try to secure school placements until a work permit has been granted.

• Due to the traffic problems in many parts of Brazil, proximity from home to school should be factored into home and/or school choices.

H O U S E H O L D G O O D S S H I P P I N GBrazil’s household goods shipment procedures and timelines are another area of potential difficulty for assignees and companies. An awareness of some of the most common stumbling blocks can help ease the process.

• Transport timelines may vary by origin location, but the average timeline for air freight can be three to four weeks. Ocean shipments can take eight to 10 weeks.

• Import duties and even the ability to take possession of shipments are affected by the type of visa held.

• A Resident Visa (Temporary or Permanent) is required to take delivery of household (sea) shipments. This is the predominant type of visa held by expatriates on assignment.

• Holders of Type II Temporary Visas (Business or Tourist) can import air shipments duty free, providing the shipment consists of personal clothing, shoes, and

books. Import duties must be paid on any other item, including personal files.


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• Expats moving to Brazil for a two- to three-year period have to obtain bond guarantees for their household goods shipments. Moving companies keep track of the bonds. Frequently, the company that brings household goods in is not the company that transports them back out at the end of the assignment. Although not legally required to do so, moving companies will pass the bonds to the company handling the next shipment.

• Electrical items must have brand, model, and serial number, and any new items must be identified, or they will be subject to import duties.

• The quantity of alcoholic beverages is limited, and penalties are severe—usually, a duty of 50% and a tax of 50% (total: 100%) over the declared value of the alcohol—so typically, it is not recommended to ship alcohol. Shipment of food is strictly prohibited.

P o l i c y & P ro g r a m R e c o m m e n d a t i o n s• Expats are advised to ship only small appliances (not large

refrigerators, washing machines, etc.) and to avoid shipping oversize mattresses and bedding, as apartments in Brazil are smaller than many Western accommodations, and items may not fit. It should also be noted, however, that furniture rental is available only in certain major locations.

• It is extremely important that the assignee review important requirements and documents as presented by the household goods shipper, as it will help to expedite processing the release of personal property through Customs.

• Many companies require their assignees to sign documents that detail shipping requirements as a guarantee that they have reviewed them, in order to avoid complications on the destination end and potential requests for the company to cover taxes or duties that may have been assessed.

V I S A & I M M I G R AT I O NBrazil’s visa and immigration process is one of the most involved in the world. Below are some of the key points that assignees and companies should keep in mind:

• Every foreign citizen working either in a Brazilian company or in the representative office (branch) of a foreign company has to obtain a work permit and an entry visa. The type of work permit may vary based on length of assignment and payroll location (home or host). Spouses and partners require a Work Permit in their own right to work in Brazil (that is, they cannot work on dependent status based on the main applicant’s permit, unless the main applicant is under a Permanent Visa [residence]).


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C o m m o n D e s t i n a t i o n s : B r a z i l

– Locations shown on map are considered major destinations, based on Cartus’ portfolio.

• Entry visas, as well as work permits, are required for all expats in Brazilian companies or representative offices of foreign companies.

• To take delivery of household goods, the assignee must arrive in Brazil on his or her entry visa and complete the registration procedures. Upon registering, a temporary RNE card is issued. The assignee will also need a tax ID card (CPF) to receive household goods. (Note: with these two forms of identification, the assignee should be able to clear his goods through customs. Obtaining the final RNE card takes about 60 days, once filed.)

• Most work permit processes, regardless of the type, take a minimum of three, and up to five, months before the employee can arrive in Brazil to begin working. After arrival, the assignee and family will need to complete the registration procedures within 30 days.

• Numerous documents must be legalized before the work permit application can be filed in Brazil. Approval of the work permit is needed before the application for the entry visa can be submitted to the Brazilian consulate in the employee’s home location. Examples of these are birth certificates of children, marriage certificates for a spouse, university diplomas, and company support letters. Once documents have been filed, the visa should be processed, typically within 45 to 60 days.

• After four years of holding a temporary resident status (under a Temporary V Labor Contract Visa only), foreign nationals must apply for a permanent residence status (Visa Transformation).

• Technical visas apply only to employees who hold technical positions, such as engineers. Technical visas can be obtained for a 90-day period but cannot be renewed. One-year technical visas are also available and require that a Technical Services Agreement be put into place between the sending company and the host company. This document must be in a specific form. One-year technical visas can only be renewed for one additional year and no longer.

P o l i c y & P ro g r a m R e c o m m e n d a t i o n s• Initiating the process early and providing ample destination

support is key for the transition

• Assembling required documentation early can help speed the work permit and visa process.

C O M P E N S AT I O N & PAY R O L LThe administration of compensation for assignees to Brazil presents a number of challenges, and therefore requires special attention:

1) Brazil enforces a pay-split whereby foreign nationals temporarily working in Brazil must have a minimum amount of wages delivered locally, commensurate with local salary scales. The amount is determined by the Brazilian National Immigration Council or the Ministry of Labor. (Mobility

Magazine, June 2010: “The Basics of Split Payrolls for Expatriates: Splits and Shadows.”)

2) From an administrative perspective, the enforced pay-split requires the setup of local payroll delivery as well as associated setup of deductions from the home country payroll.

3) With an enforced pay-split, assignees often perceive a financial loss as a result of currency fluctuations. This is especially true for assignees from economically stronger countries. By the time the host-paid portion is converted to home country currency, it often amounts to less than 100% of total pay. If this is a trend, companies find themselves “truing up” for any perceived financial loss—an additional administrative burden.

4) Another issue is the transfer of funds from Brazil to the home country at the end of an assignment. To repatriate monies to the home country, the employee needs to file a communication of final departure, submit a final departure tax return, and obtain a tax clearance certificate. The employee should leave a power of attorney to manage these steps in his or her absence.

P o l i c y & P ro g r a m R e c o m m e n d a t i o n s• Ensure that you (the Company) understand the implication

of obtaining a temporary V General Work Permit, i.e., the mandate for a portion of salary to be paid in Brazil.

• As this may be a time-consuming and complex process, research ahead of time the options and requirements for pay delivery in-country as soon as you plan to deploy human resources to Brazil.

• Put into place the appropriate strategy to mitigate perceived and actual currency impacts on your assignees as a result of the enforced pay split.

• Regarding transfer of funds back to the home country at assignment end, there are no quick fixes; the only way to remediate this issue is to ensure compliance with local tax regulations and file a departure return.


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C U LT U R A L I S S U E S• Great importance is placed on family and social life, and

many families are very large. Brazilians are also governed by a class system. Money, family, and education can be influential.

• Brazil is a bureaucratically structured society, but much personal and business “commerce” is relationship-based.

• Brazil is one of the world’s most unequal societies. Some 5% of the population owns 85% of the wealth. More than 90% of the people live on 10% of the land, and more than 20 million people live in São Paulo alone.

• Brazil’s ethnic composition is 55% European descent (primarily Portuguese), 38% a mixture of cultures (African, German, Japanese, Amerindian, and so forth), 6% African, and only 1% Amerindian. Nearly 50% of the population is under 20 years of age.

• Portuguese is the official language, although some of the population speaks Spanish, Italian, or various Amerindian languages.

C u l t u r a l A d a p t a t i o n P o i n t e r s• Comments about a woman’s appearance are customary and

should be considered complimentary, even if they could be construed as inappropriate in another country. Foreign

businesswomen may consider such practices unprofessional, but an invitation from a Brazilian man to have a drink after work is not necessarily an overture but rather can be simply an expression of hospitality.

• Personal relationships are key to doing business in Brazil; hence the expression, “For friends, everything; for enemies, the law.”

• Be prepared for meetings to be conducted at a casual, unhurried pace. Don’t get right down to business; engage in conversation first. Wait for Brazilian colleagues to raise business issues.

• Expect decisions to be made by the highest ranking individual. The people you negotiate with will often not have decision-making authority.

• Be prepared to be interrupted in conversations. Brazilians are expressive and passionate conversationalists.

• Expect lengthy negotiations. Brazilians will take time to review details. Do not try to rush things!

Cartus thanks the following companies for their contributions: Fragomen Global, G-Inter Transportes Internacionais, HSBC, LARM USA, Inc., and School Choice International.

© 2011 Cartus Corporation. All rights reserved. Cartus and the Cartus logo are pending or registered trademarks of Cartus Corporation.

The information provided in this Brazil MarketWatch publication is provided in good faith but is not intended to provide specific advice or to take the place of either written law or regulations.Cartus does not guarantee the accuracy or endorse any of the views or opinions given by any third parties and accepts no liability for the data and information included within.

www.cartus.com | [email protected]


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EMERGING MARKETS: BRAZIL · competing with expats for available housing and placements in schools, and is also putting more pressure on basic household maintenance providers and labor

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