How Bad is Corruption in Brazil?

How Bad is Corruption in Brazil?

You may have heard in the news about large corruption schemes in Brazil. Big names such as Petrobras are becoming the center of corruption investigations; renowned international companies such as Germany’s Siemens and, France’s Alstom SA, among others, are being scrutinized on cartel allegations. But, how exactly will corruption affect you and your business in Brazil?

The Cost of Corruption

First, let’s put things into perspective. Corruption in Brazil eats up a considerable chunk of resources.

Brazil is in the 69th place on the Corruption Perceptions Index from Transparency International. Undoubtedly, it has way more corruption going on than Chile (21st), the USA (17th place) and Canada (10th place).  Brazil has a similar ranking as Bulgaria, Greece, Italy, Romania, Senegal and Swaziland. In 2015, it’s very likely to fall a few places based on the latest scandals.

Forbes estimated that in 2013 corruption cost Brazil 53 billion dollars, translating to 1.38% to 2.3% of the country’s total GDP that year.  This year, according to Bloomberg, Petrobras alone is considering 20 billion dollars in write offs in corruption related charges.

A fair amount of money, isn’t it?

But, let’s see, in practical terms, specifically how corruption can affect your business life in Brazil.

Corruption on the Streets

Most of the time, you won’t face corruption directly.  In other words, you won’t find people wondering around and asking you to join illicit activities on every corner you turn.

Don’t worry about the stories about the Brazilian police stopping you and taking every penny of your wallet. This is largely a misconception.

In fact, these days, unless you are doing something completely wrong out in the open, you may never be stopped by the police. And, if so, it’s very unlikely they’ll ask you for money.

Corruption may exist on the streets in Brazil, but in my frank opinion it is overrated. The real problem is not on the streets, but inside government buildings and offices.

Corruption and Bureaucracy

The real type of corruption you will see in Brazil is related to expediting bureaucracy. That is a very common type of corruption and you will find at almost all levels of government.

Let’s imagine you are planning to build a new manufacturing plant in Brazil. You do all the paperwork required to get the project off the ground and submit it to the local authorities for approval.

As part of the process, you’ll need a specific environmental license, given that the construction site is close to an environmentally sensitive area. You know it is a lengthy process, but hope things will work out according to your schedule.

A few months down the road, you learn that all your paperwork has been approved, except the environmental license. In fact, the license hasn’t moved a single inch inside the government office responsible for it.

In your last meeting with your CEO, he put you on the spot saying that any delay in the paperwork will derail the company plans to win a major market opportunity. You are feeling the pressure and are getting desperate, not knowing what to do.

Magically, someone calls you for a business lunch to talk about new opportunities. After a fair amount of wishy washy chattering, the person tells you the real reason he wanted to meet you:

“If you provide me with a few thousand reals in cash, your license process will be running like a rabbit inside the department.”

Surprised, you look incredulously at the man.

“Obviously no one will know about it, ’cause cash doesn’t leave trails, does it?” – The corruptor winks.

You know, now, how the famous corruption schemes work in Brazil. After you join in these types of deals, it is very hard to distance yourself from them. And, one day everything can surface, as it happened in this corruption probe involving São Paulo municipal officials.

Corruption as a Culture

It’s not corruption, it’s a jeitinho.

The jeitinho is a very interesting component in Brazilian culture that makes corruption look like unsuspected people trying to help each other. Many Brazilians will use corruption as a way to get things done, not realizing they are contributing to enormous corruption schemes.

To illustrate this point, a friend of mine was casually chatting with a co-worker and mentioned that he had a container stuck in Santos, delayed in customs because of the World Cup Games season.  His colleague mentioned that there must be a way to solve this.

“There must be a jeitinho.”

A few days later, a person called him from out of the blue saying that she could to help him to get the container unstuck.

“I can put your container at the top of the line for inspection. It will cost you some money, but please, no questions asked!” – said the lady on the other line.

He politely declined the offer, thanked her and hung up the phone. A few weeks later, the container arrived safely at its destination. No need to pay for what you can get for free, right?

In local Brazilian culture, corruption is not perceived for what it is. Be aware of that. The problem is that, the more you are here, the more ‘natural’ it becomes to you and the more easily you can get caught trying it.

Political Corruption

The business of “greasing the wheels” is a big one in Brazil. Along the same lines as facilitating licenses inside local agencies, things get even more sophisticated when you are dealing with anything that touches on politics.

The bigger your business gets, the more challenging it is not to get involved with corruption. You will find it surfacing when partnering with other companies that are already involved in corruption schemes.  These are the ones who, without proper explanation, will ask you the strangest requests to close an imminent deal – such as first class seats and tickets to Lollapalooza in Rio next weekend. (Yup, that happens!)

Also, it’s present in industrial circles contaminated by corruption. For instance, to be able to bid on projects, you will need to join a club and contribute to a hidden fund (used for who knows what!). The recent findings of the Train Cartel and Car Wash investigations provide invaluable information on how these clubs are formed and operate.  In these corrupted circles, companies give up their integrity to win projects and contracts.

However, the most onerous type of corruption I find in Brazil is the one that involves someone who has the power change political priorities. This is the classic scheme where you have a person acting as proxy for a policy maker or politician. It goes beyond classical lobbying and political give and take negotiations.  Usually, this person is acting on behalf of the politician and obtains monetary contributions to significantly influence the politician’s agenda in exchange for self-gain.

You’ll know when you get hit one of these. You simply can’t miss them. The perpetrator will make their proposal and intent crystal clear while asking for a significant gift.

Corruptors need Corruptees

My grandma used to say “A assombração sabe para quem aparece.” – The ghost knows whom to it appears.

If you are experiencing a situation in which you are being introduced to a corruption scheme; that could just an occasional corruptor testing the waters to see if you’d like to join the club. However, if that happens somewhat frequently, watch out for anyone who may already be contaminated in your organization.

Most certainly, if your business is growing in Brazil, sooner or later you will experience some level of corruption and bribery attempts. The biggest problem is not the situation itself, but it is not to be sure what to do about it when you face corruption. If you don’t know what to do, you’d better think about it, so you and your organization is not caught unprepared.

Leave your comment! Let’s start a conversation! I plan to write a blog post on how to identify if someone is doing something illegal in your organization. Please let me know if you would be interested and what aspects would be more relevant to you.

Photo credits: 401kcalculator.org

5 World Cup Planning Mistakes You Can Avoid

5 World Cup Planning Mistakes You Can Avoid

With the FIFA World Cup in Brazil just around the corner, the organizing committee is giving signs of panicking as the event deadline approaches.   Construction costs are soaring and infrastructure is halfway finished. What can we learn from the mistakes made in this mega project?

Lesson #1 – In Brazil, planning is essential, but not everything.

From a general perspective, in my opinion FIFA relied too much on its initial plan, neglecting to notice important changes in the Brazilian context. It seems they didn’t realize until too late that these changes would have a huge impact in their projects.

Colin Powell used to say that no battle plan survived contact with the enemy. So, no matter how well (or badly) planned World Cup planning was for Brazil, shifts were expected in the execution priorities as issues came up during the construction phase of the stadiums and infrastructure. In a mega project like this one, extra caution should be taken in order to keep things on track.

Just to name a few high-impact issues that arose during infrastructure construction phase were the political changes with the 2010 Brazilian elections, the economic change with the global recession and consequent slowdown in the Brazilian economy and the social backlash brought by the movements against the World Cup. None of them were small enough to be overlooked.

It would be naïve to consider issues faced by FIFA were simply brought on by poor planning. There was a lot more happening in the country that wasn’t initially foreseen by the organizing committee.

The baseline is that, if you are involved in large projects in Brazil, consider the entire context you are operating in. Changes in the economic, political and social environment can – and will – directly affect your timelines, costs and public perception. Therefore, go beyond monitoring your plan; monitor the entire context of the country you are operating in.

Lesson #2 – In Brazil, you need to be present to know what is going on.

I have the feeling that FIFA took too long to realize things were out of control and that it needed to increase its presence in Brazil. As FIFA leadership focused exclusively on approving World Cup legislation, it lost precious time, completely overlooking the negative impact infrastructure delays would have on the overall project. In fact, I am still amazed to think that the official site visits only began after it was too late and project delivery dates were already compromised.

Know one thing for sure. Operating in Brazil will require a higher level of your presence in the country. Having a country representative, a liaison officer or a local partner may not be enough to provide you accurate information of what is going on in the field. Complex projects will require your personal commitment and many times a physical presence in Brazil.

Managing remotely may work for certain types of initiatives, but there will be a time when things will stall and, unless you don’t take the next plane to Guarulhos  and see with your own eyes what is going on, things simply won’t move forward. That is something you should always have at the forefront of your mind when doing business in Brazil.

Lesson #3 – In Brazil, if something looks too good to be true… maybe it is.

All the early political moves, the cordial pats on the backs of FIFA reps, and the solemn promises from smiling high-profile politicians indicated that this would be the World Cup of a life time. Then, in a short while, the harsh reality appeared and serious problems began to surface. Besides being the best World Cup ever, this would also be the most difficult for FIFA to execute.

In Brazil, if your project is sailing too smoothly, if problems stop popping up in your email inbox, if you stop hearing negative things from your Brazilian management team, it’s time to make an unannounced visit to the project. If something is looks too good to be true, it certainly isn’t.

It is notorious how project managers tend to underestimate the difficulties of projects they are involved in. This is no exception in Brazil: no one will be willing to talk about the bad things hidden in the closet and difficult decisions will end up delayed.

If you feel your local team is not raising any risks and issues – regardless of your repeated inquires – a red flag should go up. They may simply be avoiding telling you the bad news. If you feel things sound too good, take action and check them out for yourself.

Lesson #4 – In Brazil, kicking people’s backsides won’t help your project get back on track.

In early 2013, FIFA learned that things weren’t progressing as planned. Under pressure and in the heat of the moment, one of its officials heavily criticized Brazil’s organizing committee. “Brazil needs a ‘kick up the backside’ over World Cup preparations”, he mentioned. After an enormous backlash from the Brazilian Government, the official had to apologise for his comments, saying he had been misinterpreted. The project still isn’t on track.

When running projects in Brazil, you may be the person in command and have all the reason to be angry. However, shouting at or insulting your local staff may help very little towards getting your project back on track. In the end, you will need these same people to help you carry on your project work.

Although it may be tempting to kick someone’s backside, and you may have valid reasons to do so, the result will be your complete loss of credibility. Things simply won’t get done.

If you are upset with your local team, my recommendation, for sure, is to call people on their responsibility and get to the specifics in regards to what needs to get done and how it should be done.

If you don’t fully trust someone on your local team, have a serious – but respectful – conversation with the person and, if necessary, replace them.

However, always hear what your staff has to say. It may also be that you are completely biased towards your own way of doing things and what you are attempting to do something that is simply not feasible in Brazil.

Never, ever, leave these types of conversations for later. But, be respectful and human.

Lesson #5 – In Brazil, cash is king and financing the queen.

As the deadline for the World Cup games was looming, FIFA discovered that many of the venue construction projects hadn’t secured enough financing to get the work completely done. Work had fallen behind the schedule because of basic cash flow problems.

Working in Brazil, monitoring your project’s financing may be one of the most important priorities you should have. In time, your local partner may lose the ability to access the required capital needed to carry your project on.

There are many reasons this may happen. But, know for sure that it may happen because your local partner may have underestimated his fund raising ability. In some situations, your partner may also have become more leveraged in other unrelated projects, or even have lost some important assets which could have been used to secure further financing.

Watch for signs that your partner may be having financing issues. There could be that they no longer want to share interim financial reports with you. Or, they begin to slow down on project execution missing important deadlines. Then, your partner may want to pressure you to use your cash to finance the project, claiming that Brazilian banks are taking too long to review their credit application.

In essence, we can learn a lot about doing business in Brazil based on the issues FIFA had while coordinating infrastructure construction for the 2014 World Cup. I hope you read this article many years from now and know that the event is safely over and that everything had a happy ending.  But for now, let’s learn from FIFA’s mistakes and avoid major issues in our own projects in Brazil.

Photo credits: Digo Souza

 

How to Hire Brazilian Talent without Traveling to Brazil

How to Hire Brazilian Talent without Traveling to Brazil

Did you know there is a way to hire talented professionals from Brazil without setting a single foot on Brazilian soil? Keep reading to learn more.

You may already know that the Brazilian government has created an audacious program called Science without Borders (CsF). The program was created in 2011 and aims to send 75K students to foreign colleges and universities over a period of four years.

What you may not know is that a number of these Brazilian students need to take part in a mandatory internship program in the countries they are visiting. This is great news if you are seeking skilled workers who are fluent in your language and Portuguese.

A step by step guide on how to find and hire Brazilian talent

The best way to have access to Brazilian talent is to get involved with the CsF program. Here’s how:

Find out if your country is participating in the CsF program. Here is a list of program partners: Australia, Austria, Belgium, Canada, China, Germany, South Korea, Denmark, The US, Spain, Finland, France, The Netherlands, Hungary, India, Ireland, Italy, Japan, Norway, New Zealand, Portugal, The UK, The Czech Republic, Russia, Sweden and Ukraine.

Look for the universities in your area which are hosting CsF students. For instance, if you are in British Columbia, search google for “British Columbia Science without Borders” or “British Columbia Ciencia sem Fronteiras” to find the program information for the University of British Columbia and Simon Fraser University

Contact the international liaison office at the educational institution.  Learn more about their partnership with the CsF program. Ask about the type of students they are hosting and the areas these students are studying. Also, check if they are looking for internship opportunities and if there are any timelines you need to be aware of.

With all this information in mind, create a recruitment and selection process for an internship position and develop a job posting with the job requirements you have mind.

Promote your CsF internship posting by adding it to your website. Ask the university to broadcast this information to all its CsF students.

Consider promoting your posting in other locations. Being that CsF students are allowed to participate in internships outside their home university, consider broadcasting the posting to other universities in your country.

Contact the Brazilian Government to add your posting to the Ciencia sem Fronteiras job board. You can advertise the position to a large number of students for free.

Depending on the skill level required for the position, consider using alumni associations, such as the Alumni Canada Brazil Network, to help spread the word.

Go through the selection process and chose the best candidate for the job. Call people for the interview and hire the best candidate you find. There are a lot of smart, ambitious students in Brazil. Don’t settle for average candidates, hire the best person you can find!

Once the internship is over, keep the student’s contact information in Brazil handy.  Csf students need, by obligation, to be back to Brazil for a certain period of time once the program is over. I am sure if the experience was successful, they may be very interested in continuing to work with you in Brazil, Canada or elsewhere.  Keep that in mind.

Benefits of hiring Brazilian talent through the Science without Borders Program

Although the internship may last a short period of time, there are some great advantages of piggybacking on the CsF program. Here are a few, just to help you think about it.

You may get a talented professional from Brazil for free. Some CsF scholarships will cover the costs, providing a stipend to the co-op student while they work for you.

If you have any plans of doing business in Brazil, this is a great start to understand the Brazilian culture and to establish connections in the country.

You will have someone who understands both cultures on your team. This person can be extremely valuable to navigate through the problems you may face in Brazil as well as to communicate with your team.

The student will eventually go back to Brazil and be a trustworthy contact there. If that person does a great job, you may want to deepen the relationship with them and re-hire them back in Brazil.

These are my tips for hiring a Brazilian professional without traveling to Brazil. If you have any tips and challenges for hiring Brazilians, please don’t hesitate to share them.  It would be great to hear from you.

 

Photo credits: Joel Kelly