OPINION – How to get around the current crisis in Brazil

By Biominas Brasil and Serpa Group

We all know that 2015 was a year of economic crisis in Brazil. Political instability, rising inflation, low growth of the productive sectors and the rise in the US dollar against Brazilian the currency contributed to the uncomfortable situation for many sectors of our economy. However, the pharmaceutical industry, historically, is the last to enter in the crisis and the first to get out of it, because the consumption of drugs by the population is a priority, with no immediate cuts.

The Life Science sector and particularly the pharmaceutical industry are very dependent on import activities. The pharmaceutical has been
affected by the current political and economic crisis not by decreased demand for its products, but mainly by the exchange rate, since the production chain depends on many imported inputs. Apart from this fact, many drugs (final product) are also imported – emphasis can be given to biological medicines. According to data compiled by the Brazilian Pharmochemical Industry Association (Abiquifi), in 2014 were imported about nine billion dollars (FOB price), considering medicines and pharmaceutical ingredients. More than 60% of the total were for medicines.

Regarding the import and export sector, it is necessary to look for smart solutions to reduce such impacts, searching for new markets, identifying new suppliers and buyers. In this scenario, as a way to positive results reappear, it is very important to conduct internal assessments to improve the results, such as reducing costs and evaluation of new opportunities for action.

Some company practices may contribute to minimizing the effects of the crisis. We should not forget to mention the possibility of replacement of imported products by domestic products, as this may be a way to reduce the impacts of the dollar price. The company can also check the possibility of exploring other areas with a technology that they already have. In this sense, to know and act in new niches just replacing their products can be a way to generate growth without the need for a high development investment. Another strategy would be the establishment of partnership as a way of increase the scope of business. The search for relevant partners can bring new possibilities of business. For these new activities to be considered, perhaps running a good strategic plan for the coming years may bring benefits.

Related to import activities, it is important to consider the following steps:

Are the tariff classifications correct? In a database review of products that are imported by the company, some mistakes can be identified and so corrected, leaving all databases uniforms. Thus, it can avoid problems such as invoice containing a description and NCM (Mercosur Common Nomenclature) different than what was recorded in the import declaration and also avoids the improper payment of taxes.

The logistics used in import is the best option? Before performing an import, the importer must rely on partners who draw the best route with less cost and time. By reducing costs at this stage, it reduces the cost of the entire tax chain, since the international shipping and the costs that make it up are included in the calculation basis of all tax in an import operation.

Tax analysis of the import operation. The importer must do a tax study before his operation, making sure that there is a possibility of using some current tax benefit by the Brazilian tax laws. Examples of benefits are: use a particular customs procedures, request a benefit for reduction of the Import Tax, identify any tax agreement you may benefit from, use some deferred ICMS, among others.

Enable in the Authorized Economic Operator Program – OEA.  OEA is a program that aims to bring security and compliance with all customs rules involved in the process. All actors involved in the import and export process can be accredited and enable. The Brazilian government is planning that by 2019, 50% of Brazilian companies operating in foreign trade are enabled in Brazilian Program OEA. The program aims to develop procedures to ensure the physical security of export cargo and also deals with compliance with tax and customs obligations.

In the case of imports it is recommended that the importers do his habilitation as soon as possible because a company certified in the OEA program will have some advantages, such as: cost reduction with the decrease in terms of time needed to release of goods; predictability in its operations; priority in taxpayers consultation responses; direct communication with specialized auditors the IRF; and others.

By the government, one can increase the export custom, with incentives to small businesses to put their products abroad. Thus, related to export activities, it is recommended that some questioning are made as follows:

The exporting company uses customs procedures that benefit to exporters? Exporters must assess whether their operation is using all available benefits. It must analyze the source of their inputs and how it will impact the accounting of all taxes in the final product. Among the special customs regimes, we highlight the Drawback regime, which is easily accessible and provides cost savings in the acquisition of inputs purchased domestically, with suspension of various taxes. Exporting companies may also benefit from Brazilian government programs that enable and assist in the reduction of internal costs, trade promotion abroad and finance their exports.

The company uses the information tools provided by the Federal Government? An example of these tools is the “Vitrine Exportador”, whose goal is to promote Brazilian companies and their products in a website available to the international market. Other examples of institutions that operate in this type of disclosure are the Apex (Brazilian Export and Investment Promotion) and Secom (Trade Promotion Sector).

Export financing. It is known that maintaining the activities related to export requires high costs. Thus, it is suggested to search for specific lines of financing, as well as the advantages to the business.

Biominas Brazil and the Serpa Group are specialized companies that can contribute to the resolution of questions raised. The Serpa Group provides solutions in Foreign Trade and is present with a specialized team to assist importers and exporters. Biominas Brazil is a company specialized in Life Sciences which has several customized consulting services, involving market analysis, preparation of strategic planning, identification of sources of financing, identification of strategic partners, among others.