By Stephen Thompson
For the price of a small car, you can buy a restaurant business in São Paulo. You might make more money than you do teaching English. If you're thinking of buying a business, start by looking at the negocios and opportunidades pages in the Estado, Folha on Sundays or Primeira Mao, or go to the website of Center Negocios, http://www.centernegocios.com.br, the biggest business agency in São Paulo. In Río de Janeiro, try the Globo on Sundays.
It will be hard to get credit from the bank of Brazil to buy a business here, but most business owners will sign over the business for a down payment of 50%, and lets you pay the rest off from the takings. This informal form of credit makes it easier to buy businesses in Brazil, but of course when you sell the business, you also only get half the value back upfront, and run the risk that the new owner will mess the business up, go bankrupt and be unable to play off their debt to you.
Despite some of the most insane bureaucracy and red tape imaginable, São Paulo has a very entrepreneurial culture, and new businesses are opening and closing all the time. Of course, this means that the majority of them fail within a short time of opening. However, no one will think you're mad if you open up a business, and almost all my English students have a close relative who runs a bar or restaurant or other small business.
With patience you will master the black arts of business management in Brazil. Here there are always two ways of doing things, the best way, and the legal way.
With a good accountant, you will avoid paying almost all your taxes, and get away with it. However, it is difficult and dangerous to not pay your employees benefits, which are high; they add up to around 120% of the value of their salaries. Brazilian employment legislation is strict, and the fine for employing an employee who is not on the books is 5000 Reais. São Paulo is full of lawyers who make their living suing businesses who did not pay employee benefits. Even so, many Brazilian businesses prefer to take this risk, rather than bankrupt themselves paying all these benefits, and the number of unregistered workers has been growing in recent years. Examples of employee benefits are: I.N.S.S. which is a kind of social security scheme, and F.G.T.S, which stands for Guarantee Fund for Time of Service.
Registered workers also receive a 13th salary payments, in two instalments, on the 7th and 20th of December, and have a right to 30 days paid holiday, with 40% extra holiday pay. Hours worked in excess of 40 must be paid as overtime. Each category of worker has a different minimum wage, for example the minimum wage for a waitress is around 550 reals per month. Employers are required to pay 94% of employees transportation costs. When all is this added up, Brazilian wages do not look so low, at least from the employer's perspective.
If you dismiss a Brazilian employee, they will receive a payout from their FGTS fund. If they have done something to justify their dismissal, they will be dismissed with justa causa, which means they will receive less payment from the fund.
Brazilian workers employment history is registered in a small booklet which Brazilian workers keep, called the "Carta de Trabalho" (work card).
Of course a lot of the businesses which offers sale in São Paulo are going bust, or are going to go bust, and you have to be very suspicious. But some businesses are generally profitable, the owners may simply want to retire. Other reasons for selling up include conflicts between business partners or just giving up. It is common for business owners to claim they are selling because they are not "do ramo", i.e. it is not their normal line of work. Again, it's common for Brazilians to have a go and running at small business and then give up when they realise how exhausting it is.
The Brazilian economy has been stagnant for the last 25 years, and don't expect it to start booming any time soon. Also, be suspicious of the statistics; when they say the economy grew through a 4% last year, don't forget the population also grew 2%, so the real growth rate is more like 1 or 2%.
As you're probably aiming your business at middle-class customers, you should be aware that the middle classes have been particularly hard hit by the very long recession. It is said that the gap between rich and poor has narrowed slightly during the Lula government, however this is mainly because living standards for the middle-classes have fallen, while those of the poor have stagnated. Four years ago, I was able to charge 50 Reais per hour teaching English, but since then my rent has gone up 70%, but the market won't let me increase my rates by a similar amount.
However, the good news is that there is one business which never goes out of fashion, or at least not entirely; the restaurant business. Unlike North Americans and Britons, the Brazilians don't feed on sandwiches at lunchtime. Brazilian employment legislation stipulates a one-hour lunch break, and this is often stretched into two or more, allowing plenty of time to eat out for lunch. So Brazilian cities have a surprisingly large number and wide variety of eating establishments, such as Pizzerias and Churrascarias. Bakers also serve meals here. For some reason, good ice cream is hard to find, which is surprising considering the large Italian community.
One form of restaurant business which has thrived in the years of economic hardship is the kilogram restaurant business. Here cost conscious workers can weigh every gram of their food, and decide exactly how much they want to spend. Average prices in São Paulo for a kilogram of food are around 15 to 20 Reais, and offerings usually includes meat, salads and pasta. It's such a good idea that it's surprising it hasn't become more popular in other countries.
When you buy a business, you agree a price, which is usually a factor of three to 10 times the takings, and you make a first instalment, usually 25%. Then the owner will show you the ropes for the first month, while you check the takings to see how much the business really makes. If it adds up, you pay another 25%, and he signs over the firm, otherwise if there's a shortfall, the sale price is discounted accordingly.
If you're thinking of going into business, don't forget that Brazil has more holidays than most countries. In particular, the weeks between Christmas and Carnival in February or March are usually very quiet, unless you are in the tourist business, in which case they are your best months. This is especially true in São Paulo which has no obvious tourist attractions.
Brazil has the world's highest interest rates, which suppresses both consumer demand and business investment. One of the reasons interest rates are so high is the BNDES, or National Bank Of Economic and Social Development, which lends money to Brazilian businesses for much less than the commercial rate. Small Brazilian businesses can apply for loans to refurbish or relaunch, or even to pay day-to-day expenses.
Of course there are many other business opportunities here such as tourism. Brazil has an enormous tourist potential which has yet to be promoted in the way that other hot weather destinations. Brazil has 5000 miles of beautiful beaches, yet it receives only 5 million tourists a year.
But as Charles de Gaulle once said, Brazil is the country of the future, and always will be!
Stephen Thompson runs "O Gaucho", a snack bar serving breakfast, juices, smoothies, sandwiches. Galeria 2001, 2001 Avenida Paulista, São Paulo. For an English menu contact email@example.com
To read previous articles by Stephen click the links below:
Brazil: To Free Or Not To Free
Brazil: Trail Biking in Chapada Diamantinha
Brazil: So Near, but So Far Apart
How to Get Into University in Brazil
The Pleasure of Driving a Car in Brazil
Brazil: The Bairro of Flamengo in Río de Janeiro
Brazil: The Information Technology Law
Managing a Brazilian bank account
Brazil's Middle Class Ruled By Political Apathy